Discussion: RSR emissions approach for the second half of the token supply

I like Mallo’s suggestion of the slow wallet emissions not exceeding the staking rewards for any given month.

It seems that we have the protocol needing to continually market buy RSR for staking rewards, and the slow wallet wanting to continually sell RSR for funding growth.

Maybe the two needs could be met automatically by the protocol, at least for the next 10-20 years, which may remove any negativity towards the slow wallet.

Ok, getting to the other ideas that have been shared.

  • Position: Hard-code a release schedule, and direct some fixed portion to Confusion Capital, leaving the rest to DAO control.

    • Steelman:
      • This could be a good way to strike a balance between the issues with full-DAO and full-CC control of emissions. If either portion of the tokens were misallocated, at least the other portion has a chance of still being allocated well.
      • Some opportunities are easier for a DAO to take advantage of, and other opportunities are easier for a company to take advantage of, so perhaps with this mix the ecosystem could capture both types.
    • My take:
      • I currently find this the most promising direction.
      • There’s a tension between the costs and benefits of CC having a very significant portion – if it has too little, it may not be able to coordinate significant efforts in the ecosystem in the longer term, but if it has too much, it could be too much of a centralizing force. I’m still thinking through how this balance could be struck.
  • Position: Create a foundation.

    • Steelman:
      • Foundations are corporate entities that have to use their funds for a purpose, rather than making money for shareholders. (There are no shares in a foundation.) So perhaps a foundation would be more trustworthy than a standard corporation in administering emitted tokens.
    • My take:
      • When setting it up, we considered whether CC should be a foundation or a normal corporation. Foundations’ profits are typically tax-exempt, and it always seemed wrong to claim a tax exemption for what we are doing, since the individuals involved are making money along the way. I’d prefer to go the route of a DAO than a foundation for the purpose of reducing centralized control, but I remain open to the idea if it serves an important purpose in the larger plan.
  • Position: Make RSR available for use until some milestone is reached, and then burn the rest at that point if there is any left.

    • Steelman:
      • If the project has already achieved escape velocity and needs no more capital to continue to grow and thrive, further emissions will only be a negative, not a positive.
    • My take:
      • It’s an interesting idea. I can imagine giving RSR holders the ability to vote to either pause emissions or burn the remaining non-emitted supply at any point. (I assume a vote would be needed, probably couldn’t hard-code any milestone logic.) I’ll consider this as we think about plans.
      • But this assumes there will come a point where no further capital is useful for initiatives that tend to the commons of the Reserve ecosystem, or that some other funding mechanism for those things will arise. I’m not so sure that is true – consider the need to develop collateral adapters, get them audited, adapt to new oracle options, and so on.
      • You can get a similar outcome from emissions just going down a lot over time. If you have a small long tail of emissions, those can be really meaningful if the project is doing really well and the token price is high, even while being a super low inflation rate in % terms.
  • Position: Release RSR based on reaching milestones rather than robotically over time.

    • Steelman:
      • Milestones could include metrics of success (for incentive purposes) or metrics of revenue (for emissions offset purposes from RSR being purchased by the protocol for stakers).
      • Or perhaps emissions could occur in response to metrics that weren’t directly related to the protocol, like RSR price.
      • One could imagine a perfectly benevolent and wise emissions genie who only added to circulating supply at the optimal moments. One would expect this genie not to robotically allocate emissions across time, but to release them in strategic moments somehow. So if the optimal release pattern is strategic, not simple and robotic, perhaps we should try to emulate that.
    • My take:
      • I think this is an idea worth exploring, though I don’t expect anyone to be able to state a concrete plan that would actually be robust enough.
      • My two biggest concerns with the idea are:
        • Who would decide when the milestones or conditions are satisfied? Oracle data feeds? A DAO? What if that mechanism malfunctioned?
        • Doing it this way makes it harder to judge when emissions will occur, so we may still get the “cloud over the project” effect, as well as getting FUD responses any time milestones or release conditions are approaching or activated.
      • If solid proposals for how to handle both of these issues are made, that would be quite interesting.
  • Position: Do an airdrop.

    • Steelman:
      • Airdrops help jumpstart usage of DeFi things when done well.
      • Reserve needs to acquire organic RToken users, so maybe with an airdrop to RToken users it could get people to try RTokens, and a good portion would keep using them after the airdrop since they’d learned about them and like them.
    • My take:
      • RSR is fair game to be used as incentives to help early RToken growth as far as I’m concerned. Whether it’s offered as an airdrop, LP position reward, direct juicing of RTokens, incentive to platforms that feature RTokens, or otherwise is just a question of which will bring the most lasting organic usage after the incentive runs out. I’m not sure how an airdrop stacks up against these other options, but am open to the idea. I probably would not be the one to directly evaluate this – it could be ABC Labs if it happened soon, or RSR holders voting on how to direct RSR in the future through some design that comes from this conversation we are having.
      • An airdrop to incentivize RSR staking has also been proposed. I am less keen on this idea since it seems like the built-in economics are incentivizing plenty of RSR staking already. I predict that if RTokens grow, staking will grow as revenues go up.
  • Position: Use RSR only for building costs. Do not offer any growth or liquidity incentives.

    • Steelman:
      • Perhaps incentivized growth all just goes away when the incentives dry up – DeFi farmers are mercenaries.
      • This could be true in our case if (a) farmers had no interest in RTokens without juiced yields, and (b) no organic usage was generated from the momentum of higher TVL deposited by farmers.
    • My take:
      • My current position on this question is: You have to incentivize some early usage to get things off the ground – getting noticed, proving the code isn’t going to be hacked. Once you have satisfied those needs, further incentivized growth (which will necessarily be unsustainable) is probably not the best use of resources. So I don’t think we should skip incentives entirely (much of current RToken usage is incentivized – see: Reserve Register - Reserve Protocol Interface), but I do think there’s a limit to how much should be spent this way.
  • Position: Combine approaches – do some combo of the approaches above, since there’s no hard requirement to do everything just one way.

    • Steelman:
      • It’s unlikely that any one mechanism is best in all ways, so the optimal path is probably some intelligent combo.
    • My take:
      • While this may be true in principle, the complexity of combo options does come with a cost, in that it makes it harder for people to understand how things work and may add operational overhead.
      • Still, I’m open to combo plans and am considering them. They just come with these costs.
  • Position: Go slowly in deciding how this all should work, consulting our advisor network and other crypto projects, to make sure we get to the best answer.

    • Steelman:
      • Tons of attempts at emitting tokens have been made, and we can avoid mistakes others have made if we talk to them.
      • Many mistakes will not be talked about publicly, so by talking to people directly we might learn more than just going off of what’s known in the public record.
    • My take:
      • This seems reasonable when I consider it, but I must admit I hadn’t really planned to take the time to get in touch with our advisors and other projects and ask them for their opinions. I think I was worried it would be too much of a hassle.
      • Now that it’s been pointed out it seems like a pretty obvious thing to do in case they have ideas, inspiration, or horror stories we should account for. I’m adding it to my plans to send around some info on what we are considering and ask for feedback and opinions from our advisors and other nearby projects.
  • Position: Charge fees on RSR traded on exchanges, and use that income to fund things.

    • Steelman:
      • There’s a high volume of RSR trading on exchanges during bull markets. If we could capture some of those fees, that would be a meaningful amount of money to allocate.
    • My take:
      • Like I said above: two people suggested this; is that even possible? If two people suggested it maybe this is something that memecoins have negotiated with exchanges these days or something? I have never heard of an exchange offering a revenue share with the coins they list.
  • Position: Connect the emissions figure to the amount of staking rewards, which are paid by the protocol purchasing RSR off the market and directing it to stakers, so that additions to circulation are matched by RSR removed from circulation by the protocol.

    • Steelman:
      • If the emissions never exceed the staking rewards, then as long as (a) stakers always stay staked and (b) they keep their rewards instead of selling them, this would mean zero growth in circulating supply.
      • Perhaps the meme of “no supply growth” would lead to a higher RSR price, making the smaller amount that would be emitted be worth more in purchasing power terms than if this constraint were not in place.
    • My take:
      • If RToken usage were to go down, staking rewards would go down, reducing emissions. This could lead to a negative spiral if emissions were necessary for funding ecosystem functions that were needed to move things forward and generate more RToken usage again. This could perhaps be countered with a minimum emissions amount, so if usage goes too low, RSR holders take on some mild inflation in order to move things forward.
      • Still, even outside of a negative spiral scenario, there’s the risk that under-spending early on leads the project to progress too slowly and lose momentum.
      • So: I’m intellectually open to the option of keeping emissions quite low, but I’m always thinking about what that would do to project momentum. While I obviously am convinced we have to worry a lot about making sure emissions are not too high so that RSR markets are not overwhelmed by them, I’m not sure they need to be this low.
  • Position: Offer emitted RSR as an incentive to platforms that bring usage of RTokens.

    • Note:
      • Goku, this is in response to your suggestion. Juicing RSR staker rewards in order to then have more revenue left over to send to platforms that feature the RToken seems like a more roundabout approach than just offering the RSR directly to the platforms, so that’s what I’m evaluating here.
    • Steelman:
      • Like eUSD is about to experiment with via sharing its revenue with platforms that bring users to eUSD, RSR could be offered to platforms that feature any RTokens.
      • Getting more integrations for RTokens makes them more accessible to people. If the platforms are simple fintech platforms that normal people use, we can go beyond DeFi users and reach a broader audience.
    • My take:
      • I think this is a good idea.
      • We could perhaps offer the RSR with a lockup, or pay it in liquid form. If locked up, we know it isn’t going to just be sold. The downside is that it will be perceived as less valuable without liquidity, so we’d need to offer larger RSR amounts to get the same degree of incentive.

Happy July 4th to anyone in the US!

This essay does a good job of framing some of the tradeoffs of creating fundamental new value vs redistributing existing value. Said another way, building the future vs optimizing the present.

While this specific model may not be ideal for the RSR community, the framing of options for building the future vs optimizing the present could be helpful for prioritization.

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I find it useful to discover and understand outside perspectives. Here is Yearn’s approach to similar challenges in 2020. TLDR: they chose to invest for the future but emphasized the need for clarity on budgets, distribution plans, and vesting schedules to ensure effective capital allocation and long-term growth.

Looking forward to discuss with everyone at Monetarium.

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One more to share. For the last two years I’ve been curious about Airdrops. Do they work?

The best sources of data analysis I’ve found is Kerman Kohli from ArcX Analytics. His blog has covered Arbitrum, Optimism, Starkware and many others. Highly recommended reading!

TLDR on Airdrops: they work for hype and short-term dumpers (good for projects that are fundraising and boosting valuation). They generally don’t work for building long term users of a protocol. The data shows that 85 to 95% of recipients generally dump the airdrop within weeks.

Here is Kerman’s post on Starkware which is a nice place to start although I suggest exploring his whole blog. Starkware Airdrop Analysis - Kerman Kohli

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Hi Reserve Community,

Glad to see this thoughtful discussion. One of the potential approaches mentioned in the blog post was the ve-tokenomics model pioneered by Curve (veCRV). By itself, ve-tokenomics does a good job of incentivizing locked tokens to align longer-term interests, but the model is incomplete. It was the addition of the Convex layer built on top of Curve that unlocked the promise of the ve-model.

Convex boosted yields for LPs and increased utility by introducing a liquid wrapper for the locked token, but most importantly, it aggregates governance power and creates a market for it, increasing governance participation significantly.

I’m one of the founders of Monarch Finance, where we are building off what Convex started, providing a scalable Convex layer. Reserve is structured very well for ve-tokenomics, and we could be a potential partner in providing that Convex layer if you decide to go down that path. This would create demand for and monetize Reserve’s governance.

Happy to provide more details or answer any questions, but wanted to throw this out there for discussion.

If we get new fintech partnerships whose big mints eat up the eUSD yield (at 100% revshare currently) it would be a good idea to use the Slow Wallet to reward stakers instead of the buyback program. This way fintechs are further incentivized to use eUSD as they can keep 100% of the profits longer while still having a massively overcollateralized eUSD. It would be nice to hard-code these emissions and halve them every 6 months in order to have a simmilar approach as Bitcoin. Follow up the halvings with adjusting revshare percentages. This way we also have the psychological benefit on the market with each emission halving being a positive thing. The Slower Wallet can be used for other purposes. Ofcourse, this can also be done with other RTokens as well.

EDIT: Because of the huge amount with halvings the initial emission would be huge. It would be better to decrease the emissions on a monthly basis for something like 5% for example. This way the initial emission can be lower. However, the minus is it would be bad for the price. Hopefully, there would be a huge rise in RToken mcap which would with decreasing emissions pull in people for the future adjusted revshare percentages which would increase the price with buybacks. A $10 billion token with 7% yield would generate $700 million, if only 10% of that went to stakers it would generate $70 million/year.
The initial emission at 5% down for 20b (in the slow wallet?) would put out 9.6 billion RSR in the first 12 months. At these prices that’s $38 million. So that’s to keep in mind, it would need to be a big RToken to pay off.

Hello,
I saw in your post that you mentioned several viewpoints such as “We won’t promote, if you want to make a fortune in the short term, please switch to a different project” and “What’s a hundred years?” In response to these comments, I have my own opinions to discuss with you
First of all, acknowledge that your vision is very good and has a good driving effect on the current global financial environment, but the value of the project should be reflected in multiple dimensions. If we don’t consider market value and profitability, why did those institutions invest in RSR in the first place? I don’t think they just paid for your vision, right? Value is the best endorsement and recognition of the project? As financial institutions, they are certainly driven by profit expectations, which you understand better than us. In the eyes of ordinary investors, since you are issuing coins, it is definitely linked to value. The value here is the most primitive expectation of the vast majority of Earthlings, rather than the one hundred year vision you advocate. If that’s not the case, why don’t you release tokens in outer space, why do you still need to raise funds, and why do you still need to go on exchanges. After World War II, many sovereign countries were established less than 80 years ago, and some of them no longer exist. During these decades, the fintech war has been constantly affecting the world order. When their sovereign currencies have become worthless, can we expect them to play with this theory? In a hundred years, we will no longer exist, and RSR will definitely cease to exist. Are you confident that RSR will still stand tall in the world financial system in a hundred years? Of course, as you said, you did not publicize that they learned about this project, so it is even more of a false proposition.
Since you proposed a discussion on unlocking the remaining tokens. The performance of RSR on major exchanges is not satisfactory. They either sell or wait and see, afraid to hold. Perhaps you really don’t care about the market value and are determined to achieve your desired vision, but 99.99% of the investors you face are ordinary investors. We don’t have the same pattern as you. We are more concerned about where RSR can go because we are real money holding and paying for your vision. When you mentioned that it may take several months to discuss and determine the final outcome, the person in charge informed you. The few months you mentioned will become a vacuum for ordinary investors, which will deal a greater blow to the previously unknown RSR. So please, in the spirit of being responsible to RSR itself and investors, carefully consider the token unlocking plan and listen to the voices of investors. Don’t be stubborn and only consider those vague theories.
Thank you for reading!

It would actually be even better to give RSR to fintech apps using it so we further incentivize expansion.
Fintechs already use the stablecoins they have to lend and generate revenue, if we add a certain 3-4% to the yield the stables generate themselves it would be the biggest earning opportunity on the market. It would only make sense for everyone to use eUSD instead of other stables.
Reaching some 12% APY would most likely fetch huge clients. Why stop at 12% though?
Make an initial 1 billion RSR emission that goes to stakers and fintech apps and decrease the emission by 5% each month.
That’s 5 600 000$ in additional revenue in the first month. This huge yield would certainly attract numerous fintechs to join the RToken revolution.

Not only would this solve the issue of fear regarding the locked supply, but it would also bring positive psychological reinfercoment regarding the monthly emission decrease and heavily incentivize fintechs to use eUSD as it would in the beginning give even over 40% APY while being the safest stablecoin on the market.