Authors: @Nour @PatB @nakamomo @n3bs @basedxeno @thealientourist
Summary
Transition the tokenomics of INV from a simple governance token with optional staking rewards to a rebasing and bonding token that drives organic demand for DOLA.
Background
Like most stablecoins, Inverse Finance is seeking better ways to grow organic demand for DOLA, increase cross-chain AMM liquidity, as well as finance the expansion of the Inverse Finance DAO operating budget. Inverse’s experiment with Olympus Pro during November is internally seen as successful and worthy of expansion.
Olympus Pro liquidity rewards today are funded via INV taken from the current Inverse Finance treasury, which retains a total of approximately 30,000 INV tokens. Inverse receives swap rewards from the SLP tokens it permanently owns as a result of the Olympus Pro bonds, but the supply of INV rewards from the treasury will be depleted in the short-term as our liquidity needs expand. A change in the tokenomics of Inverse is therefore contemplated as a way to overcome this INV token supply cliff.
Concept
- Transition the INV governance token to a rebasing token with a much higher rate of return than is currently offered with staked xINV in order to attract new INV holders. This transition provides Inverse Finance with the additional capital necessary to fund liquidity mining programs as well as expansion of Inverse Finance DAO operations. This updated rebasing model for INV is preferable to simply minting new INV tokens without protecting INV stakers, which may trigger negative price action on INV.
- INV which is staked in Anchor receives rebasing rewards and participates in the supply expansion. Along with the utility provided by Anchor and all other things being equal, this is a powerful incentive to stay staked.
- The transition begins in “Phase I” by increasing INV rewards for xINV holders and resupplying Olympus Pro bonds. These INV rewards will be drawn from the Inverse treasury at a predetermined but ideally constant rate. INV rewards in this phase will also serve to encourage unstaked INV holders on Ethereum to stake and for INV on Fantom to migrate to Ethereum and then stake.
- As the supply of INV tokens in the Inverse treasury decreases, the treasury will begin minting, in “Phase II”, new INV+ tokens for rebasing rewards and distributing them to xINV stakers. The reward rate will be according to a predefined schedule based on the total supply of INV.
- INV+ stakers can borrow DOLA against their staked INV+.
- A “looping” feature in a later (e.g. 1.1) version will be added to provide easier one-click additional leverage up to 11x.
- How it works:
Draft Elevator Pitch
- Inverse built something called a “positive sum” token which combines a stablecoin, a money market, and a rebasing token all under one roof but with a high APY, and you can use it as collateral and borrow against it at very low interest rates.
Objectives
- Boost Inverse treasury holdings in order to increase the supply of lendable DOLA
- Provide additional operating capital for the expansion of the Inverse Finance DAO
- Ensure that the Inverse Finance product line is optimized for maximum performance and competitive strength
Benefits For Inverse Finance
- Turbocharged Inverse Finance Revenue Model. Provides Inverse with a more coherent business model that combines three of the most attractive DeFi legos available (stablecoin, money market, rebasing token) into one, improving revenue returned to INV holders and attracting new INV holders. There is currently no comparable business model like this today.
- Boosts DOLA. Increased Treasury holdings leads to increased DOLA circulation and interest revenue. Improves DOLA borrowing options on Anchor and enables greater numbers of collateral types.
- Better Liquidity Strategy. Rebasing brings higher rates of (permanent) ownership of cross-chain liquidity & higher swap revenue from LM tokens.
Core Proposal Features
- INV+ rebase rewards. Inverse holders receive continuous rebase rewards, using a rebasing framework similar to OHM, as long as they stake their INV as INV+.
- Expansion of Olympus Pro bonds. Treasury INV will be used to expand the use of Olympus Pro to “own” our own DEX liquidity and expand the pairs used to purchase INV and DOLA.
- Inverse Finance DAO operations funding. Expanding our Olympus Pro bond offerings provides additional revenue in the form of swap fees which will be used to fund expanded hiring and other operational overhead to help us scale the Inverse DAO.
- Leverage Engine. A leverage engine (looping) feature for Anchor borrowers up to 11x with gas/health optimizing features will be added in version 1.1.
Summary of Rebase Reward Rate Framework
- Rebase rewards occur on a near-constant basis, not an arbitrary interval (e.g. 8 hours). The rebasing interval coincides with the creation of new Ethereum blocks Ethereum Blocks Per Day which today are mined 6400 times per day.
- The amount of INV+ rebase reward received by stakers is tied to the total supply of INV+ tokens in circulation, using the following (draft) reward schedule*:
| Total INV+ Supply between … | And … | Min Reward Rate | Max Reward Rate | Min APY (90% Staked) | Max APY (90% Staked) |
|---|---|---|---|---|---|
| 100,000 | 500,000 | 0.000001976 | 0.0000026613 | 10000% | 50000% |
| 500,000 | 1,000,000 | 0.000001684 | 0.00019760% | 5000% | 10000% |
| 1,000,000 | 10,000,000 | 0.0000010265 | 0.00016840% | 1000% | 5000% |
| 10,000,000 | 100,000,000 | 0.0000007671 | 0.00010265% | 500% | 1000% |
| 100,000,000 | 1,000,000,000 | 0.0000002968 | 0.00007671% | 100% | 500% |
| 1,000,000,000 | 10,000,000,000 | 0.0000009554 | 0.00002968% | 25% | 100% |
| 10,000,000,000 | 100,000,000,000 | 0.0000002496 | 0.00009554% | 6% | 25% |
| 100,000,000,000 | 1,000,000,000,000 | 0.0000001267 | 0.00002496% | 3% | 6% |
A DAO-run INV+ rewards committee can, similar to other rebasing projects, determine the optimal reward rates for a given day/week provided the rate remains within the band matching the total INV+ supply.
Timeline (as of Dec 30 2021)
| Deliverable | Duration (d) | Due Date | Complete |
|---|---|---|---|
| Develop v1 Concept, post to Discord | 3 | 17 Dec 2021 | 17 Dec 2021 |
| Gather feedback, refine proposal, complete requirements doc, post proposal to discourse forum for comment | 5 | 31 Dec 2021 | 31 Dec 2021 |
| Draft complete UX requirements, identify designer(s), finalize documentation plan | 7 | 7 Jan 2022 | |
| Post “master” on-chain vote | 1 | 7 Jan 2022 | |
| Complete “master” on-chain vote | 5 | 12 Jan 2022 | |
| Begin 30-day Migration Plan for existing INV holders | 1 | 13 Jan 2022 | |
| Deploy rebasing to testnet | 1 | 13 Jan 2022 | |
| Frontend Engineering & Design | 15 | 28 Jan 2022 | |
| Internal Usability/System Test on Testnet/Closed Beta | 14 | 11 Feb 2022 | |
| Deploy to mainnnet, complete migration of non-staked INV, public launch of INV+ | 3 | 14 Feb 2022 |
Revenue Model
- DOLA lending interest revenue
- Bond revenue
- LP token swap fee revenue
- Liquidation revenue on Anchor
- Treasury productivity revenue