I’ve been thinking a lot about tokenomics and how to make it more attractive to hold OOKI. A big part of the reason for the price trending down since the Binance token launch is that there’s no reason to hold OOKI and no use for it (yet).
This is a proposal to introduce OOKI liquidity mining/rewards for OOKI stakers (in addition to the share of platform fees that is already planned).
I know OOKI staking is coming - that’s the first step for sure. But unless we have a really dramatic jump in platform usage and trading volume with Curve liquidity (also coming soon), it will not increase rewards for OOKI stakers much - they will have a share of fees but it will be a very small amount plus it also doesn’t help that the returns (based on fee sharing) are unpredictable and depend entirely on platform usage, so returns in future are difficult to calculate.
Basically I think we need to juice OOKI staking with OOKI reward emissions the way Curve does. Even the most successful of all DeFi protocols - Curve - rewards CRV holders with CRV emissions (till 2026 I think) in addition to fees - even though they make a TON of money in fees, they pump it with token emissions and we should do the same.
I don’t think we need to go crazy with the emissions like with the aggressive BGOV rewards from last year That’s not sustainable. I mean much lower steadier amounts that we can keep up for years, which the DAO treasury can afford.
For comparison I think Curve CRV rewards (not including platform fees) are only around 3.2% APY (not APR!). And that’s for tokens staked and locked for 4 years (it’s much lower if you lock your tokens for shorter periods).
Now we are not Curve and our platform doesn’t generate those kind of fees but something like 5-10% APY is more than good enough IMHO.
I’ve done some calculations and the DAO can easily afford this over the long term from the treasury.
If we take high numbers for our assumptions - let’s say 10% APY (around 9.5% APR) targeted in USD terms, and we assume that fully HALF of the OOKI circulating supply gets staked - around 1.7 billion (it will probably be less - Binance alone holds a lot more than half of circulating supply and they are unlikely to stake - they do that for very few protocols).
On that basis at current prices the staked tokens will be worth around $50 million which means we need to pay about $5m in OOKI per year (actually a bit less with APY but let’s keep it simple here), This is roughly about 13m OOKI per month at current prices which is nothing compared to the benefits it will give.
For comparison remember that about 70m OOKI vests into the treasury each month (from vBZRX vesting - the treasury has something like 350m vBZRX) - this is less than 20% of that, plus there will be other revenue sources for the DAO like Ribbon Finance option selling (see separate proposal on the Forum).
Of course this cost will go up slowly as more vBZRX vests into BZRX and then OOKI and the staked amounts increase in line with the circulating supply increasing but the treasury is the biggest beneficiary of this and not all the vesting tokens will be staked - we’ll need to either stop this program or fund it in some other way when vBZRX finishes vesting in 2024 but that’s a long way away and the program can be modified in a year or two if we think it won’t be affordable later.
I think there are huge benefits to this approach:
OOKI already has a use case (governance plus fee share) but this will massively improve it and give people steady returns/passive income and make OOKI 10x more attractive to hold and let people calculate their returns better.
Very easy for devs to implement - we already have an OOKI staking portal coming soon. Just need to add OOKI rewards to it - very similar to what was done with BGOV last year. Most of the work for this was done with BGOV/PGOV last year.
Easily affordable by the DAO (see above).
Locking up a big chunk of OOKI supply reduces what’s available in the market and is likely to result in a sustainable price increase (unlike the temporary pump from the Binance listing). It also means everything else is cheaper in OOKI terms - if we save more than 10-15m OOKI per month on other expenses because of this, that alone could mean this program pays for itself (so for eg if OOKI price doubles, then we only need to pay half as much in OOKI terms for Curve bribes, or a Tokemak Reactor in future, or any other expenses the DAO has, because most expenses are denominated in USD etc).
It will generate a lot of hype and marketing - best marketing we can have is giving people a strong financial incentive to hold OOKI (and passive returns/income) and publicizing that.
In the longer term, we can consider some further modifications and adopting a Curve-style veToken model with enhanced rewards/fee sharing and voting rights for people who lock their tokens up for longer periods (up to 4 years). The economics of this will take time to work out (and also longer to implement in the staking portal) so I suggest that we take lessons learned from these rewards and plan a longer term move to the veToken/veOOKI model in a few months - many other DeFi projects are also in the process of doing this.
NOTE: Although I have written the above proposal on the basis of 8-10% APY, in practice the best way to do this is for the DAO to allocate a fixed amount of OOKI per month for OOKI rewards, not to target a specific APY in USD terms - because that’s the only way the DAO will have certainty and clarity on what it is spending.
It works out to almost the same amount of rewards, but just calculated in a different way. The DAO can allocate 10-15m OOKI per month for OOKI rewards, and the APY will depend on the amount of OOKI staked (also of course, only staked OOKI can vote in governance - this was the case with BZRX before and I assume it will be the same with OOKI staking).
So if only a few people stake OOKI, they will receive very high OOKI rewards. If around 50% of supply is staked, then about 8-10% APY in OOKI. I doubt more than 50% of circulating supply will be staked.
My recommendation is that the DAO should allot between 10-15m OOKI per month for this (out of the 70m OOKI vesting into the treasury each month) and commit to this program as a pilot for 6 months and then decide whether to continue it or not.
- 10-11m OOKI per month - very conservative and steady and leaves plenty of OOKI for other expenses
- 12-13m OOKI per month - mid-level figure
- 14-15m OOKI per month - aggressive/high levels of rewards.
We could also consider starting off with a high level of rewards (14-15m OOKI per month) and reducing it to 10-11m OOKI after the first 1-2 months or something like that.
Another point to consider is imposing a small withdrawal fee to withdraw OOKi from staking (very small - 0.25% or 0.1% or something - small enough that it will be profitable to stake within a few days or a week) - the idea is not really to make money or penalise people for withdrawal with such a small fee - more to just make people think twice before withdrawing on a whim.
What does everyone think? Both in terms of the proposal in general, but also specifically:
- How much OOKI to allot per month?
- Should we have a withdrawal fee?
- Any other ideas/suggestions to improve the proposal?