Anti-Dumping Strategies for Protocol Tokens

Anti-Dumping Strategies for Protocol Tokens

By Budget Boy | Budget Boy Finance | 6 Sep 2021


This is a continuation to my previous article "What sort of tokens to farm in DeFi summer 2021". If you have not read this article feel free to do so as it would give you a little more context. 

There are lots of liquidity mining rewards awaiting farmers, namely:

1. 180 Million AVAX - on Avalanche "C" Chain

2. 370 Million FTM - on Fantom Opera Chain

On top of the above rewards, especially in the case of Fantom, since LM is performance based, all protocols will be incentivised to boost the APY by by giving significant LM rewards in their own tokens so that TVL will not move and they will qualify for the FTM liquidity mining programme.

The is really good for individual users and farmers but not so good for protocols as the sell pressure of their tokens maybe too high to continue and sustain growth in terms of V2's, treasury growth, new team members etc...

I will be providing an example of a hypothetical protocol named "Budget Boy Finance" based on Polygon's PoS chain with "BUDJET" as its protocol token. Please remember that I have do not have an engineering background and some of the ideas here may not be feasible or technically possible in reality due to the complex nature of smart contracts but the reader will understand where I am trying to go at.

Strategies

1. Governance Token Strategies: Users can stake BUDGET in return for xBUDGET which will represent your share of the staked pool. xBUDJET will operate similarly to xSUSHI and earns a percentage of trade fees to buy back BUDJET. Your balance of xBUDGET won't changed, but the ratio of xBUDGET to BUDGET will infinitely grow over time as it buys more BUDGET from the market to create constant buying pressure.

Only those with xBUDJET can participate in governance voting and the BUDJET rewards accumulated due to staking will remain locked for a period of 3 months. They can be withdrawn early with 50% slashing and the slashed amount will be distributed among the xBUDJET stakers. A user can stake and un stake BUDJET as and when they want. This mechanism also helps locking away BUDGET from circulation. In addition to this the users can get a further boost in rewards by committing to extra lock period > 91 days up to a maximum of 4 years. 

2. Allow farming of strategic LP pairs: Incentivise staking of strategic LP pairs like

a) ETH/BUDGET

b) MATIC/BUDGET

c) USDC or DAI or miMATIC/BUDGET

By incentivising the assets that most people swap for by having auto compounding vaults within the protocol it helps lock more tokens out of circulation. The BUDGET earned here will be locked for 3 months and rewards will be slashed by 50% and redistributed  if there is an early withdrawal. The penalty for withdrawal will discourage users from creating sell pressure. Further, the users can be incentivised to lock LP tokens for longer to earn boosted BUDGET rewards.

3. Incentivise voters:  Ensure that voters decide the emissions/distribution of BUDGET rewards. The protocol can have incentivised LP and single asset pools where BUDGET rewards allocation is entirely decided by vote every 2 weeks like Curve Finance and the gauge system. The protocol can have inbuilt bribe systems in which other protocols can bribe the xBUDJET holders to skew the BUDJET rewards in favour of their own LP or single asset staking pairs.

This much utility will cause a massive buy pressure on the token as its governance power + revenue earning potential is immense.

In a nutshell, all protocols must do everything in their power to prevent the token from dumping for sustainable and high levels of growth.

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Budget Boy
Budget Boy

DeFi and Crypto Enthusiast


Budget Boy Finance
Budget Boy Finance

Decentralised Finance, Crypto and Economics

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