I propose upgrading $CU tokenomics by introducing a Buyback & Burn system with the upcoming migration to XAI. If approved by the DAO, 50% of all future ETH Treasury inflows will be used to buy $CU and burn it. This will reduce the total supply and increase liquidity simultaneously.
Motivation
Deflationary tokenomics are easy to understand and can be leveraged to attract more people to our ecosystem. By tying all revenue (from primary sales, secondary sales, LP fees, etc.) to the purchase and burn of $CU tokens, we can support the value of our ecosystem over the long term.
Details
ETH Treasury inflows come from various sources and represent the revenue of our protocol:
Primary Sales: Land Vending Machine purchases, with land type set against its own bonding curve. At current ETH prices, this represents $50M if all 1M land plots are minted. Note: We would need only 62,500 DAW demand at 16 lands per wallet.
Secondary Sales: Our new custom marketplace will charge a 4% fee on all NFT transactions. Players can use $ETH or $CU to purchase NFTs.
LP Fees: Our treasury earns 0.5% per trade in the $CU/$wETH DEX pool. These fees are in $ETH or $CU, depending on the trade.
Auxiliary Revenue: As our ecosystem expands, we will have additional revenue sources, including revenue shares from Unicorn Party and licensing revenue from merchandise and media deals.
If this proposal passes, 50% of all ETH earned by the treasury will be used to purchase $CU from the open market and burn it. For NFT purchases made in $CU and $CU earned from LP Fees, we will burn these tokens directly.
Operationally, this process will be handled semi-automatically. On a daily basis a series of bots will make purchases and transfer bought $CU to the burn address. Additionally, $CU collected from Secondary Revenue and LP Fees will be burned twice monthly.
Conclusion
Implementing a Buyback & Burn system will strengthen our tokenomics by creating a deflationary model and enhance our ecosystem’s attractiveness. I encourage the DAO to vote in favor of this proposal.
Thanks for writing this up SK, big fan of kill screen. I’m very much in favor of a CU buyback and burn. I think this will greatly support a flywheel, and align players interests with LG’s interests to maximize revenue. My question is, will this be implemented for a set period of time or for the foreseeable future?
Interesting idea here. My first thought is how quickly we burn through RBW/CU in loops. Which I guess leads to a question. What happens when we eventually have only 1 CU left. Do we make a new token.
This is not likely to ever happen. BNB coin from binance exchange also has a burn mechanism. you can study it.
As coins get burn the price increases and as price increases you are only able to buy a fraction of the coin to burn. you will never run out of coins to burn.
Since the purchase amounts are denominated in ETH, as the CU circulating supply drops (and hopefully CU price increases) each ETH will buy less CU. Of course, this assumes that CU price appreciates faster than ETH. But I don’t think that is something that needs to be worried about for a while. Future DAO votes could change the mechanism if we think it causes an existential threat down the road.
Do we have any counter measure on this just in-case it causes issues in future game loops?
eg.
Unicorn Party will require RBW/CU as rewards and fees.
Breeding & Evolution
Crafting Tribe Materials
Shadowcorn Minions
This is a future concern that if the tokens becomes high in value which is good. breeding may be limited. specially for new users. and right now that land game play sometimes require 250 unicorns. are these valuables also being considered? had an experience where users are discouraged because of the cost of entry to be “competitive”. will we still be able to find new users if the proposal is approved? [I was thinking we will get more high end users, but what is your thoughts on this?
For #1, the DAO could vote to change the mechanics in the future if issues arise. However I believe a strong CU token will be good for all Crypto Unicorn games/IP.
For #2, I firmly believe that are strong fairly predictable token (and thus tokenomics) are the best form of active user recruitment. Imo, the games is already out of the price range of the casual player due to needing 16 land and many many corns to be competitive. I think the best course is to acknowledge it and adapt to embrace it. While I’m not personally a user of LootRush, that and other setups that support stewards/guilds are a great proven way to get engagement. Again, if people can earn, we shouldn’t have issues getting players.
Thanks for submitting this proposal. I’ve also been wondering about about burns. When the Migrating RBW and Converting to CU proposal went live, I asked Aron about adding a CU token burn component along with it. I’m adding his reply here for reference.
I appreciate you surfacing this so I can give an updated response based on where we are today. Also, massive shout out to @skmd for putting this proposal forward!
In short, I’ve come around to strongly favor adding a core burn mechanism into our economic loop. What SKMD has proposed is a clear and transparent system design that ties revenue with $CU token deflation. This narrative I think is also easy to market and well understood by the crypto crowd. I like the idea of people understanding that every LVM mint, DEX transaction, nft sale, etc is directly driving value to our governance token. This feels like a “meme” we can propagate and bring further awareness to the ecosystem.
To wrap it up I’m in support of this proposal and excited to see if it passes!
Great questions, I’ll echo some of what SKMD said and give my two cents below regarding counter measures we can deploy into our game loops in the future.
Unicorn Party Wagers - It’s easy for us to adjust the costs per room down. If $CU value gets crazy high we could even introduce a soft currency with an exchange rate (to avoid lots of decimals in UI, etc).
Breeding & Evolution - I’ve long believed that we need to move away from static breeding and evo costs. I’m very interesting in finding ways to introduce a dynamic cost that accounts for things like $CU/$UNIM price as well as other on-chain factors like corn supply, etc. This is something that I think we need to address over the long term but can easily make necessary adjusts (as we have in the past) via a DAO vote if it becomes necessary in the short / mid term.
Crafting Mats - Easy to adjust tuning here to accommodate for whatever price of $CU. In the 4.0 release we are adding decimal support everywhere in UI to be prepared for this. Long term to avoid a lot of ugly decimal places everywhere in our UI we could also switch to a soft currency that would have an exchange rate on stash in / out to $CU. This would solve any potential issues we have from a UX/UI perspective.
Shadowcorn Minions - Same as above.
To your last question refer to my answer on #2. I feel like we should long term move away from static breeding / evo costs to effectively embed self regulation into the underlying mechanism design. This would insure breeding never becomes too expensive or conversely too cheap.
Just adding in to conversation to add another perspective to token burning. While I like the idea. I think there is a lot to look at here. Token allocations outlined in white paper were created in my mind with the idea of eventual decentralization of the tokens. By burning tokens we further the event of the game become decentralized farther into the future increasing majority share of tokens by large holders. Just something to think about. Not saying this is good or bad. Just something to think about when making and voting on this proposal.
