Multiple tokens are a bad idea and failed. How can we fix it?

First of all I want to excuse my bad English, I will try my best to make my thoughts understandable.

Current status: Now we have multiple new tokens (bgov, pgov) and potentially other new ones coming when new chains go live. Pgov and Bgov performed very poorly, much to general market conditions, but most of it is for following reasons:

First: It is hard to understand (for me) why we should need a own governance token for each chain. And for governance issues, it is fact bzrx holders of mainnet are the one holding those other two token and doing the voting. With handling it all as different platforms the value of bzrx mainnet token gets damaged.

Second: Tokenomics “Trading, borrowing, and lending fees generated by users of the platform on Polygon will be distributed in the form of buyback and burns, and farming rewards to PGOV token holders.”
Doesn’t work, because people cannot touch or feel these effects. They happen or they don’t happen, you don’t even realise it. Why should you keep it? Other token you have instant feedback of how they work for you. Like bzrx staking. Users need instant gratification and to feel it.

It is all to hard to understand or explain this concept to new investors/farmers why these limitations are.

I understand: It is needed to create incentives to bootstrap liqiudity on new chains. But to the nature of most incentives went to bzrx farmers I think the bzrx holders and the remaining (who did not sell yet) bgov/pgov holders are largely the same. Does it really make sense to have new tokens?
Will we really need to start a treasury for each chain? Why? The marketing should market protocol at the same time.

Other platforms like Kyber DMM let the users farm not a newly created token which have nothing to do with their OG token. They use the main KNC token also on Polygon to farm.

My idea:
After rebrand we will migrate $bzrx to a new token anyway (I will call it “main token”). When this happens, agree on a fixed exchange / buyback rate for pgov and bgov for a vesting token of the new one.
All fees of all chains will be received by staking of the main token.
All chain’s governance via the main token.
Any upcoming farming via a vesting main token, like Kyber does it.

Now every chain will add value to main token, via fees and governance - Before every chain damaged main token, because it took volume away from mainnet.

This will uncomplicate things and help the main token.

How do you guys feel about the situation? How about my ideas? Do you have other ideas? Did I miss something?

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There are some good points here - you’re certainly right that the new tokens were created to incentivize liquidity through farming and that they add complexity.

However, there are several points to address in this message - I will stick to the most important one: I am not sure how workable this plan is, because I don’t understand how you plan to pay for this token swap.

If you swap PGOV/BGOV for the new BZRX tokens (whatever the name is), how will this be funded? Where will the new BZRX tokens to pay PGOV/BGOV holders come from? The token treasury? Or inflation to increase the fixed cap of 1.03 billion BZRX? Do you think BZRX holders will vote to approve inflation of BZRX in favour of PGOV and BGOV holders?

Basically I think there are some interesting thoughts here, but need to hear a lot more details on the tokenomics and how exactly the funding of this can work.

Perhaps more importantly, I would be very interested in any ideas you have about how the upcoming Fulcrum launch on Optimism (which is likely to be more important than Polygon and Binance Smart Chain) should be done - how will we incentivize liquidity without a new token? Just by farming with vBZRX?

Thanks for your answer Badri.

“Do you think BZRX holders will vote to approve inflation of BZRX in favour of PGOV and BGOV holders?”
Those 2 groups will be largely the same, like 90%+.
Because of these 2 points: the most effective way to obtain those was having bzrx token and using it for farming. And only the people who would hold bzrx and believe in it didn’t dump their gov tokens quickly.

As the token price is not too high the treasury could be used for it. Maybe we could agree on something like 50pgov for 1vbzrx.

The other way: Inflating bzrx supply to reduce the indirect inflation. Isn’t such a crazy thing in my mind.
(I believe creating those new tokens which capture value and governance which would belong to bzrx token is indirect inflation of this).

For optimism launch, why not try something innovative like this, which will be a win for all:
The treasury will be applied to borrow funds on fulcrum mainnet which it will deploy into optimism to bootstrap liquidity. Mainnet has volume, Stakers receive fees, Lenders receive interest, Optimism is funded without farming and a new token. Only treasury will pay.

The farming rewards should be given for correct use of the platform, by trading. Maybe with gamification elements, it doesn’t need to be as soon as it starts. I think of something like zapper quests.
You complete a task, you get rewards.
Finish a tutorial, 100vbzrx.
Your first real trade, 1000vbzrx
Your first loss/win, 1000vbzrx

In L2 this should be possible without big fees. I am sure Paris has cool ideas.

I think the updated rebranded token contracts will need additional functionality to facilitate this. It might be wise to arbitrarily early-unvest some tokens from the treasury to swap PGOV/BGOV to BZRX. We also need to deprecate fees from a certain date for PGOV and BGOV to incentivize the swap. It’s inflationary, but probably not terribly so and it would lessen the long-term inflation from unvesting. On a long enough timeframe it’s probably better if it happens when market conditions are suppressed.

A time-lock/cliff element might also work for farming the main chain token on L2/OE. That is, you can farm vBZRX using whatever asset but there’s a cliff that is enabled from receipt. You fully unlock a % from the wrapper contract after a year for example, then the rest of the vesting schedule completes. This helps align incentives and would keep BZRX as the main token.

I agree with the premise of the proposal that the multi-token situation has not panned out very well and has caused significant confusion amongst users and introducing new individuals to bZx. I personally support the switch to using only BZRX as it reduces complications. The main area of concentration I have at the moment is how to handle the token buybacks. This is a delicate situation that requires significant thought to be put in or else it could get gamed. Depending on the balances held in the treasury, I believe the BZRX held in the treasury should be used to buy back the tokens at a 1:1 valuation ratio with no lockups on the swaps or anything like that. The treasury should not use vBZRX to handle this buyout due to it being a waste of vBZRX. The treasury will rarely need to spend BZRX and using vBZRX for the buyout would require discounting the unvested BZRX left due to it having contingencies attached to it. This means that in the long run, it is actually a waste of capital to buy out BGOV/PGOV using vBZRX. If the treasury does not have the necessary balance of BZRX, it can be discussed if a combination of BZRX and vBZRX be used, minting new BZRX to cover the difference, or solely using vBZRX to buy out the tokens is wiser.

Some great ideas and perspectives here.

I think the main thing now is if someone can make suggestions on the details of what such a token swap/buy out would involve, with specific details of the buy out/exchange rate, then we will have a more detailed proposal to discuss - it’s always better to discuss a proposal with the details fleshed out, including the points Drypto raised above.

Personally, I think it would be much better to avoid inflating the total supply to do this if at all possible - much better to do it with a buy out, but we need to know how much BZRX is in the Treasury for that.

As a starting point - the current market cap of both BGOV and PGOV combined is about $4.8 million. At current prices, that means it will require a little over 30 million BZRX to buy them both out completely (the actual figure will be a bit less, because if the PGOV treasury is merged with the BZRX treasury then the treasury will not need to pay itself). Note that the important thing here is not the USD price of BGOV, PGOV or BZRX - it is the PGOV/BZRX and BGOV/BZRX ratios.

It would be good to know how much vBZRX is in the BZRX Treasury and how much of it has vested to BZRX (for the reasons Drypto said above).

Another point to keep in mind: if we do this (and we keep the current fee sharing model on Polygon and BSC), then we will be bringing burns to BZRX for the first time - BZRX will become deflationary, even if burns are not added to Ethereum (although we can consider that too).

Finally: we need to figure out how to incentivize liquidity on Optimism and Arbitrum without a new token - OGOV, or whatever. If we’re abandoning BGOV/PGOV, then we can’t really have OGOV. So how do we get liquidity there? One option that Drypto suggested might work is that we can just seed the liquidity pools with a small amount of liquidity ($500k-$1 million), which should be enough for initial usage of the platform by traders, and once they start borrowing, supply rates will go up and lenders will step in to lend funds - ie, this means there will be no farming at all. The process will be (almost) entirely organic. From a functional perspective, this is likely to work. However, it means that all the hype and marketing and flood of hot money to farm tokens and drive TVL to crazy levels - will not happen. But then again, that kind of farming based TVL is not sustainable and will not last.

I don’t have the first clue how easy this would be to code, but what if, for only a certain liquidity incentive period, people who provided liquidity got reduced borrowing APR or fees on their trades? Then it could be phased out once a solid foundation of liquidity existed. That avoids the whole new token and farm aspect of a launch and doesn’t introduce new supply. The question is, would it be enough to entice people to provide liquidity? I’m not sure on that, but it’s something, and maybe other perks could be thought of to go along with it.

Posted this on telegram:

The reason why I am against it is because it’s not such a big problem and it’s impossible to put a fair price on it. We’ve heard 1:1 valuation, 1:1 swap, 4 pgov/bgov for 1 bzrx, 4bzrx for 1 bgov or 8 bzrx for 1 pgov. (and on this forum even 50 pgov for 1 vbzrx… what the hell?)

It shows how much differences there are in valuations. We’ve put out bgov and pgov and that comes with a responsibility, they expect governance and revenue from fulcrum platform on their favourite blockchain.

The benefits of removing them from the system don’t outweigh the backfire you’ll get from the community. Not only the bgov/pgov community, but also the bzrx community that would see their share diluted if it’s paid out of an extra bzrx mint instead of the treasury. Just let the tokens be, and focus on the next steps. It’s not such a big deal that needs to be dealt with right now. There are more pressing matters that need attention.

Let’s discuss if the next expansion should be without a new token to see how that goes. We can discuss to have an extra mint to increase the treasury, or just use the millions of bzrx we already have. Let’s discuss if we need to start with the farming directly when deploying on a new chain, or wait for the Rebrand or Fulcrum Pro before deploying on a new chain.

In the meantime, the team can continue on things that will really make a difference: increasing the functionality of the platform for the users. Imagine a decentralised leverage trading platform with the same functionalities as on a CEX. Do you have any idea how much trading volume that will bring? Borrowing/Lending APRs will naturally rise through the roof, which will draw huge TVL, all completely organic.

We don’t need gasfree trading on polygon.
We don’t need a buyout of pgov/bgov.
We don’t need a new token before the rebrand token.

We just need those functionalities like on a CEX and you will only need a little farming incentive to get the snowball rolling. Especially in a bearmarket you can really surprise the market and become the centre of attention (AXS). It can become huge, just keep focused!

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