Solving $path utility and price ($vePath and trust)

Hello everyone. I would like to continue the discussion from the dao forum here, gauge responses and then create a formal PIP proposal based on the feedback.

Premise:
$path is a treasury-backed token, and therefore $path holders own a pro-rata portion of the treasury. We have seen many projects implement this form of tokenomics, yet the price of these tokens rarely reflects the portion of the treasury that it’s ‘meant’ to be backed by, especially when markets are down. $path is no different, with the token currently trading 4x under treasury-backed value and with daily trading volumes rarely exceeding 15-20k. This is in addition to inflationary tokenomics. Recently, there were some changes to lock up and vest staking rewards, which certainly helps with farming and dumping (for now!!!) but once the unlocks come, people would likely dump their rewards unless something is done. Trading volume is also very low, which suggests that people simply don’t see value in the token itself.

Problems:

  1. Token utility, value and incentive misalignment.
    The three parties: Protocol, token holders (investors) and scholars. The protocol’s treasury is performing extremely well and scholar numbers are growing. Token holders are currently on the sidelines in a more precarious position. It’s imperative for incentives to be aligned amongst all groups for a successful project/business. Right now $path is a valueless inflationary governance token, a combination of which will hurt investors long term. There is little incentive for pathdao team to worry about the price of $path as it has little bearing on operations, a massive benefit to the longevity of the protocol. However, this means investors will feel hard done by and generally be unhappy, and, perhaps, rightly so. In addition, it will be hard to use $path as an incentive, for example, for alpha finders. Based on the discussion in dao forum chat, some believe more $path rewards should be allocated to alpha finders, as price decreases, the amount needed to fund alpha finders etc would need to increase. A death spiral would occur. Currently, the only utility for $path is to stake it for more $path, a losing trade in the long run if utility isnt added.

  2. Treasury-backed? Says who? (Trust)
    With almost no accountability in crypto, we do not have luxury to assume investors and potential investors will trust the PathDAO team. Treasury-backed tokens simply do not work in its current form (see $time, $mag, $Jade, and $path, and countless others).
    In the real world, stocks and shares function in a similar manner, only that there is more trust and accountability. This generally means that stocks will trade based on performance and company asset values. Therefore, there needs to be other ways from which to derive trust, and do so in a sustainable manner. Trusting in a multisig has proven to be pretty weak (see $time)

Solutions:

  1. $vePath for revenue sharing (like curve). All or a portion of the protocol earnings would be allocated to vesters. Obviously, keeping funds within the treasury for compounding growth is the most ideal situation. However, there needs to be some give and take. If revenues are high enough, people would buy $path and lock them into the escrow contract, decreasing supply and increasing price. Price also is great for marketing as people would notice a mooning project (Coingecko trending etc). This benefits PathDAO because they could allocate less tokens for incentives, and, in my opinion, would allow pathdao to sell $path on the spot market or otc to raise even more funds over time. Curve cannot sell their $crv on the spot market because the price of $crv is directly correlated with TVL as LPs would pull their liquidity if they aren’t getting decent returns. We don’t have that issue, and its a huge strength. It might sound harsh to ‘dump on token holders’ but by offering revenue sharing, token holders would be confident that those funds would be recycled back into the protocol to generate even more income from scholars.

  2. Focus on bringing trust to the team through the addition of well-known crypto (gaming) names to the multisig. This would likely add legitimacy to the project and bring more eyeballs to the project and token. This also means the team doesn’t have to change current tokenomics model and could leave it as ‘treasury-backed’. This doesn’t add utility to the token itself, but it brings legitimacy and therefore trading volume, and therefore happy investors/traders. Could be great for marketing too, depending on how high profile the person is.

Final remarks
My preference is number 1, and I would love to hear some feedback. I would like to add, this implementation would not need to go into effect immediately but ideally a date would be set for this to be done.

I have a few questions for readers:
-If you prefer $vePath, how much would you allocate to this pool? 100% 75% 50% 25%? other?
-For the issue of building trust, do you have any better suggestions?
-Would you like to see both options implemented?

I do not condone using treasury funds for buyback and burns. Buybacks are ok if to sell at a later date as a trade on ourselves, but without token utility, it would be pointless as the token would likely keep going down.

Cheers everyone.

*EDITS:
-Some have asked me how veCRV revenue sharing functions:
Every time a trade takes place on Curve Finance, 50% of the trading fee is collected by the users who have locked their CRV. the longer you lock your CRV into the vesting contract, the more revenue you receive. The amount you get is expressed in the image below. I suggest something similar for vePATH. Reward those who lock their $path for longer.
image

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I would encorage you to continue this discussion, I think most people are not looking into this forum regularly but this is a conversation that could greatly improve the DAO.

I do think we obviously have a problem when we are for weeks and weeks trading 4 times below the treasury value. I dont think I have a opinion how to fix this and not sure if this proposal is the best resolution for the problem, it might be but I truly dont know.

Maybe other DAO members and the team could give more input of what they think about this situation and lets get this conversation going

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Thanks for writing this and opening this up for discussion.

The two ideas are quite good. I will provide my input for these two.

Idea 1. It’s good but wonder if this can be implemented in later stages when PathDAO has grown and progressed along the way. At this point, I feel like we are still on growing phase, hence, putting back capital for the growth of PathDAO is more important than revenue sharing. I would relook at this coming months and years. I am sure PathDAO team has their own vision and goals for every quarter etc, Their input will be very useful for this discussion.

Idea 2. For multisig wallet, it can be more people. But I would also add members in the community. We know most top management/famous people have access to capital most time, but having a normal member who can represent the mass community will add trust to the team.

I too do not condone burning of tokens.

Please add on your inputs on this. Nice to see some real discussion happening here :slight_smile:

Thanks.

CitF

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thanks for the ecnouragement buddy

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I agree - something needs to change to improve price discovery / volumes of the token. I’m not sure what the “best” way is though - whether it is providing access to some of the deals that Path is getting, revenue sharing of income, or something else….

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100%. Admittedly, im more defi than crypto gaming so I took ideas from where I know. Im sure there are a ton of other usecases that could be implemented that im unaware of. I believe that revenue sharing would be a massive USP for $path. It would truly then be a DAO, where everyone get a share of the scholars. At the same time, I understand the need to grow the treasury and should be the priority. with revenue sharing, let the team sell $path and fill that sucker up.

Big thanks for the proposal, high quality and valid points!

On token utility, I’d suggest revisiting the proposal of revenue sharing 6-12 months down the road, for two reasons

  1. Current staking rewards are already incentivising token holders to hold/buy, with rewards being locked for 12 months. Emission of staking rewards only end 11 months later
  2. We are seeing lots of great opportunities in the market to deploy dry powder, relative to our treasury size. The opportunity cost of revenue sharing is high in my opinion, but we should revisit this once the treasury gets multitudes larger

On trust, we believe in extreme transparency, hence the dashboard app.pathdao.io. Compared to other industry players who share treasury report only once a month, we update our dashboard on a weekly (eventually live) manner, alongside wallet addresses for all assets & funds. Expansion of multisig is another option we could explore upon identifying the best candidate(s) who has the best interest of all stakeholders (investors / scholars / gamers / games) and designing the most efficient processes

I agree today, $path utility is limited. That said, as we explore and adopt polygon (or other L2s with lower gas), we could start adding utilities to our ecosystem play. Imagine staking $path to have free access to our fintech services or getting a higher deposit APY (deposits are then lent to scholars)? We are working on these

Read our 2022 ecosystem vision here

It is such a beautiful sight seeing thoughtful suggestions from the community, and happy to discuss further

Weekee

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TY for the reply buddy :slight_smile:
I like what youre saying but a few points I’d make:

  1. rewards holders in the same token theyre staking is almost always ends up in dumping/dilution etc. So I would not say that its an incentive to buy. Please look at the volume on uniswap. It’s not working.
    The positive side of it is that many have staked, but at the time of unlock, if nothing has changed with regards to tokenomics/utility, expect mass dumping. However, we have a lot of time to get things in order before then but if we put this off too long, a lot of people will get rekt.
  2. Yes, treasury growth is key and dry powder is too. This is why, I believe, if you update tokenomics to something of real value (such as revenue sharing with token locking, the Pathdao team should be allowed to sell $path on the spot market at their own discrepancy to fill the treasury. Revenue and token price are not correlated and therefore this could be a win-win situation. $path hits $50m, $100m. No reason why the treasury cant sell a few million worth on the market to increase the treasury which would be recirculated back into the businesses, creating even more revenue for stakers. you can see the positive feedback loop. And because people will be buying and staking, the token price will return to whatever value people are willing to buy and stake for.

I agree with waiting btw, but I think plans should begin to get hashed out now so there can be hype leading up to it. :slight_smile: Thanks again dude

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There’s some merit to this type of approach with a vePATH at some point in time. But there’s a lot to think through here to design tokenomics that fits with our long-term goals.

For an example of a similar approach to get people thinking about how this might work, you can see what GuildFi is doing – The GF Token — Connecting the GuildFi Ecosystem | by GuildFi | GuildFi | Feb, 2022 | Medium. We have different goals and setup than GuildFi, but it might get your creative juices flowing with ideas for $PATH.

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There is some good rationale in this, but I think it is hard to know if it is too early or not for some of these suggestions. You don’t want to unintentionally inhibit the ability of the treasury to compound from its small size today. Further, this team is clearly working on several distinct initiatives, some of which have visible near-term rewards and some which will not be quantifiable for >1 year from now.

Perhaps it is worth looking at some proposals passed at other asset manager DAOs. More relevant I think would be Merit Circle which has passed two proposals. I don’t necessarily endorse this 100% for PATH, but they have useful ideas, parts of which may be worth considering for PATH.

For example:

  • As profits start being utilized, I think it could help to pre-plan how a portion of these could be used to build the non-native token treasury or allocate 10%-15% to buybacks if the price is a certain % below treasury value.
  • Also, I think the idea of burning a % of the unallocated community rewards that unlock each month can help with inflation.

MIP-7 - Sustainable future vision

MIP-6 Early Stage Investment De-risking Mandate

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Hey! thanks for the reply.

I agree growing the treasury is paramount at this stage, but buying back $path wouldn’t be a good use of funds unless the plan is to bet on our own token and sell at a later date. This could easily drain the treasury too, particularly when the unlocks happen.

Compounding the treasury is smart, but I want us to be open to the idea that both of these things are possible at the same time. The protocol currently has 3 ways of growing the treasury to date:

  1. profits from investments
  2. revenue from scholars
  3. liquidity pools

If we were to only use the revenue from scholars (or a % of it) as a revenue share, it could create a better incentive model for token holders AND the team (treasury). Token holders/potential investors would be incentivised to buy and lock away their $path, this increases the price. This added utility would also improve trading conditions, which would also grow the treasury. The treasury currently owns the entire V3 liquidity at 1% trading fees, meaning that trading volume of $1m daily in that pool would earn the treasury $10,000 per day or $300,000 per month (claimable in $path and $eth). It would also earn trading fees for those in the V2 pools (this is the same as the current scholarly earnings per month). Not to mention, that when price increases so does awareness of pathdao. It also increases the chance for the team to sell $path OTC(or on the secondary market) at a reasonable price, some of which have been collected from the liqudity pools.

This doesnt have to be implemented now, but I believe creating a plan for something like this would benefit the protocol overall, even if 100% of revenues arent being allocated to the treasury.