[RFC] ThorFOX, a FOX tokenomics upgrade proposal


Steel-mainning here a bit (can’t comment on the doc)

  • The tokens only go up… on every sheet. :rofl:
  • where is the actual market realistic predictions? Negatives exist and as soon as we enter a bull it might be just enough time for a trap. Consider modeling a bear case in which RUNE price goes down, and also in which volume doesn’t grow, grows modestly, plus subsequent staking behavior.
  • Suggest working with @ProfMcCarthy on sophisticated modeling to feed into the starting parameters, if he hasn’t forked it already to tinker.
  • There is no research behind these numbers at all, they just look like a couple formulas yeeted into a projection table. that’s a good start but it is not sufficient. FOX holders will demand better.

Would love that, and it makes the technical work unlocking easier down the road too. Come to think of it, people love achievements, thresholds for rallying around for FOX holders, community members, and users would align messaging well. We can all imagine people pushing for more milestones on the twitters, this is a great implementation detail to add. Good idea.

sure thing! I hear you about the upside being potentially more valuable, it’s a valid point to make.

Ill break down the risks and add more later, I’m sure the community would appreciate some mitigation strategies to them.

Technical risks:

  • Smart contract exploit. even when forking several battle tested contracts, we want to be abundantly sure that there is no room for error. After watching kyber get hacked for a .0000001 precision error there is no wiggle room for mistakes or “let’s wait and see.”
  • Pro rata is tricky to get right so those parameters need a reliable formula without anything like rebasing on top.
  • Burning is a simple action to explain and really complex to get right. Some more research here is sadly missing even on the technical due diligence. Sandwiching is a huge risk with open market orders, especially as they begin to accumulate in size. I for one appreciate the simplicity but worth a bit more clarity.

Abuse risks:

  • Large FOX holders come in, dominate the rewards pool, unstake every month and restake, rinse and repeat. no benefit to broader community only whales.
  • 50% of distribution is enshrined, all pro rata claims are claimed quickly, we can’t pay contributors, they leave.

Operational risks:

  • Treasury signers mis-allocate funds to the wrong location, they did this recently.
  • Nodes go down or THORChain addresses have issues or
  • something gets lost with recognizing the addresses for issuing pro rata across two chain ecosystems.

Sweet, thanks for breaking it down. Loves me a good growth loop. Nice to see a flywheel that doesn’t require too many steps. Just for a sanity check, how would rising volume link to rising staking APR? Especially in a scenario where prices stay flat, APR would just stay the same, no?

Thanks for hearing me out. Would love to see an explicit callout in the final proposal that this is the “first step of several overhauling the FOX capital flow markets.”


Thanks again @0xFBL for the continual engagement on this, its super valuable!

It is a growth projection model so of course they only go up :slight_smile:

In all seriousness, if someone wants to make “negative” growth or more conservative growth models they can modify this as I suggested in the previous post and come up with that, but to be honest I don’t find that particularly useful here, because we have to assume some modest growth for any projection and I think the base case does that. Any model where we remain static or fall in growth from current levels is going to be obviously unappealing and thus not super useful for this purpose (and if anyone thinks that is the likely outcome then this proposal won’t be something they want to vote forward anyway).

As I said, I actually consider even the more aggressive cases quite conservative to what we might see in a proper bull market. On the other side, the base case is quite muted growth so I think that is represented here, but again anyone can modify it and create what they believe to be more “realistic” numbers, but just because you don’t see it as “market realistic predictions” doesn’t meant it isn’t, only time will tell that (none of us can predict the future after all). What is “market realistic”, especially in crypto terms, is going to be quite subjective for any projections and historically even “aggressive” projections have often ended up being far too conservative when we are considering past crypto bull markets.

I encourage anyone who doesn’t find the current cases realistic to create cases they do find realistic and share those, but you are basically making my point that I made when I posted it that some will find it too aggressive, and some too conservative and thus would encourage others to do their own tweaking (like I am hoping prof will).

Anyone is welcome to share research they think informs these models, tweak these models, share their own alternative models or even alternative proposals here, would love to see it!

Would be great to hear from you and others who want to see these params what starting numbers and volume triggers would make sense to you!

These technical risks will be risks with any smart contract or crypto implementation, those would be mitigated over time with audits and careful code but you are right that some technical risks will exist regardless.

I don’t actually see the issue of “FOX whales” dominating the rewards being a significant issue here, in such a case that there are good enough rewards that we are worried about this it likely means the flywheel is working and a number of larger FOX whales have been created benefiting the entire FOX ecosystem. I don’t think the DAO should be “anti-whale”, in fact we should likely want more whales as that would mean a healthier token ecosystem. Similarly even if we started at 50%, i don’t see that as a big risk as governance could change it at anytime.

These are the more concerning risks, and one’s that I think could be addressed, but even in the “worst” case here we are talking some weeks of lost yield, not some existential risk to the full treasury.

Similarly the whole point here is I think the risk/reward is asymmetric, we aren’t risking much at current revenue (at current numbers runway for paying contributors etc would not be materially affected in the worst case) but the reward potential for getting this right for the whole FOX ecosystem is potentially massive, and could potentially even make runway concerns a thing of the past quite quickly if the flywheel really gets going. That makes this, or some tokenomic upgrade along similar lines, more than worth the DAO taking that risk from my perspective.

Actually no that would be incorrect, staking APR would not stay the same if there was rising volume. In fact even if all prices stayed the same or even dropped, if volume was rising during that time the APR would also rise regardless of the price action of RUNE and FOX. While the prices can play a role in the staking APR in some cases, volume is the primary and most important driver in any of these scenarios (and you can see this by playing with the model variables to test that assumption).

There is a callout in the benefits section right now about this, but a bit more meat can be added to it for the next phases.

Hey friends - hope everyone’s doing well in DAO land.

I love the spirit and direction of this proposal; thanks @jonisjon for articulating a promising path toward building better tokenomics for FOX. In particular, I love how it helps more-closely align the DAO with Thorchain (a natural fit, considering the DAO’s current core competencies), and adds to potential value-accrual mechanisms for FOX.

One potential downside I see here is something that was also alluded to in the Potential Drawbacks section; there’s an opportunity cost associated with the work that this would entail. So were this to go forward, I would encourage the DAO to also prioritize non-Thorchain projects (such as further integration with Ethereum-based rollups) in order to diversify its risk portfolio. Similarly, there’s a “narrative risk” in becoming known as a token that’s ancillary to the Thorchain ecosystem. If ShapeShift winds up being a “one-trick pony” that (in the general perception of the crypto space) only does Thorchain stuff, that would be antithetical to its multi-chain ethos – and in the process, marry its fortunes very heavily to the RUNE world.

The main point here is always diversify…especially if this happens to work out spectacularly and everything is coming up roses. As we all know, the landscape and footing can change almost overnight in this space, and if the DAO has its feet too firmly planted in RUNE Land - both with respect to how it’s positioned from a business standpoint, and from a narrative standpoint (i.e. how people perceive the DAO and its token) - a winning strategy could quickly turn to a losing one if there isn’t a more robust and diversified business model.

But hey this isn’t mutually exclusive, is it? The work that @0xean outlined seems doable without a super-heavy lift. That should leave ShapeShift with ample opportunity to build in other directions.

Meanwhile, I love the very deliberate and cautious approach @0xFBL is taking. Smart contracts can blow up in spectacular fashion, as we’ve seen time and again. There should be careful modeling of what the worst-case scenario would look like in that case, as well as brainstorming about ways to mitigate those risks. Assume the worst-case will happen. What does that look like for the DAO and FOX holders?

I’m less concerned about revenue-sharing for a DAO that’s pre-revenue.; the Fox Foundation loans mean that runway isn’t super-pressing concern, and meanwhile (as Jon as some others have pointed out), a compelling Tokenomics mechanism could lead to meaningful treasury accrual down the road. Perhaps the larger risk here is that everyone will get too sanguine about runway and proper treasury management due to the adoption of a promising Tokenomics mechanism in a more bullish market environment. In other words - it would be beneficial to assume that this proposal is a necessary-but-not-sufficient condition for the DAO’s long-term success.

Building on Tim’s suggestions, it’s most definitely a good idea to model the ever-loving shit out of this proposal, both in terms of NGU and NGD. Similarly, I hope there will be a robust community debate about the details of implementation. I like how the proposal provides straightforward mechanisms for tweaking important parameters over time. At the same time, it’s also important to get certain elements right from Square One, including the all-important game-theoretical aspects.

Don’t rush the process. Apply due diligence and careful thought at every step of the way. We’ve seen countless examples of Tokenomics Clusterfucks because teams failed to do these things.

Lastly…I wonder: could this proposal eventually be extended to other ecosystems as well? Maybe this could serve as a template that could be gradually expanded as the DAO generates revenue from other sources/ecosystems.

I’m rooting from the sidelines and super excited to see this idea getting debated - especially by some very knowledgeable people. Looking forward to seeing how this evolves!