Tokenomics Changes
We made a huge step forward in improving the tokenomics of RBW by reducing staking emissions by 60% via CUIP-016, but we believe there is more work yet to be done in order to set CU up for the best shot at long term success. We realize not everyone in the community was onboard for the reductions proposal, so we will not send this “Idea” post forward without overwhelming community support. Please read the following carefully and make your voices heard in the comments below.
Current State of RBW
After the RBW emissions reduction, RBW emissions to incentivize staking and LPing sit at 50,625 daily. The RMP sees roughly 65kof daily RBW volume, resulting in a net sink of 3.25k RBW per day. Between breeding and evolving, we typically see 40k RBW sunk each day. From the LVM, we see around 20 land mints per day, resulting in a net sink of 1k RBW. All in all, we are removing ~44K RBW from the supply each day versus the ~50k of RBW inflation.
With jousting’s implementation, there will be a 10% take rate on entries that flow to the treasury. Potions will likely prove critical to the success in tournaments, so it’s fair to assume the RMP will begin to see more volume and increase our tax revenue. It is also worth noting that the launch of jousting will likely increase breeding/evolution spend as demand for high stat corns picks up. However, we believe it will not be sufficient. If we set the lofty projection of a 3x in evolution and breeding rates, RMP volume, and land mints, we are still only removing 132k RBW from the supply each day versus the 50k of inflation… netting out to 82k of RBW deflation each day.
We, like the rest of the community, are extremely excited about jousting. However, hyper casual gameloops typically do not have the longest life span. With a 3x in growth of all RBW sinks across the board (ambitious projections), we would need to see a full month of these volumes to sink just ~2.46M RBW. The deepest RBW/WETH pool currently contains 16.6M RBW and 411 ETH, and we now have over 100M RBW in circulation, and the new staking rate will reduce demand to re-stake and lock for a full year. A measly 2.5% monthly deflation rate that is derived from lofty projections centered around a hyper casual game loop does not make us confident that this event will ignite the CU flywheel.
The LG team has done a fantastic job of balancing the UNIM supply by implementing in-game sinks and QE. However, the latter comes at a great cost to the community governed treasury. As of December 31 2022, we have accumulated over 90M of UNIM for protocol owned liquidity. 60M of the UNIM was acquired throughout Q4 for 233k USDC. We believe that there are much more effective use-cases for that money which we are going to elaborate in the following section.
Proposed Changes
We believe that increasing the breeding/evo/LVM RBW input costs is the best path forward.
For that reason, we are proposing to increase the breeding and evo RBW input costs by 5x.
This could result in less breeding and evolving, but we believe jousting will bring enough demand for high stat corns that it won’t be a problem. This would, in theory, increase the RBW daily sink deriving from breeding/evo from ~40K to ~200K per day at current breed/evo rates. If we get a 2x in breeding and evo demand in lieu of jousting (instead of the 3x used in the ‘Current State of RBW and UNIM’ section above), it would end up being 400k RBW sunk each day versus the ~50k of inflation. After 1 month, we would see net deflation of ~10.5M RBW versus the ~2.46M projection above. After RBW deflation takes hold and things become unaffordable due to RBW appreciation, LG could readjust breeding and evo costs accordingly.
For the LVM, we are proposing to increase the RBW input cost for minting common land 4x, rare land 8x and mythic land 12x as seen above.
While this change could temporarily lead to reduced LVM minting it is our strong belief that this change is needed to account for the strong decrease of the RBW price.
Additionally, we are proposing to halt the UNIM QE and instead use these treasury funds to provide cash prizes in the upcoming pvp games. The UNIM QE bleeds treasury funds with no positive effect on the economy. By providing tangible cash prizes for pvp game loops instead, CU gains a marketable tool that makes people want to compete, creating more demand for corns and making the breeding game more attractive.
We acknowledge that these changes appear drastic. However, we believe that the upcoming updates and features that CU plans to release over the next couple of months will lead to market demand for Lands and Corns. The resulting increase in floor prices will generate arbitrage gaps between the market prices and the production costs which will ignite the land minting and breeding flywheel. The ultimate goal of the proposed measures is to increase the spot price of RBW. This will increase our ecosystem fund’s value and enable us to fund further development for 2nd party games, strengthening the CU IP and creating more and more utility for our collective assets.
Conclusion
It has been a very tough year for crypto, and even harder for the early adopters of Crypto Unicorns. We need to take very drastic steps in order to right the ship, as many holders in the community simply want out. We face heavy headwinds with any meaningfully positive price action, as many users would be willing to cash out for 50% losses instead of 98% losses at this point. We believe that the increase of breeding/evo/LVM RBW input costs across the board will force users to market buy RBW or use staking income that could be sold otherwise. This gives us the best chance at long-term success. Our immediate focus should be making RBW as deflationary as possible to ignite the flywheel, and this proposal would do just that.
Excited to hear the community’s thoughts and concerns! Please join the conversation below.
This proposal has been co-authored by swmartin19 and DefinitlyDABOZZ.
