This one is all about FNX tokenomics, please feel free to drop in any suggestions or arguements.
A few ideas - more like a brainstorming. Will detail some of them later if you are interested.
Generally there are a lot of projects who completely turned their token price around (from trending down to trending up) partly due to good tokenomics and token utility, e.g. Nexo ($NEXO), Breeder Dodo $DODO), Bancor ($BNT).
Provide a discount to option premiums for FNX holders. The prerequisite could be a fixed amount of FNX/FPT locked (e.g. 10k) or a certain ratio compared to the option price.
Fee accrual towards FNX stakers either through buying (on the open market) and distributing or burning (prefer the former)
“Option trade mining” - incentivize the usage of option by paying back a part of the fees/premiums. Comparable to rakeback in poker.
Foster synergies between options and the new leveraged token project through the FNX token. So options platform users will have benefits on the leveraged token platforms (e.g. higher leverage) and vice versa. Alpha Finance Lab is trying something similar (not yet announced).
Reserve a certain amount of tokens for “volume mining” through partnership, so partners that create volume on FinNexus platforms through their platform will receive an incentive. (Synthetix did the same)
Create dev/community grants that incentivize useful tools built on top of the FinNexus products ranging from marketing -elated content (guides, memes, designs) to more technical stuff (e.g. analytic dashboards, alternative frontends, etc.)
NFT (cooperation with an artist) to early stakers/users of the platform that can be converted to an airdrop or physical goods
Thanks for an Opportunity to discuss this topic openly…
I would like to suggest to have a FNX-vault, which work as one stop liquidity providing to all the FNX possibilities…
FNX is on Multichain, on Sushiswap, on FNX Options V1 and Wanlend… Each places creates an opportunity to generate yield on the FNX…
Users are can not figure it out which is the best place to generate yield… on Sushiswap or Options protocol V1 or wanlend or wanswap… here comes the vault to rescue…
Percentage of vault can be distributed to each yield generating opportunity as well as deposit fees to cover the gas cost and avoid bots to jump in and out of the vault…
Can I put more than 1 like to this?
To put it in short for discussion, the current FNX utility is that:
- community governance
- as the base currency in buying and settling options in the FNX pool in FPO
- staking to gain rewards by liquidity mining
- boosting rewards in liquidity mining as a multiplier and lock-time modifier
- entitled to rewards from FPO transaction fees collected by the protocol (fees are accumulated for now and details are yet to be decided)
Some possible further utilities for discussion (thanks to @Archon that some are suggested as above)
- FNX holders may have some discount when buying options. But we should be careful when deciding the discount as the options pricing is not linear to the underlying assets’ price.
- Getting some rebates when buying options. This has been applied before and it is not working very well. Also, it will be similar to the discount.
- Tranched governance, like longer FNX stakers will have more voting power than those in the wallets.
The others are already suggested by @Archon and I think they are all very good additional utilities to FNX tokens. I will not repeat them here.
Also another thing I think we need to talk about here is the mining mechanism and inflation.
- Now that FinNexus is designing some new products like leveraged tokens. And the FRAX pool is also on the way. There will be a lot more pools created in the FinNexus protocols and to incentivize the early participants, liquidity mining is necessary.
- The idea is to make a balance on the distribution of FNX rewards among different pools, according to the size or TVL of the pools and the risks. Like what Curve is doing.
- FNX pool will turn into a boosting pool, like how it is working in FPO now.
- The inflation is a bit too high for now. We have many FNX believers who staked their FNX for over 30 months, which gives them a boosting factor of over 14 times. If 20,000 CFNX are rewarded as the basic amount, there will be like 280,000 CFNX rewards per day and 8,400,000 CFNX per month. In 10 months, the reserves will be totally exhausted. We need a better plan to control the inflation rate.
What do you think?
I think that mining rewards are crucial but they also cannot be treated as an independent part of the whole environment. Two comments to begin with:
- Straightaway, I’m locked for 36 months so my ideas might be a bit biased here. But honestly, who else would comment on the forum if not someone invested and thus also mining in FNX?
- Also, and I mean with all due respect, what did you expect? I mean the boosting mechanism is super-rewarding for long locking periods. It was not hard to imagine that almost everyone would go for it. With the 36 months locking and withdrawing your 1/6 once a month, you get your investment back in 3 months (if FNX price remains the same), which is crazy.
Now, how to get out of it, meaning how not to mine everything in 10 months?
- You need to get the average boosting down. There are at least two ways how to do it:
– Decrease the boosting factors in the mining mechanism for everyone (like 8x for 36 months, maybe just do not reward the long locking periods so much, make the growth slower). This would be highly controversial because you have just introduced this mining mechanism and you would be changing it in a month or so. That would really undermine the trust. Locking is in a way a contract and just changing it would be a bad thing. And also having this straightaway after the Heco fail would not be perceived well.
– Keep the factors for the old miners and introduce lower boosting factors for incoming miners. Old miners should be rewarded for their trust and money they put at the very beginning. This, of course, will put an extra pressure on increasing FNX price which will only happen through new products and utility (some ideas in other posts). To be honest, even an 8x boosting factor for 36 months lock is very good. Probably even a lower one would still keep attracting new miners. Maybe with a more aggressive marketing. But really have it thought through. The new mining mechanism should not change for some time to keep the trust.
Overall, I think you can lower the boosting factors for newcomers and even though it might have a short-term negative effect, it will put some pressure on the team to deliver new and innovative products with utility that would attract usage of FNX and thus its price. The boosting factors can be theoretically lowered on some regular basis (some kind of “halving”).
True. Although I would miss my precious APY, I think inflation is too high/steep right now harming the product and also the FNX price mid- to long-term.
I love what Archon had to say. Like it like like.
However, the current task at hand is to mitigate the drying out of the pool. I think that given the current state of affairs, the most well thought of mitigation is spelled out right above and it is actually something I was going to suggest. Mine suggestion was going to be just a tad different:
What I was going to suggest (and this is considering all of the pain points already described by the FNX Fan - e.g. potential negative sentiments, failed Heco initiative, loss of trust, undermining early adopters/investors) is a staggered taper of the rewards multipliers. This can be done in a number of ways. Examples can range from:
-next 1000 (whatever amount of users) will receive a multiplier of x-factor - say the rewars multiplier/apy gets slashed in half -next 5000 liquidity providers get their apy/rewards multipliers at this rate -the rest stay constant at say (whatever number/percentage other suggestions included) ×4/6/8 for 12/24/36 months... etc.
However, it is to be done, the team cannot be afraid to go onto a conservative side as to ensure the rewards do not dry up prior to the exp. date. The main take away here is to ensure those who have already staked, UNDER NO CIRCUMSTANCES, get screwed, shorted, or the contract terms become less appealing, defaulted, changed or undermined under any circumstances. The team can change the terms going forward and they ABSOLUTELY MUST, but it should be done so with protection in mind for those already invested. Those terms should remain unchanged.
Now, this brings us to the question - whatsthe end state. Eventually, unless the rest of the tokens will get unfrozen, there needs to be fnx available for years to come to continue to provide incentive for providing liquidity, etc. I think at some point in time, when the project and the platform have become a leading options/,derivatives platform in the defi space, incentives using tokens will just have to cease
Yes, I completely agree, we are saying pretty much the same thing.
Very good points @Pasha, agree with your analysis.
The more I think about what @Pasha says, the more I like it. The multipliers can have a clear structure for either next X miners or next X FNX/FPT staked (or be dependent on the level of FPT currently staked). The latter might be more appropriate for estimating the effect of newcomers to the average boosting and thus inflation. Also marketing-wise, it sounds pretty good because it says “come quick before the boosting drops”.
And to be completely honest, when someone reads “come, you will have 320x”, a scam-alert usually rings (at least in my ears). It wasn’t the case for me because I had researched on FinNexus before the new mining mechanism so that my mind was already made. What I’m saying is that we do not need 1200% APY to be attractive. I tried staking Hegic and the return was pretty much nothing (minus the fees) so I sold with a loss and bought FNX instead. But others are staking Hegic and other tokens with much lower APYs. Too high can be actually counterproductive in medium and long term. In short term, it is good to attract early investors. But it seems this phase is done.
But I will repeat again, changing the rules/contract for the current miners would be a very bad signal.
Agree with the direction @Pasha suggested. However, noting that there are a few issues if we use the number of participating users as a metric to adjust the multiplying factor:
(i) it can be attacked by cloning multiple accounts with minimal staking amount.
(ii) it may not directly correlate with the growth of Finnexus.
An alternative to consider is using Total Value Locked (TVL) metric as it is a more direct measurement of Finnexus platform’s growth. Say anyone who participates when the TVL is smaller 20M$ will get the current multiplying factor, and as the TVL increases, we can reduce the factor gradually/linearly or using range thresholds:
- TVL <= 20M$: current multiplying factor
- 20M$ < TVL <= 50M$: 80% of the current factor
- 50M$ < TVL <= 100M$: 60% of the current factor
you get the idea
Another potential solution is to adjust the stable coin/FNX ratio instead of adjusting the multiplying factor. Say, we keep the same factor, but as theTVL increase, participating users need to stake more stable coin to achieve the same rate of reward.
All good suggestions. Thank you.
I believe there are some basic principles:
- make the rules as clear and anticipatable as possible
- keep the inflation at a sustainable and healthy rate
- protect the early contributors and long term FNX stakers
- make the rules impartial among different pools and all the miners
We need to keep the discussion going, and all suggestions are welcome.
My understanding of the purpose of a high APR for locked FNX in the liquidity mining program was to increase the TVL. Now the protocol seems to have an adequate amount of liquidity for the pool but the long term end goal should be that the rewards from the premiums by themselves are enough incentive for liquidity providers without the additional FNX rewards. Increasing the collateral utilization and premium accumulation in the pool will be the best way to ensure that the inflation rate via rewards can be gradually tapered/decreased while keeping TVL stable or increased. I’m not sure what efforts are being made to increase the platform utility to what the current collateral level can support rather than continuing to increase the collateral level via liquidity mining rewards.
Hi @Ryan, you mentioned the strategy of giving discount to FNX holders has been applied before but did not work out well. Can you elaborate on that?? It would be great if you can shared the statistic data you observed?
Was it the case that (i) users get discount if they buy an option with FNX or (ii) they can buy option with any token (FNX/USDC/USDT) and will get discount as long as they hold some FNX?
Just a side note, but right now LPs are overly favored - they get a lot of FNX for staking and they profit from the excessive (5% entry & 5% exercise) fees for traders.
I would like to see a reduction in trading fees. This might increase the risks of being a LP, but the trading volume is abysmal right now and something has to change.
Whatever the final decision, I think this should be figured out, announced and put into practice before anything else, even the new UI.
One more thing about mining. Even if nothing changes, it is kinda ok for the current miners. What I mean is that anyone reasonable actually calculating the number of FNX being mined a day should have seen that they will be mined out in less than a year (with the average boosting so high, but the average boosting is visible on the site, i.e. public, i.e. they should have counted with it). The “contract” they (we) got into is “stake for 3 years, get XX points for your FNX+USDC/USDT staked, time the boosting factor and based on that and the number of miners, you will be given your cFNX with its rules”. The contract is not on APY as it changes all the time. And the total number of FNX attributed for mining is also given, i.e. within the implicit contract. When all these are mined out, there are still fees to be distributed and hopefully by the time FNX is mined out, they will climb considerably, so that the locked FNX would still bring revenues even without FNX.
I’m not saying it should be like this, but I do not think it would be breaking the implicit contract if it stays as is.
Yes, in the last version, there is some FNX rewards as rebates for buying options.
So for users who are buying options with USDC or USDT, they will get some FNX back as a discount or rebate.
But we didn’t notice there is much of an increase in the volume. And after we cancelled it, the options purchase is not dropping. We talked to some traders and they just didn’t care about the rebates as it did little encouragement to their strategies.