[OGP-12] OATH Tokenomics Upgrade

Governance Proposals
1

Title: OATH Tokenomics Upgrade

Proposal Chain: All current and future chains hosting OATH liquidity

Proposal Type: OATH Improvement Proposal (OIP)

Proposal Author: Charles

Date: November 20, 2023

Executive Summary:

This proposal aims to refine OATH tokenomics to maximize benefits for stakeholders, address fragmentation challenges, incorporate innovative features (oOATH), and update features of Bonded OATH (bOATH) LPs. Emphasizing real yields and implementing new measures like Option Tokens will drive deeper community buy-in and enhance the OATH ecosystem’s sustainability and growth potential.

Proposal Motivation:

Reason for Submission: Given OATH’s shift to address liquidity fragmentation, a tokenomics update is paramount for the project’s success. The goal of this proposal is three-fold:

  • Facilitating the alignment of incentives between protocols and users by redirecting value from opportunistic liquidity to dedicated liquidity.
  • To increase on-chain liquidity for $OATH.
  • To enhance sustainability and profitability for the protocols and users.

Potential Conflicts of Interest:

None identified at this point. Continuous disclosure will be discussed with the community should any arise in the future.

Justification:

The current tokenomics is faced with challenges such as inability to penetrate markets across multiple networks and lack of effective incentives for long-term community engagement.

Proposed Solutions:

Proposal Specifics:

Part I: Option Token (oOATH) Implementation

oOATH will represent the right to buy or obtain liquid OATH at a discount, and will replace all OATH rewards. When a user receives oOATH, they will have three (3) options:

1. Redeem

  • Requires upfront capital.
  • Immediate redemption of oOATH for liquid OATH at a 50% discount.
  • Example: User has $100 oOATH, pays $50 in ETH to instantly receive $100 OATH.

The revenue generated from users redeeming oOATH rewards will be distributed as such:

  • 80% to bOATH stakers
  • 20% to OATH treasury

2. Bond

  • Requires less upfront capital + time.
  • Convert oOATH into Bonded OATH (bOATH). This involves a gradual vesting process over 3-6 months, during which claimable amount increases linearly.

3. Stream

  • Requires no upfront capital, only time.
  • Deposit oOATH and receive OATH distributed linearly over 6-9 months.

Part II: bOATH Revenue Sources

Following the implementation of Ethos Reserve v2, bOATH will receive revenue in the following ways:

  • All Ethos Reserve platform fees will be directly given to bOATH stakers in the form of ETH, BTC and OP.
  • oOATH tokenomics revenue in the form of $ETH.
  • Allocation of OATH Chapter tokens.

All specifics to be implemented are subject to change following further discussion and feedback from the community.

Team Experience:

The OATH team has shown adaptability by evolving strategies based on the needs of the hour, such as the introduction of oOATH and focus on bOATH. Their successful collaborations and implementations in the past provide confidence in their ability to carry out the proposed tokenomics update.

Key Objectives & Success Metrics:

Objectives:

  • Increase OATH’s competitive position.
  • Enhance the OATH ecosystem’s sustainability.
  • Increase OATH trading volume.
  • Create positive feedback and alignment between the protocol and committed users.

Success Metrics:

  • Increased liquidity conditions for OATH.
  • Increased revenue for bOATH holders.
  • Enhanced active user and community engagement metrics.

Length of Engagement & Budget Breakdown:

No budget requested. Seeking community feedback.

Community Support:

Early feedback from community forums like Twitter (X), discord and google forms has been positive, especially regarding features like real yield and bOATH. Seeking governor feedback on the proposal specifics.

Partnerships:

N/A

Risk Assessment:

Potential risks:

  • Potential confusion among existing users due to the tokenomics transition.
  • Technical challenges during implementation.
  • Market risks due to volatility in the cryptocurrency space.

Additional Details:

Implementation details will be made at the discretion of OATH Foundation contributors. Any desired changes or additions to the model post-implementation are subject to change via future governance votes.

6 Likes
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This time I am not late for the reply.

Very well written. Best proposal write imo.

I hope the team be able to apply my suggestion regarding the “showing options pre calculated” for the user when he is about to redeem oOath at the UI.

I am in favour. :+1:

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Thanks Naul!

Indeed sir, the UI will have all the information one needs to pick the option best suited to their needs

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Great proposal! Very easy to read and understand. I wouldn’t mind knowing a bit more on the reasoning to change the previous decision to have reaper fees go to bOATH stakers though. If not going to bOATH anymore, where would it be going? I’m not opposed to directing it elsewhere if there’s good reason, but if it is a negligible source of revenue and barely moves the needle as mentioned in the telegram group, then I think it should go to bOATH as opposed to the team or the protocol. I feel like simply the optics of having more revenue sources would benefit oath/bOATH. I also feel that it’s beneficial having something, even if just a little something, from every protocol under the oath foundation umbrella go to bOATH stakers. Again, even if just for optics and making stakers feel like they’re getting a little piece of the pie from everything. I think the more streams of revenue that go to bOATH, the more appealing it will be for people to buy into oath and bond into bOATH.

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5

This looks good and well thought out

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All good points!

Putting overhead aside, the way we see it, and as JB puts it, we have 3 levers to pull and balance over time to achieve max ecosystem value:

  • Liquidity
  • Buybacks
  • Real Yield

Whether Reaper fees go towards building POL, contributing to buybacks or to real yield depends on which area needs attention. Right now its not of much consequence since they don’t amount to much, but allowing flexibility on where we can spend them could be beneficial. Same goes for the 20% of oOATH redemption revenue. Personally I really like buybacks to fund the redemption contract, and I think bOATH revenue is going to be popping just based on the changes above. Observing the first few weeks of the new implementation is going to give us a ton of information on what needs to be tweaked.

The marketing aspect of directing Reaper fees is definitely a good point!

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Attached shows a critical vulnerability in the design.

A4 - 3
A4 - 31812Ă—988 131 KB

I have some solutions in mind and would like to postpone any implementation until resolved.

I do however think a basic “redemption” feature could be implemented by itself for now.

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All fair points and I definitely agree with making sure there’s a good balance between directing revenues to the protocol vs bOATH. I think if it’s not going to be included though there should be some way we can all monitor the fees reaper is bringing in and maybe when it gets to a certain point a governance proposal could be set up for a percentage to go to bOATH? Or even just set up that percentage now even if it’s minimal? I just think it makes bOATH very attractive when you can genuinely say it gets a piece of everything the oath foundation does, however big or small that piece may be. Those are my thoughts anyways. Regardless, I’m excited to get these tokenomics finalized so that everyone knows exactly what they’re getting with oath/bOATH.

1 Like
9

Great proposal Charles. FULLY supportive pending details.

Going to address a couple of points here.

Sober, your observation is correct. If participants are willing to wait, they can stream OATH for zero cost. Buying oOATH off the market is a strange move but achievable, and will result in oOATH being sold to arbitrage, functionally bypassing the purpose of the oToken. This is not an exploit per se; all funds are safe and everything works as intended, but it is certainly not desirable.

I offer two suggestions.

  1. There are better ways to offer zero upfront capital solutions. The first that comes to mind is to have a source of ETH available for participants to borrow, that is used to pay the redeem premium, and converts a portion of the user’s OATH back to ETH (or other), plus a fee. For example, a user has $100 oOATH. They give it to the contract, which uses $50 of ETH to redeem $100 OATH, and gives the user $45 OATH instead of $50 (10% fee). The ETH can come from the POL, users, etc. and the remaining $55 of OATH can be either converted to ETH and compounded, returned to users, etc. I won’t decide details here.

  2. Once these oToken options are implemented, we can engage with governance to tailor the market response we want to see. For example, in the stream problem described, increasing the stream duration to 20 years would likely dissuade users from that option. Not to say that adjustments need to be so drastic; I am simply demonstrating a point. We can tailor the time-based compensations to reward or dissuade certain behaviours, in favour of the collective.

Hopefully this all makes sense.
I look forward to engaging in discussions as we hone the details.

Edit: The amount of liquidity required to make oOATH/OATH a viable exit strategy in size would remove so much OATH from circulation that the other options would become preferred. In a way, the problem solves itself, but regardless, we will always be able to adjust parameters to tailor behaviour.

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Although “locks” can be incredibly powerful in terms of narratives, it’s also been the stance of the Byte Masons to design systems without locks (which I support). Creating a lock, whether vested or not, can also work against the protocol. If it’s 1 of 3 options, and the least popular, it can appear to outsiders as a bad thing. “Look how little of the supply is locked. I’m not buying that garbage”.

Your flash loan redemption idea is super smart and imo a far better design.

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We need to also consider that normies don’t understand what flash loan is. I get the idea that “lock bad thing” but lets face the fact that if we go to a complex road will be us + half dozen nerds using it.

I understand that ethos isnt made focusing on retail, but they are also a target, so making a over complicated reward system will just make people go away.

We either need a system that is easy to use and understand (from a normie perspective) or that have the easy and the complex options.

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Additionally: I will say here again what I said on telegram group weeks ago: I dont find a smart idea to request the user to have spare money (eth) to claim or bond their oath tokens. It doenst make much sense. Loans and/or the selling of part of their oath tokens into eth will make much more sense. You can argue that the oath selling isn’t a good thing, and I would argue that it is better than demanding the user to have spare eth to claim rewards and lock the rewards (two things that most people aren’t very keen on doing).

1 Like
13

For the most part the proposal is great and I support it, however there are some changes I’d like to see made.

Even if what Sober pointed out is a theoretical problem, I think it should still be addressed so it doesn’t become a real one. I found Yuvi’s first suggestion to be an interesting one, and one that should be given more thought.

One opinion I have about it is that I think the pool to flash loan ETH should be completely separate from user funds to avoid all possibility for exploit affecting users directly, maybe a separate POL pool could be created and kept funded by some of the premium the flash lenders pay? If this is the way we decide to go, I’m sure the team will find a way to safe way to implement this change.

The second thing I’d like to see changed is reaper fees directed to bOath. Even if it’s not that much it has the potential to increase in the future. Also I see it as good “marketing” for people who are just looking into oath for the first time, to make entering bOath just that much more desirable. I know it might be negligible amount for the treasury, but maybe the reaper fees could be split 80/20 similar to oOath fees if we don’t want to give everything to bOath.

Over all, great job everyone on the team and also the community. I’d like to especially point out my appreciation for Sober, Charles and Yuvi for all the work you’ve done.

3 Likes
14

Hi Guys,

Thanks for a great proposal. My remarks:

With the Bonding option, why should we wait 3 months before vesting starts? I think a vesting period 0-6 months would be more attractive. We want users to enter the OATH rabbit hole via bOATH right?

I would prefer to start with the Stream option, and see how it goes. After 3 months we have some data. If Sobers scenario plays out (imo not very likely because of the 6-9 months price risk) we could change the stream option (vesting length) or replace it completely if needed.

I agree with crypt0c to make bOath as attractive as possible to users. Meaning to have every product / chapter under the OATH umbrella streaming some form of rewards/fees towards bOath.

With this in mind I do miss the agreed Aurelius fees (test phase, 10% of $xAU exercising revenues) streaming towards bOath revenue. I would like to see this mentioned for documentation/logging purpose in the proposal.

The reaper fees are 10% of harvests so might be not so negligible as people are saying in the future. But I do understand the wish to configure between POL, Buybacks and bOath. I prefer to start with 80% towards bOath as mpo suggested.

Question: does Digit earn any fees from the relics? If so, what is currently happening with these fees?

Looking forward to see all the coming changes in action!

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I agree that with a long enough timeframe, gaming the stream becomes unlikely.

The problem is, the stream was only designed as a solution to those not wanting to pay a premium (low capital, inflexible users). I never even wanted to add it in the first place. When you add a lengthy lock, it doesn’t end up benefiting the individuals I designed it for. Instead, it becomes a feature that dupes impulsive maxxists and services large funds with the ability to take on time risk. Both behaviors I find to be toxic.

oTokens in their basic form achieve something really powerful. They allow the protocol to rapidly achieve a higher circulating supply, without sending the price to zero.

This is something everyone should be excited about. It gives the team funding to achieve sustainable revenue with their products, and allows the market to participate without fear of being diluted (as it approaches max cir. supply)

2 Likes
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Maybe we create a separate proposal for Reaper fees just so this proposal doesn’t get stuck in revision hell (it has already been tied up for awhile and I’d like to get it pushed to a vote sooner rather than later).

Im happy to draft the separate Reaper Fees proposal (probably sometime next week since this week is the Thanksgiving holiday for a lot of people) for more discussion if that helps push this one along.

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Great proposal - one suggestion I have is Yuvi’s point that we need zero upfront capital solutions. I think oOath should not be implemented without a transmute solution like oRetro has, could be make or break UX for a lot of people.

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First of all, loving the engagement here.

We had discussed releasing the proposal without a third option to begin with, but seeing as several of you had called for a no cost option, I thought I’d leave it in for further discussion.

@Sober and @yuvi bring up some really good and valid points. It’s apparent we can design a better no cost option that adheres more to our lock-averse principles. It seems like implementing the first two (redemption and bonding) to start is desirable as we continue to flesh out the best no cost option. I would fully be in favor of this staggered approach.

As an aside, my thoughts on Yuvi’s flash loan idea:
Imo the source of ETH for underlying exercising is a key detail.
I like the idea of creating and capping a flash loan fund at a certain amount to limit the amount of [option 3] available at one time. What we could do is allocate (x) amount of ETH from redemption revenue to a flash loan fund and cap it at that amount. The ETH then used for flash loans can go back into the fund in perpetuity.
E.g: Protocol exercises for a 10% (or whatever) fee as Yuvi described. The ETH used goes back into the flash loan fund. The OATH received by the protocol funds the redemption contract.

We also have to keep in mind the development challenges of an option like this, we’ll have to consult Eidolon and the rest of the oToken developers to gauge feasibility. Regardless, we can release the first 2 options as I said to get the ball rolling as we work on an optimal no cost option.

And to @NauLxD’s point, users don’t have to understand what a flash loan is. All they see is the conversion from oOATH to OATH.

How does everyone feel about an initial implementation without a third option while we work out details?

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I happily support GPRC review for implementation of options 1 and 2.
With follow-up proposals to confirm a solution for option 3.
Agree with @A_S on Reaper fees as well. Happy for that to get voted in later.

For everyone, please remember, whether fees are automatically directed to bOATH or to the treasury is of little relevance long term. It will all go back to benefit the ecosystem eventually. Automatically directing all fees to bOATH limits our flexibility as it rigidly incentivises liquidity, which may not always be the most impactful path.

Yes, we love yield. But, there are other investments to be made.

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I’m agree with starting with 2 options as other gentlemen already stated. Let’s get the vote started!

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