There have been previous discussions raised on the Forums that have proposed a concept of allowing negative voted collections to be liquidated to fund the purchase of winning collections.
There was some good feedback in this thread, and I’d like to expand upon it with some concepts I’ve designed around it.
Two community desired mechanics in the system are:
Allowing for a percentage of the bottom voted collection(s) to be dynamically liquidated, with funds moved to a Revenue Staking strategy that then subsequently funds a future epoch’s yield.
The ability for members of the DAO to exit their position against a value equivalent to the TVL. If this was achieved in a sustainable manner then we would, in theory, bring token value more in line with the TVL organically over time. In theory (again) that would be beneficial to everyone and hopefully render this mechanic moot in the process.
What I’m proposing is that these two mechanics get jiggy with it and make a horrific, yet mysteriously beautiful half-Eat, half-Quit baby. Welcome: Eat Prey, Leave.
The concept of this is as follows:
- The bottom voted collection of an epoch is liquidated at a percentage based on the amount of negative votes to fund an intermediary pool.
- Token holders then have the next epoch to rage quit their token holdings
- At the end of this subsequent epoch, any residual funds will be added to a strategy that will distribute sweeping funds over the next x epochs, capping the amount released each epoch to prevent large sweeps on smaller collections (for example, selling 10% PUNK and sweeping BGAN wouldn’t make sense)
Imagine that in a current sweep war we see PUNK take the bottom spot. Through a calculation, this takes 10% of our current PUNK position, liquidates it into (W)ETH and creates a pool with a value of approximately $500,000.
This amount could then be targeted by rage quitters to exit at TVL, minus a fee based on the yield that specific collection has generated on average over a set period of time.
This penalty determined by the yield is proposed as it shows the damage caused to the DAO by actioning an early exit. The aim of this penalty is to promote exiting against collections that are not beneficial to the DAO, rather than collections that generate the majority of our yield. In this instance, PUNK is a good example as although it holds a high, stable price the yield that it generates doesn’t benefit the DAO in long term holding.
So continuing with our PUNK example, there has been 0.02 in PUNK fees collected over the past week. This is equivalent to roughly 0.1 ETH. If we assume this is average then the annual yield of our PUNK position is 4.8 ETH.
Below is a snapshot of values that were taken a couple of weeks back whilst initially looking into this:
TVL = 6,013 ETH
PUNK liquidation = 263 ETH
PUNK annual yield = 4.8 ETH
Tokens in circulation = 1,697,135
Current token price = $4.21
TVL token price = $6.71
I haven’t put together a formula for calculating the true exit price, but considering that yield is so low, I would imagine the following would be roughly accurate and we can determine a pure calculation if approved:
- Exit token price = $6.60
The amount of yield remaining following this rage quit epoch window will then be put up as sweep funds for the next epoch up to a ceiling cap, with excess returned to the Treasury, or stay in the exit pool for future ragers.
As collections become targeted more often, we will continue to have smaller and smaller allocations, which will deter motivation for voting against it. For example, a subsequent vote against PUNK after the initial 10% would instead only yield $450k → $400k, etc.
FLOOR tokens that are used to rage quit are locked in the contract to remove from the ecosystem / burnt.
I welcome any questions, thoughts and comments to this. This is something that has come from me individually, and I hold no ill will to how the team, community or public react to this.