[DRAFT] SIP 0006 - Sovryn Origins Pre-Sale

For your consideration, my proposal for the Sovryn Origins pre-sale.
The draft SIP can be found here:

Additionally, there is a companion piece, with additional tokenomics here:

I plan to make available an editable spreadsheet with the tokenomics, so that it is easier to follow and critique my assumptions and calculations.

Looking forward to your comments and suggestions.

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Here’s the spreadsheet with the tokenomics!

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Firstly, great attention to detail when comparing Sovryn with other similar projects. Secondly, I love the SIP 0006 proposal for a dutch auction, but maybe to make it even more interesting the total pool of 2m tokens could be split into half with half being immediately liquid and half adhering to the usual 10 month vesting schedule (with both being auctioned off separately). Some users may prefer liquidity while others (out of whom many missed the genesis presale) may prefer a better long-term entry. During the auction, the market would find a fair price for both of these arrangements and perhaps it would be for the best to sell these separately if possible.

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Great suggestion. I am, however, starting to get concerned that we will need more liquid tokens on the market sooner. The primary reason is that these tokens will be required as collateral for the Sovryn BTC peg. This might be mitigated if we allow the tokens to be used for staking as peg collateral. That does add some smart contract complexity that I’m not sure we want.

A second aspect is we might want a larger float, so that as more tokens enter the circulating supply, it creates less of a “supply shock”. However, I’m not clear on how important this actually is.

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In the Sovryn Dutch auction, the price of an ESOV token starts at a ceiling price of 10000sats and drops as a function of time.
Maximum auction duration is 20K RSK blocks (~1 week).
At the 20K block floor price of 3000sats may be reached unless the auction has been fully sold by this time as illustrated in the graph below:
Participants place bids for the maximum deposits they would like to bid at the current price.
Participants cannot choose to create a bid at a different price other than the current price. As the auction price declines, bids are accepted in the order that they were received (First come first Served).
Dutch Auction smart contract will record the total amount of allocation for successful bids.

The auction ends when (a) current bids allocation meets supply or (b) the max duration is met. All successful bidders pay the same final clearing price per token and the price is the lowest price of the bid. The final price may only be equal or lower to the price of a participant’s bid, but never higher.

Participants can deposit BTC prior to the auction start and will be assumed as making a bid at block 0 when the Auction starts.

During the auction participants can create a bid using RBTC or BTC.
When the auction ends full allocation of sold token will be distributed to all participants at the clearing price.

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  1. Excess Funds Return: Having many participants bid above the clearing price, would necessitate the return of excess funds. This can be done easily in a smart contract environment, but is more complicated for bids made in BTC.
    Point 1 can be mitigated in part by allowing a pre-deposit phase.

My preferred approach to this would be to do a pure smart contract auction. It’s possible to get funds over to RSK using either an RBTC broker or by sending funds through the RSK PowPeg. Perhaps the most compelling argument for this approach is to have contributors “dogfood” and experience RSK themselves. This way they gain a firsthand understanding of what the Sovryn user journey is like to get funds into RSK and use RSK smart contracts.

It is also not clear what the maximum allowable purchase would ideally be. It is proposed

There seems to be a section missing here, as the sentence is incomplete.

On the topic of equitable distribution in the sale, one idea here is that the auction could be broken in half: one half for the ~75% of Sovryn NFT holders who weren’t able to participate in Genesis, and the other half open to the public free for all. The NFTs could have a cap per NFT-holding address, helping with the equitable access and distribution. And the public free for all would have no limits and may end up with a greater concentration but at least it’s open to anyone.

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@yago thanks for your efforts on this (and everything else) - much appreciated.

If I understand this correctly the origin sale will have the same supply as the genesis sale which, based on comments above, only met ~25% of the demand. Add to this the demand of people like me who have discovered Sovryn since 8th January and it’s surely going to be massively over subscribed again.

I also see the potential for voting power to be too concentrated if whales can effectively buy huge chunks with no limits (in theory one person could buy the entire supply?).

For these reasons I would be in favour of a purchasing limit (albeit I don’t have a vote!).

My only other question relates to the tokenomics part (and I might be showing my ignorance here, so please educate me if necessary!)… Trying to put values on SOV before it’s even seen a market is next to impossible, so kudos for doing so, but is the comparison of SOV with 1 month circulating supply against the market cap of much longer established projects ‘fair’? (adult market cap / infant circulating supply). Would a comparison to the 6 or 12 month circulating supply be more realistic? I’m not expecting 8x in 1 month and that expectation might encourage short-termism that works against the long-term aims of Sovryn?

I’ll finish where I started - by expressing my appreciation for your efforts (and those of the rest of the community!). Impressed with everything I’ve seen so far.

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  1. There simply isn’t enough RBTC that can be created to facilitate this. There is hard cap of 700 RBTC, and at 200 BTC for this sale, that would exceed the hardcap. So while I agree with you - the reality doesn’t really allow it.

  2. At this point, I am disinclined to adding complexity. Especially when it is in the pursuit of fair distribution, since questions of fairness become messy. I am leaning towards a cap for all. Maybe something on the order of 0.1 BTC.

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Thanks @el_mono!

If I understand this correctly the origin sale will have the same supply as the genesis sale which, based on comments above, only met ~25% of the demand. Add to this the demand of people like me who have discovered Sovryn since 8th January and it’s surely going to be massively over subscribed again.

I am starting to get more concerned about this as well. Maybe we are wrong to set an upper limit so tightly on price? Maybe we should just let the market find its price, even if it is above 10k sats? I really don’t have a strong answer here. We could potentially do that and provide OGs with a bonus? Given that you are a recent user - how would you feel about that?

I also see the potential for voting power to be too concentrated if whales can effectively buy huge chunks with no limits (in theory one person could buy the entire supply?).

For these reasons I would be in favour of a purchasing limit (albeit I don’t have a vote!).

I am not opposed to concentrated holding. I actually think that if the protocol has permissionless entry, and the powers of governance are appropriately curtailed, having some parties have a heavy stake in the system promotes good stewardship. That said, since SOV is not openly traded yet, I agree that a cap is desirable - see my above response to Light.

Would a comparison to the 6 or 12 month circulating supply be more realistic? I’m not expecting 8x in 1 month and that expectation might encourage short-termism that works against the long-term aims of Sovryn?

Good point - I think this is a good way of modelling it. The spreadsheet has been provided by @Ponjinge - so anyone can try their own model.

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I see, if it’s too complex to be integrated and/or not wanted in the contracts then we can keep the auction tokens unlocked.

Regarding the other posts, I do agree with setting a max allocation of some sort for all users (0.1-0.3btc) or splitting it into a public pool with no limit and an og pool with a limit. Personally I would also keep the maximum price level of 10k sats just so it doesn’t turn into a mayhem. However, if you feel the need to remove the max limit, I would say the Britocracy has almost an ethical obligation to provide more details on how will the auction prices relate to suggested future sale prices (of course pending approval). For example, somebody could buy a lot of tokens at 10 or 15k sats expecting the subsequent sales to be priced in that region, only to find out later on the origin presale will be priced at 4K sats… So if you wish to go with “removing the max price” route, I would say we need a statement like “The origin sale price will be determined by:

a) the average cost of all tokens sold during the auction

or

b) the highest cost of a single auction purchase

or something of this nature”

Good point. Maybe we can get an emergency RSKIP through to raise the cap? Only half joking :joy:

In seriousness, I see the need for this alternative mechanism for accepting BTC now.

At this point, I am disinclined to adding complexity. Especially when it is in the pursuit of fair distribution, since questions of fairness become messy. I am leaning towards a cap for all. Maybe something on the order of 0.1 BTC.

My motivation for the suggestion is not “fairness” so much as it is about having a wider initial distribution. On that, the definition is fairly straightforward e.g. Gini measurement, and existing NFT holders are a reasonably large group of folks to consider here. Capping individual addresses is I think more theater than anything; the fact we’re having the discussion here gives purchasers time to split up their coins and prepare to get lots of addresses in under the limit. Whereas the NFTs have already been distributed and the likelihood of Sybil attack on their ownership is relatively low since it wasn’t known ahead of time they’d be used for this purpose. Just some ideas, not a huge concern of mine but something to consider if this becomes a reoccurring theme.

It’s a difficult balance… From a personal viewpoint I’d rather have a price cap because I know that I’m motivated to get in early to secure some SOV and I’d rather do it at a lower price!

The danger of letting the market find the price in the origin sale is that it’s not a representative market (additional supply constraints, time bound, no opportunity to sell as a balance for price discovery) although I’d need to understand the mechanics of such a sale to take a better view. FOMO is likely and I definitely subscribe to the theory that the price should grow with the ecosystem. Creating the Sovryn equivalent of negative equity doesn’t help to build the community I think we all want.

Only those more closely involved in the day to day can balance all of that against the potential of a bigger treasury pot though!

Very good point, I’m sure the community would appreciate it if we provided people with (unused) genesis NFTs more opportunities to purchase. Of course the added SIP 0004 is catering to it to a certain degree, but many people experienced issues with generating btc deposit address or similar issues that will not benefit from the proposal (if passed).

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I’d be interested in seeing in further detail how exactly the SovrynBTC peg will work. In order to fully comprehend what will happen to collateralized BTC if the SOV token price drops by say 40% in a day or if it is to pump more than 100% in a day, and other various situations.

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Prior to the Genesis Sale or slightly after, I had not heard of the Origin-pre sale. The public sale was the next sale. What is the real purpose behind the origin-pre sale? To give more early users an opportunity to obtain SOV and a bigger community? If thats the case, I believe that all wallets that have NFT’s, that missed out on the sale, and will not be part of SIP004, should be given a chance to buy at the 3000 mark with a 0.1 BTC limit say for a day or 1 block timeframe. Next day, next block, the price should increase, again with limits of BTC (or even limits on the amount of buyers) first come first serve. Each day of six days until 10000 sats or sold out. Maybe tiered, second day, up to 100 buyers, third day up to 200 buyers etc. Maybe pick the people for each day in the order in which they signed up to whitelist? Just thoughts, thanks.

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Thanks @d2Man. There are multiple motivations, as described briefly in the document. One proposal that has been made is to allow the NFT holders to enjoy bonuses to liquidity mining when it begins.

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Did I understand it right with this Dutch auction - first 1k block with bid price starting @ minimum 10k SAT? Max price is open sky? Sorry - but english is not my native language… I would like to undestrand it.

Other way round - price starts at 10k and goes down.

So fixed price for each 1k block - descending with time?

I would see this as minimal price. Let the market decide max. price for each block. Biding starts from 10k and drops to 3k with time.