RECAP AND SUGGESTION FOR A SIP
I think we had an important and good discussion in this forum. Now it is time to summarise and take next steps.
We do need to raise the SOV tokenprice significantly in two years time to fund our future operations.
The general consensus in this forum is that increasing platform fees only, will not do the job. So while discussing plans to raise platform fees is important, it is not sufficient.
We need to do more.
The discussion in this forum was to add two fundamental characteristics to the SOV token and receiving a better valuation because of it:-
b) Some kind of token burning.
Most of the reactions are not in favor of adding Utility to the SOV token, and I think it is safe to say, most of the community members will also not be in favor to do this.
However, there is support for adding some kind of token burning.
So let’s take this one step further, what are your opinions on a SIP as described below?
To secure funding future operations, we implement the following changes:-
a) Raising the one-off (rBTC) fee for ZERO from 0,5% to 1,0%;
b) Use the increase in one-off fee to buy SOV tokens from the highly priceinelastic SOV/rBTC pool;
c) Add those SOV tokens to the Development/Adoption fund.
RAISING THE ONE-OFF ZERO FEE FROM 0,5% TO 1,0%
We need to accrue some of the value our top product ZERO creates to fund future operations and continue building Sovryn. And as illustrated below we only take a very small part of the value ZERO creates.
If a bitcoin investor needs a personal loan of 10.000 USD for 10 years, he would normally pay at least 6% interest per year. Using ZERO he now pays 0%. The value ZERO creates for this person is 600 USD per year, in total 6.000 USD. For this value creation he only pays a one-off fee of 100 USD.
The difference of paying 50 USD or 100 USD (0,5% or 1,0% one-off fees) to receive 6.000 USD value in this example, is irrelevant. The hurdle to adoption is trust in the protocol, not paying 0,5% or 1,0% in one-off fees.
Paying 1,0 % one-off to get a loan against 0%, indefinitely, is a game changer, especially when interest rates are increased worldwide. So, a small increase in one-off fees to help funding future operations, will have little to none impact on adoption, as trust in the protocol is the relevant hurdle.
IMPACT ON SOV TOKEN PRICE
As we implement these changes, investors will immediately start to assess the impact of these changes on the future price of the SOV token. The valuation of the SOV token will change immediately.
Buying yearly SOV tokens from the highly priceinelastic SOV/rBTC price pool will generate upward price pressure on the SOV token. Certainly when an investor expects the ZERO protocol to be succesfull, this impact can be significant. Investors will start assessing this impact on the future SOV price, as soon as the changes are implemented.
Adding the bought SOV tokens to the Development/Adoption fund is taking them out of the circulating supply (as the tokens are only released again from this fund, if leading to higher adoption and use of the protocol). This is some kind of token burning. Looking at other blockchaintokens, investors seem to value this effect.
As discussed in this forum, Sovryn is currently being valued as on ordinary share. The changes proposed in this SIP will immediately add to the valuation of the SOV token.
By actually purchasing SOV tokens from the SOV/rBTC pool there will be a constant upward pressure on the price of the SOV token. However, this will have to grow gradually over time, as usage of ZERO increases.
ADD PURCHASED SOV TOKENS TO DEVELOPMENT/ADOPTION FUND
Next to the positive effects this SIP will likely have on the SOV tokenprice, by adding the purchased tokens to the Development/Adoption fund, this will naturally have a positive effect on funding future operations.
I do not see a negative impact of raising the one-off fees for ZERO with 0,5%, I only see positive effects of these changes.
So, personally I would vote positive for a SIP like this.
Looking forward to your reactions.