AIP 011: New $AKRO Staking Tokenomics With Token Burns And Lock

Author
Cryptoz

TLDR Summary

  • Create new vesting mechanism that gives stakers the right to withdraw at least 50% of their reward at anytime during the vesting period at varying costs.
  • Use vesting mechanism to raise fund for development and marketing purposes.
  • Introduce tokens burns and lock mechanism to create scarcity to decrease sell pressure

Introduction/Rationale

Briefly:
The vesting period was created to stop stakers from continuously selling their rewards and hurting the price of $AKRO. Although it seems to have had a positive impact, it is not perfect:

  • There are constant selling pressures at key price levels due to the amount of tokens in circulation.
  • The current vesting mechanism is not attractive to investors who would prefer to have access to their rewards in part or in full at any time during the vesting period.
  • Smaller investors cannot reach the 10K tokens release limit as fast as big investors can.

The following mechanism aims to give stakers the ability to withdraw parts of their rewards anytime during the vesting period- at varying cost, raise funds for development/marketing and organically reduce the amount of tokens in circulation- which in turn to help the price of $AKRO.

Mechanism Basics:
Tokens rewards are vested for 365 days. For the first 6 months, any staker who wishes to, can withdraw 50% of his earned rewards and forfeit the remaining 50% for distribution. After 6 months, his rewards mature linearly until the vesting period is over.

We have two different scenarios possible:

Scenario 1:
Staker 1 wants to withdraw his rewards before the vesting period is over, during month 5 for example. He initiates a withdrawal request and receive 50% of his reward. The remaining 50% (unmatured) are sent to a smart contract for distribution:

  • Staker 1 will receive part of the remaining 50% as staked tokens that can never be unstaked.
  • A portion will be sent to top up a development and marketing fund.
  • A portion will be used to top up the APY of the AKRO staking vault.
  • A portion will be burned.

NOTE: Distribution quotas are yet to be decided.

Scenario 2:
Staker 2 wants to withdraw his rewards at the end of the vesting period. He initiates a withdrawal request and receives 100% of his reward.

Conclusion
The community should consider this proposal as it rewards long term investment but also gives the freedom to use rewards at anytime during the vesting period. Introducing token lock and burn should also help the price in the long run as it would decrease the amount of tokens in circulation. Lastly, anyone invested in this project should appreciate the need for a development and marketing fund to help us compete with other well funded projects.

Disclosure: The idea behind this mechanism came from another project called Delta Financial.

5 Likes

I agree that the initial vesting is unattractive to the average holder or trader, looking to capitalize on short term gains. It is worth noting that the mojority of AKRO holders in the discussion groups happen to be trying to make small and quick profits, and have little interest in staking. I feel that as a result, the token is also unattractive to buyers in this regard - due to the platform not having mass adoption or other features that will benefit short term holders.

This appears to be fair in that one still does retain a portion of the vested rewards if having to unstake early. I think this benefits both community and the team. Keen to hear the team’s feedback on this one. Ready to vote :blush:

2 Likes

This is well thought out, It’s really nice.

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I really love this proposal. Well written!

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Now this is a quality proposal. It would generate extra funds to be used for the good of Akropolis while also encouraging and rewarding longer term holders. Also treats everyone the same. I’ll vote for this

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Cryptoz,

Thank you for taking the time to present this proposal. Please view my feedback below:

  • I am initially against a token burn at this stage. Could you provide short term and long term incentives of implementing a token burn?

  • For the amount of AKRO that will not be able to be unstaked, I proposed leveraging that AKRO as collateral where community members can acquire other assets to participate in other strategies in the Akropolis ecosystem. Considering that AKRO stabilizes at a certain level and appropriate LTVs (Loan To Value) options are set appropriately.

Please view the attached image for clarity.

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I’m not sure how to put this into words, as I have only a vague idea on how this would work and need some further input - In addidition to the above, I believe that if the usecase of Akro also included the ability to fund open source development for the platform - we as a community could provide more use to the governance function by voting in on projects in dev (which to give priority to). I can also see the other side to this, but am thinking of a way to capitalize or strengthen the governance aspect of Akro, which will allow for more community involvement.

Any thoughts ladies and gents?

Could you provide short term and long term incentives of implementing a token burn?

The rational is fairly straightforward: create scarcity. The less tokens there are in circulation, the less selling pressure there is on the market. These sorts of mechanism shine when demand for a token increases. This is why Ethereum will implement a burn mechanism, and this also why tokens like XLM, Ripple and last but not least BNB have one already in place, the latter having burnt more that 7% of its max supply.
That being said, if the aim is simply to take tokens out of the circulation we could simply allocate those tokens to a non withdrawable stack. It may even be a better idea to do that ! :+1:

For the amount of AKRO that will not be able to be unstaked, I proposed leveraging that AKRO as collateral where community members can acquire other assets to participate in other strategies in the Akropolis ecosystem. Considering that AKRO stabilizes at a certain level and appropriate LTVs (Loan To Value) options are set appropriately.

Yes, there are many options available for the forfeited tokens. I think what we do not want to see is those tokens being sold for other tokens. But if they can be used in any way that doesn’t involve selling them, I am all for it. In fact this is what I had in mind for part of the development fund but you expressed it in a much clearer way.

Everyone contributes to AKRO staking and dev funds

Anyone vesting for 365 days has already paid a lot to help the project grow. For that reason, if we have to charge a withdrawal/release fee I think it should be minimal, closer to 0.5% than 2%.

Thanks for your questions and suggestions. It helps sharpen up those ideas!

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I like the proposal. I would maybe make it simpler.
Sth like:

  • insta withdrawal of rewards within first 6 months = 20% early unstake fee, 10% burned, 5% moved to AKRO vault, 5% for development
  • insta withdrawal of rewards between 7th - 12th month = 10% early unstake fee, 5% burned, 2.5% moved to AKRO vault, 2.5% for development

It sounds good.

I propose to use not discrete but analytic decreasing function like exponential distribution to count the rewards. It can be easily approximated if we need to reduce complexity.
It better serves the idea. Additionally it’s more convenient to model output in statistical experiments.
As for me to keep at non withdrawable stack vs to burn can create any ambiguity.
If you burn you cannot unburn it, but what can happens with so called non withdrawable stack. Only god knows. Plus to Burn is very sound marketing word now.

This can be useful for the following discussion
Nikhil Shamapant
Ethereum, The Triple Halving

https://drive.google.com/file/d/1bECqgijhgjdS782AB620gFjK5qx-vA99/view

You mean his unlocked amount or it would not matter if it’s still locked? Just to clarify - vesting applied to each new day of accrued rewards, so in a half year from the start of staking, only first day rewards will be 50% unlocked.

On another note - we will be adding claiming mechanism whereas users would be able to claim/withdraw unlocked rewards every 2 weeks (no need for threshold anymore).

Aaaand back to reading :slight_smile:

Could you elaborate? Not sure I follow completely - we can not tell users to not stake rewards & and we are not restaking/compound them back into staking too - they are simply sent to his wallet.

Actual end of vesting means that user unstaked AKRO & no new rewards are accruing. Otherwise it will be for each new day of staking (if we are counting from first day - e.g. rewards from Apr 1,2021 will fully unlock on Apr 1, 2022, from Apr 2 - on Apr 2, 2022, etc). Otherwise there would be no point in vesting at all :slight_smile: Or are you proposing to change vesting model entirely?

As to “unstakeable” part - not sure how that would work exactly? And not sure if it can be acually implemented properly without becoming more custodial (not a dev though).
Might be more interesting to explore staking with timeframes (similar to Curve), or adding withdrawal fee in AKRO.

Additionally we can add cool down period N days for unstaking as it works now in AAVE.
It presumably protects in case of high volatility periods.

Hi Yana,
Thanks for your feedback. I will try to clarify things as best I can.

Tokens rewards are vested for 365 days. For the first 6 months, any staker who wishes to, can withdraw 50% of his earned rewards and forfeit the remaining 50% for distribution.
You mean his unlocked amount or it would not matter if it’s still locked? Just to clarify - vesting applied to each new day of accrued rewards, so in a half year from the start of staking, only first day rewards will be 50% unlocked.

With the understanding that vesting is applied to each new day of accrued reward, a maturing rate is also applied to each new day. Each day of reward has it’s own maturing rate. The following example might help:

Staker 1 started staking on January 1st 2021
On January 1st 2022 (day 366), he decides to claim the totality of his rewards :

  • He will receive 100% of the rewards he earned on January 1st 2021 since they have fully matured.
  • He will receive 99% of the rewards earned on January 2nd 2021 since they have partially matured
  • He will receive >50% of any rewards vested for more than 6 months, between January 2nd and July, according to the maturing rate for each of the accrued daily rewards.
  • He will received 50% of any rewards vested for fewer than 6 months since these are still subject to a flat maturing rate of 50%, between August and December.

In this mechanism, rewards are not subject to being locked. They can always be claimed but at varying cost :

Staker 2 started staking on January 1st 2021.
The next day he wants to withdraw his reward.

  • Since they haven’t matured for at least 6 months, he will be able to withdraw 50% of it and forfeit the rest.

On another note - we will be adding claiming mechanism whereas users would be able to claim/withdraw unlocked rewards every 2 weeks (no need for threshold anymore).

This is great ! It can be part of the vesting mechanism I am proposing as well. More options are always better.

Staker 1 will receive part of the remaining 50% as staked tokens that can never be unstaked
Could you elaborate? Not sure I follow completely - we can not tell users to not stake rewards & and we are not restaking/compound them back into staking too - they are simply sent to his wallet.

This is a sort of restaking feature but the restaked amount will be unstakable and remain in the staking vault and earn the staker rewards forever. (There might be a possibility for stakers to sell these unstakable stakes if a 3rd party developer is interested in developing this feature).
I understand that this may not be doable with the current staking contract since rewards are sent back to the wallet.

Might be more interesting to explore staking with timeframes (similar to Curve), or adding withdrawal fee in AKRO.

Possibly, I am not sure what you have in mind in terms of numbers, fees etc. I think the model I am proposing creates a lot of value for $AKRO as it helps to reduce the flow of tokens to exchanges for the purpose of being sold and create scarcity in the long run. I have accrued around 35k AKRO so far. In the current vesting model I will be able to sell all of it in a year or so. But if it was possible I would be happy with forfeiting 50% of it to trade half now. That’s 50% less token being sold and I suspect many “whales” earning sizeable stakes would be happy to do that. Not only that, with that model we can top up the APY as well as raise funds for development and marketing purposes (if necessary). That being said, perhaps there could be a combination of Curve-like timeframes and fees on top of what is being proposed here.

This is it :grin: I hope I have made myself clear but please do let me know if you have any questions and I will be happy to respond.

Let me think about it over the weekend - our devs are currently heads down with the strategy development for new Vault, and introducing maturing without smart contracts can become a real headache with bugs - so need to brainstorm with the team first on how (and if) it can be properly implemented.
Discussion is open though - hope to see more people joining in

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I was inspired by tokenomics from Delta Financial. The guys behind this project have participated in the development of cVault.finance and will provide liquity to Coredex. They have a similar yearly vesting and maturing rate (plus other mechanism that I deemed unecessary for us). If you have some connections perhaps they may give you some input…

In any case, thank you for your time Yana,

Enjoy your weekend !

Hi all! I like the idea of having the chance to at least be able not lo lose the full vested rewards, but not sure about burning the remaing capacity, and I do not like the forever and ever stacked reward approach.
Instead of that, if on the one hand you are offering the posibility to unstake your akros before the year period with a “penalty fee”, maybe It makes sense to on the other hand give a premium to the users that would be open to restaking their Akros+rewards for more than a year.

To make it more visual: If someone wants or needs to unstacke his/hers Akros at month 6 with a penalty fee of the 50%, another user willing to mantain its stake for 6 more months could get a premium from the resting 50% (for example a 20%). In that way you are mantaining the liquidity of the pool, by trasfering some extra rewards to the patients from the ones that are in a hurry.

And to make it even more interesting for new stakers It could make sense to add 2 additional check points. for example: 20% of rewards at month 3 (30% extra to a user willing to let its stake for 9 extra months over the year, and burning of the resting 50%); 50% in month 6 (20% extra to a user staked for 6 months more over the year, and 30% burned); and 75% rewards at month 9 (10% extra for 3 extra months and resting 15% burned).

And with this mechanism the system would be rewarding the long term liquidity providers while enabling people in a hurry (or in an unforeensen that need their money) to at least recibe something for their time staked. How do you see that?

Hi Mikel,

Thanks for joining the discussion.
Why are you against burning and locking stakes? Do you think it is bad for the staker or bad tokenomics? The staker has a choice to let his full rewards mature if he choses to.
And on the tokenomics side, those tokens would have made their way out to be sold so I think it’s a positive thing.

That being said, I like the idea of giving premium apy to stakers who agree to lock their stakes for a longer timeframes.

I am not against burning, but the idea of having this premium on longtermstakers is more atractive for me. As you set you always have the chance for waiting for your full rewards, but maybe some low volume Akro holders are not interested in such a long one year period, while other longterm Investors could be interested in longer staking periods. So having this balance between penalty fees and premiums could make stacking more accesible and profitable for short and long term Investors. In terms of liquidity makes a lot of sense cause you are atrackting new stakers by making unstake more flexible, at the same time that you are promoting longer stake periods by premium rewards. I think it is a win-win-win situation for low and high volumen holders, for short and longterm investors and for the pool liquidity itself