$MINomics Research Part 1: Exploring Tokenomic Models and Revenue Sources

You could match the min rewards distribution schedule to the ADA rewards generated by the ADA usage (e.g. batcher fees, pool staking rewards, swapping fees). It is not uncommon in Private Equity deals when one can not agree on valuation that pref shares are issues to the investor along with each $ invested – I would suggest here that min is emitted for each $ADA profit generated by the dex (based on the current exchange rate). If the dex is successful min emission is fast if dex usgae is lagging min emission is slowed.

Love seeing all of the community feedback. Here are some additional thoughts.

  1. A multi-token solution makes sense to me… MIN for liquidity, MIN instead of an LP (think MIN/ADA or MIN/Stabled) as your ‘staking’ token, veMIN (or preferable veMIN_LP) as your locked vote escrow token.

This model would allow a couple things. MIN would exist strictly for farming rewards and as a liquidity offramp. MIN inside of an LP is essential to the health of the DEX. We should be rewarding LP providers by more than just MIN Liquidity Mining rewards. I think at least some portion of the ADA staking rewards should go to them as a minimum.
The most important concept here to me is veMIN, preferably veMIN_LPs. I am proposing a way of time-locking your MIN LP (say anywhere from 2 weeks to 1 year). The longer you lock, the more voting power and rewards you get. Voting power would determine the bi-weekly farming emissions, instead of it being strictly formulaic. veMINLPs would get some portion of ADA staking, maybe some batching, and definitely the 0.05% of fee revenue.

Addition… this veLP token could be bonded. Meaning, at least initially, the only way to get veMiN/ADA-Lp would be to bond ADA for veLP. Think of it like the LBE concept kinda. User gives 100 ADA and receieves 100 ADA worth of veLP. Minswap takes the 100 ADA, pairs it with 100 ADA worth of MIN and gets to keep half of the LPs as POL.

I am a fan of WL tokens that are collected as fee revenue to pass through to veMINLPers. So we would immidately WL ADA, MIN, stables. THen we could even WL some of the tiger farm tokens (this WL could be voted for my veMINLPers since they are getting these distributed to them). What a WL token would mean is that any fees collected into that token would not be swapped into ADA/Stable, they would just be passed through to veMINLPers. Every token not on the WL would be swapped into ADA/Stable and then passed to veMINLPers.

In conclusion, I love the idea of locked tokens, but if we could keep the utility of the locked token (ve style) as a liquidity provider, I think thats a win/win. We can give some utility to these veMINLPs by allowing them to control some or all of the emissions. However, some rewards to non-locked LPs should happen as well. I think all LPs should get some small portion of ADA staking rewards at a minimum. Maybe MIN LPs get slightly more, or get batching on top or something.

One final thought, I think emissions should be dynamic. We should think about a formula based emissions schedule, not just some linear emission schedule like most dexes do. We should experiment to see if the amount of MIN we are paying out as emissions is really what we need to pay out in order to keep TVL and volume where it is now.

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but in that way the minswap traders can use there min. right now there is no use case for the min token. And the people just sell it. If the batcher will sell there MIN tokens there is at least a reason for the trader to buy it and us it for there swaps.

yes but in the final wash it wont make any difference in terms of market demand at large, especially if the min ends up in the hands of an entity with operating costs and not simply one seeking pure profits. Making Min a means of exchange is pointless if it is not also a store of value.

you are right. This is a good point

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if there will be staking should be as same as Cardano, no locking, i think there should be a certain multiplier calculated every epoch w/ max epoch (same as $drip)

I prefer for no staking as it does not affect network security (as per my knowledge) and it will only contribute to inflation. Maybe the team can look on the $kcs approach, portion of the fees for buyback/burn and portion given as dividend but not so sure if it will be applicable on the current volume.

This would have been great if it was implemented in the initial stages. But for those of us who have been holding and/or DCA-Zapping our Min rewards into the Min/Ada pool in anticipation of future demand for Min it would be a kick in the dick. If the revenue of the DEX will accrue to a secondary token, then Min price will tank as people seek ADA liquidity to participate in the revenue sharing token. This is not acceptable this far along.

Sorry, rereading your post a few times, you’re drawing a distinction between escrowed LP (veMin) and bonding?

We could also buy your MIN/ADA LP tokens in exchange for the veToken. This enhances Protocol-Owned Liquidity, and pays you in a revenue earning token.

A word on Protocol-Owned Liquidity, or POL. Most people on this thread are dismissing it outright, mostly because they’ve never heard of it and don’t really understand it. Protocol-Owned Liquidity, on Cardano, is a source of ADA staking that never leaves the protocol’s control. Gotta get that 4.5% more ADA. If it is in MIN/ADA LP tokens, it means that MIN has been taken off the market, reducing sell pressure. Since it’s in an LP, it is constantly earning LP fees for the protocol that could be redirected to MIN holders. It contributes to the maintenance of deep liquidity in the pools…if the protocol owns it, there’s no danger of mercenary capital pulling it at a random time! Finally, if we expand the POL to other tokens (which we ARE ABOUT TO DO, as that is how Launch Bowl products are designed), all of these advantages are applied to other pools on the dex.

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this is helpful thank you. However, does this generate demand for Min inherently (redistributing fees to purchase the token and provide a source of stability on the buy side) or incentivize holding min in order to receive the revenue, thus preserving a measure of counterparty risk? My proposal focuses on drawing protocol revenue into demand for the token, it is much simpler. Where as POL and escrow LPs is a bit more convoluted, wouldn’t you agree?

Every buy back and burn protocol I have seen has failed. Here is one that I personally owned last year: Polycat Finance Price in USD: FISH Live Price Chart & News | CoinGecko This token was once $60 (Polygon defi summer was a bit crazy, okay?). It had an aggressive buy back/burn program. It is currently worth 16 cents. It also had a relatively small, capped supply. Why should any protocol spend revenue (or ADA staking rewards) to buy their native token? Minswap already owns billions of it’s native token, it doesn’t need more. Yes, we need to generate a demand for the token. You can do that by offering a revenue stream associated with holding it.

Is there still counterparty risk, yes. You can contain this by long, possibly decaying lockup periods to gain the full revenue share advantage(Look at the DANA/exDANA concept that Ardana will launch with), you can constantly grow the protocol to increase trading fees and ADA staking rewards and increase locked MIN revenues, and we can drastically decrease the amount of MIN emitted for yield farming. I made a comment related to this on the Discord which I think I’ll reproduce here:

The max supply is irrelevant to current price. What is relevant to current price is the Emissions Schedule of that supply, which is 5% of the total supply over the first 5 months of yield farming. This is VERY AGGRESSIVE emissions, and was done so after looking at a dex on Avalanche, I think, which had a similar aggressive schedule on launch. Yes, it made the APRs look pretty awesome, and attracted a lot of liquidity providers initially, which was why it was done. However, the issue here is that the rest of Cardano defi has essentially failed to launch. Unlike Avalanche, which has a thriving defi ecosystem, we here in Cardano have…a few dexes. So all of this supply has had nowhere else to go, has been poorly absorbed by the holders, and then we had a bear market on top of it.

Now, the emissions of MIN have been decreasing monthly, and two more decreases are already programmed into the schedule. In additional to potential revenue sharing for MIN, we can also change the emissions schedule rather radically after August if we want to. We’ve already had a preliminary discussion about this in the Kitty Farmer committee. We were all more or less in favor of some kind of considerable reduction in emissions. The upside is that hugely reduced emissions mean less daily sell pressure on the token. The downside is that hugely reduced yield farming APRs may mean liquidity providers pull their liquidity. This would be Very Bad for the exchange. A balance needs to be struck…if we can generate some ways to lock up MIN into revenue sharing staking opportunities, while at the same time reducing MIN emissions to some degree, we have a chance to continue to make it. But it’s a bit of a knife edge balancing act, I think.

I must run off and do things that pay me money, now. Good discussions, I like this!

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just to clarify, i wasnt advocating burning.

I understand now that this is part of the balancing act, and you guys are on top of all the counterfactuals.

now shutup and buy my liquidity lol

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For u, the user who has been DCAing your MIN into MIN/ADA LP, you would immediately benefit because MIN LPs would benefit (my version of a staked MIN would be a standard LP token with MIN as 1 side).
I am also proposing you could lock ur LP tokens for a period of time to enhance your rewards and get voting power (through ve style).
The bonding to me would be to bootstrap the veLP tokens. Bonding could be using normal LPs in exchange for veLPs (probably a small fee) or straight ADA bonded for veLPs.

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thank you for the clarification

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1- Min tokens should have both a utility and a governance role. Staking, liquidity providing and ownership of Min could be rewarded in different ways (fee discount is important on top of other potential natural rewards). People will always sell $DEX to realize profits. Counterbalancing this natural sale with a mix of incentive to hold (Min reward for term staking and liquidity providing, fee discounts for these two services + $DEX ownership) is important. There should also be some incentive to spend $DEX (ability to pay in $DEX coupled with fees discount if paid in $DEX).
Nonetheless, inflation also has to be neutralized: some of the revenue generated by the DAO must be burned and not just held/redistributed
2- Bonding is a great idea for LP Tokens that are not $DEX related. $DEX/pairs liquidity should be incentivized through measures cited in 1- as the $DEX pairs are obviously more ‘leveraged’
3- LP fees redistribution should be used to buy back $DEX. LP providers are taking sufficient risks and 0.3% is barely covering anything when it comes to adjusting rewards for risks, even more when no stablecoin is involved. Therefore, if any profit sharing of LP fee is involved (which it should not), it should be to reduce $DEX inflationary pressure (through $DEX buyback and burn) and not for redistribution
4- Same as 3. Should not be involved, but if it is, it should be to buy and burn $DEX
5- POL should be farmed. Farming Rewards should be burned (at least for a significant part, the rest being redistributed)
6- $ADA staking rewards belong to LPs. They should be redistributed to the LP after a ‘profit sharing’ of say about 20/30% going to the Treasury
7- Yes. It is important to add a ‘monetary policy’ to the system. I mention several times above the idea of buying back and burning $DEX. While inflation is important in the first few months of DEX life (cap it at say 6 months), it is also very important to balance it and get into small deflation quickly after. The various ideas for deflation mentioned above could be implemented by priority and magnitude order according to a formulae based on volumes/DAO revenues so that DEX utilization costs stay reasonable while the token is being slowly removed

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Provide me an example of a successful protocol that has implemented a buyback and burn strategy and had it work

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Binance regularly buys and burns the BNB token. I’m not advocating that this be done, but it has been done successfully in some instances.

For Minswap, this could be done by using ADA earned by delegating liquidity pool funds to stake pools. Each epoch, the new ADA would be used to buy MIN tokens and burn them. This would, of course, require new smart contracts to be made for all liquidity pools

I think of all of these questions, the most important phrase here is “do not have to sell the DEX token obtained to take profit.” When I think about other assets that fit this criteria even outside of crypto, I think of owning shares of a stock that pays dividends, or owning a property that produces rent. Ultimately, these things are valuable because they are more profitable to keep than they are to sell.

If we were to look at this in the most simple way possible, Minswap should create a system that shares profits with MIN holders so that it can focus more on revenue generating features and activities and gain the community’s support for doing so. As it is now, Minswap is split between its community and it’s revenue streams because more features and revenue does not lead to stronger community. In many cases, it is the opposite because Minswap is attributing resources toward things that do not increase the value of MIN and thus frustrating MIN holders. With revenue sharing, all of these initiatives become aligned and MIN holders will be begging for more partnerships, features, and services that trickle down into more value and utility for MIN.

So while it is great that the community has the opportunity to voice it’s opinion, I turn this to Minswap and ask, what do you want? If what the Minswap team really wants to do is keep building features (you seem to be releasing features faster than any other DEX on Cardano) then how can we create a system where you get to do what you naturally want to do anyway and in turn our holding of MIN allows us to get rewarded for your efforts? To me that is the most sustainable approach and the one that will guarantee the most long term value for everyone involved.

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How, under your scheme, would one begin to evaluate their LP tokens?

I agree. Not too complicated and sustainable for the future.

Ethereum burn… as one of a few. BNB as another…