SIP XXXXX Introducing Insurance Fund Mechanism and SOV HODLERS reward (Edited)

I really like this Idea and its a great motivation to Stake long-term. :slight_smile:

1 Like

I know, you’re right about all that; I just don’t see yet what is bad about it. If the dilution you describe is the consequence of new people staking, it’s not a bad thing, it’s a good thing. I like to have a Stake in a platform that grows in value, and the DAO to become evermore decentralized.

If it’s about financial incentives instead of voting power, note that if more users come and stake, value of SOV goes up, so, yes, you get less and less of it, but what you get is worth more and more.

2 Likes

I never said that more people staking is a bad thing, in fact, I would LOVE to see more people staking SOV. The reason for people to stake their SOV is to vote for the future of SOVRYN and for getting rewards back in the long term. The motivation to share this draft proposal was for the rewards part for the long term. Burning mechanism factor works through staking, the more people staking their SOV, the greater the burn. So yes, please do stake your SOV ! I think the point here is to see what long term stakers think about it, if they are going to be happy by getting reduced airdrop/fees as the time pass. Of course we want more people to stake their SOV and to be able to decide the fate of SOV through voting, but on the other hand we need to look upon the reward part long term, and, in my opinion, make it to look more sustainable. Maybe you would say it is too early, but the ‘‘problem’’ is here, when you are going to face it is a different question, you want to face it early or later? I do agree that staking SOV drives value of SOV up, but your SOV are locked for a specific period of time (it can be 1 month, it can be 3 years), you can’t benefit directly from it unless you unstake your SOV with the penalty consequence. The only way you get benefit is through SOV rewards, airdrops and fees. The last 2 in the long term will become less with more people staking. Is it still going to motivate people to stake their SOV? especially when the SOV rewards at some point will not be there for the new stakers as the amount of SOV is not endless.

As Martin mentions, your staking rewards only get diluted if more people stake. And if more people stake, the SOV circulating supply is decreasing and SOV price is increasing. So there is a natural balancing mechanism already that, to me, addresses these concerns.

As for the point of rewarding SOV holders: it’s interesting. I do wonder, personally, how many Sovryns just hold the token and do not Stake, Provide Liquidity, Trade, Lend, etc. Considering the sizable rewards in Staking and LP’ing, I would assume most people do opt to use their SOV for one of the two.

It would be nice to see some figures as to how many Sovryn holders currently just hold and do nothing else. If those figures exist.

If it’s true that many token holders are conservative and just hodl - because they want instant access if need be, or don’t like the risks of Staking, LP’ing, Trading. Then it might be worthwhile to introduce a SOV market for Lending and Borrowing. (Is there a reason it’s not included in the lending protocol yet?)

Lending out your SOV would be rewarded with a low, base-rate APY, and carry no risks of impermanent loss, staking lock-ups, trading losses, or anything else. It would, de facto, be the [JUST HODL YOUR SOV] option of the protocol, and could be communicated as such. With a prominent button on the front page or portfolio page, etc.

5 Likes

From the world of Tradfi I hodl cash at the bank with no interest reward. My reward for doing this is the opportunity and ability to excercise funds at any time and, as I choose. (The opportunity cost of holding cash). EG, my reward is the ability and opportunity to buy the dip. Is this not the same reward available to liquid Sov hodlers who can sell/swap/stake, etc at any time of their choosing?

3 Likes

I believe from my short experience in crypto that we want SOV to be a speculative token as well function as a token to govern the sovryn protocol properly. As price goes up encourages more stakers, brings more users, brings more traders, brings more liquidity, brings in more long term stakers. If we really want SOV to be a top 10 crypto project one day in terms of marketcap. We going to need speculators. Sovryn is very different to NFT projects and meme coins. Sovryn actually provides financial services to best form of digital money there is which is bitcoin! I welcome speculation and hype. Maybe I am wrong, but i dont see how else we will become number 1 Defi project without some speculation tokenomics too.

More discussion on the amount of sov tokens being burned would be helpful. I have no idea what the appropriate amount of SOV to be burned even if its 0.001% of total supply being burned. Its a good marketing opportunity to take advantage to bring in more users to sovryn. But then I do see the other side of the argument that the supply is already fixed after 7 years and funds have already be allocated. Still 50:50 for me.

1 Like

The logic of burning a voting tool is really problematic and controversial.

SoV is not a cryptocurency! There is no need for it to be deflationary.

I really do hope that the community sees how this proposition is problematic and how it might be perceived by the general public.

I do not think that Sovryn targets short term speculation.
That is the job of memecoins.

If sovryn becomes that , then I am out of here!
( I deleted the post because i felt i was too emotional about it, please don’t take it to heart, i will leave it on for the sake of the conversation)

I agree that SOV is not a cryptocurrency. Its a tool. In this SIP I raised some points that, always in my opinion, I believe they can help SOV in the LONG term. Sovryn is not a speculation coin. The team is building all the time and delivers results non-stop. I do accept people that do not like some proposals tho, which of course is respectable. I raised my points on why I believe those proposals can bring benefit. Can they be better ideas on how to improve certain situations? I am absolutely sure they can be, and that is why we are having this discussion. Most of us are here for the long term. I am one of them, and with that in mind I tried to create this SIP. I respect different voices, and from my side I would be keen to create a proposal that will make (almost) everyone happy.

Would it be more helpful to convert the factor into mechanism that will be used to buy back SOV from the market and give them back to SOV stakers in 78 intervals and at the same time lock SOV into an insurance pool? So in that case the factor is split into a 50/50 use case. With some limitations of course. Such as (Examples):
-The factor cannot be used if the active circulating supply is less than 30%.
-Insurance Pool has a target, e.g. 5% of total circulation or XXX number of SOV. When this target is reached, insurance pool factor share to be used for X,Y,Z purpose

SOV stakers will benefit from it, and this will provide rewards for more people, including new stakers in the long term and at the same time there is a creation of insurance pool that of course will benefit Sovryn, while locking SOV into a long period.

Happy to discuss this further, I am of the opinion that burning can be beneficial in the long term, but I am happy to discuss alternatives or suggestions, like the most recent idea that I shared on this post, which I do not claim it as my idea but still I find it beneficial.

Thanks for bringing in the topic of Insurance Pool SOV_HOOLIGAN.

To me Insurance pool makes perfect sense to have and burning mechanism as i explained earlier also makes sense for me until proven otherwise.

Insurance pool is something we should think about at some point, if we prepare for it earlier the better it will be for us.

I think the best way to move forward with this is for the protocol itself to earn revenue in some form such as from a small fraction of the fees charged by the protocol, and then use this protocol revenue to build up insurance pool and SOV buy backs, which then can be used for whatever is best for the platform say like rewarding stakers or for additional projects etc…

3 Likes

Burning some tokens out of the adoption fund and reduce SOV yield farming rewards might be a better way to go. It could be good for marketing, but might cost some users that want financial incentives to start using sovryn.

To me, a long term view does not match with burning SOV out of the development fund that would otherwise be used for new/improved tech and paying dev’s.

It’s basically forcing price appreciation at the cost of technology appreciation. Does not end well. Never. Let Sovryn continue to grow and develop sick superpower-sub-protocols and the price will grow organically year over year, just like bitcoin will do.

My criticism towards a burning mechanism (benefits centralization instead of decentralization) still stands and it’s not suited well for a governance token. But i have to agree that burning is a cool mechanic if implemented correctly. Burning happens in bonding curves, maybe we can make something out of it…

2 Likes

i have noticed two areas tha lack attention at the moment. two areas that would need attention as they will be very important in the future. Those two are:

  1. An Insurance fund as you wrote - an insurance fund that would cover loss of funds due to (god forbid) hacking or mistakes. This would add value to the protocol in my oppinion.( to avoid minting of new sov tokens at any cost)

  2. At the moment there is no obvious way to fund the protocol in the distant future - 15 -20 years down the line. The funds (development, adoption, founders…etc) will finish at some point(this is another reason why i don’t like burning sov from any funds as you would simply remove value from sovryn whithout certain added value). Time when the protocol will have to rely on the revenue it is producing to further inovate and maintain. If I am not mistaking all the fees are being collected by liquidity providers and stakers.

These 2 issues have been on my mind lately as they are important in the sustainability of the protocol.

I think that your ideas could help solve the issues above, if not fully at least in part.

2 Likes

Such a brilliant topic post @SOV_HOOLIGAN . I would love to see this bright ideas implemented as it would def be a WIN-WIN scenario at the end.

I am in full support and will keep :eyes: on .

:love_you_gesture:

I don’t understand. With what funds are we using to buy SOV to burn? Where is that money coming from?

2 Likes

The initial idea is to increase platform fees by the percentage factor according to how many people staking their SOV (0.25% to 2%). Yes I know that the team is trying to reduce platform fees as much as possible, in my opinion, 1% or 2% of increase on top of any platform cost will not give away our edge. If you have to pay 10$ on platform fees, with what factor you will have to pay 10.10$ with the 0.1$ going to the buyback pool. If you have to pay 0.50$, with that factor you will have to pay 0.505$ with 0.005 going to the buyback pool (1% example)

Alternatively, it could be from any fees pool that is supposed to go to stakers/LP providers - but thats not something that I would personally like as I see it as last option. I would prefer to explore different options before we examine this.

I do agree with you that those 2 issues are important for the sustainability of the protocol, I totally believe that the introduced factor can help towards solving those issues. Will bring more value to Sovryn and fund the protocol in the long term. Something like a piggy bank, we store funds but we do not touch it, until there is a real need to break it. But in order to touch that piggy bank, we will need to vote a different SIP and state the reasons of why we need to break it with a transparent list of actions/deliverables.

1 Like

So far I can see some ideas that can really be beneficial, I gathered them below:

The main reason for this SIP was to discuss some ideas, and I am pleased that people responded and provided a valuable debate on what is needed right now. So, I gathered your thoughts and turned them into a proposal:

  1. Introduce the HODL YOUR SOV option , which will give you the ability to lend out our SOV with no risks or lock-ups. A low base rate APY will be introduced, and people can lend their SOV. The idea is, everyone must feel inclusive, and those who hold SOV are part of the ecosystem.

  2. Instead of Burning Mechanism, implement an Insurance Fund Mechanism. This mechanism will buy back SOV from the market and store them into an insurance pool . This procedure can do this with a fixed trading fee on every action in the protocol (staking/swap/margin etc.). Suggestion to have a fixed fee of 0.5%. The maximum limit of SOV that can be stored in the insurance pool is 15,000,000 SOV. When the boundary of the first pool is reached, a second pool will be in place to store different assets such as BTC, which will continue gathering funds for the protocol with an ultimate goal to use those funds for development/adoption.
    It is proposed to reduce the fixed fee to 0.3% on the second pool, and there will be no limit on how many funds the collection can store.
    It is proposed that the SOV pool will not be used in the future and will only act as a guardian in case of hacking or mistakes and avoid minting new SOV tokens. The second pool will be available for use with a SIP after stating with every detail how the pool’s budget is going to be used. In the event of unused funds, any funds must return to the pool.

  3. SOV is the ultimate currency of the platform. It is proposed that any new tokens have a SOV/New token pair like MYNT, ZERO, etc.

Let me know your thoughts or anything else that you would like to see differently.

3 Likes