Adopting CORE Tokenomics for SHARE

I’ve been thinking of a token redesign for SHARE and I think there is a lot we can take from what CORE has designed. In my opinion, they have the best tokenomics for farming as CORE is a deflationary farming asset. They do this by implementing a Fee On Transfer (FOT) model. Now to incorporate this for SHARE will be a bit tricky as we’ll have to figure out how negative rebase would work, but here is the general framework of what I am thinking:

-SHARE Total Supply - 10,000
-All supply is in circulation

Now the Tax Model that will be the bread and butter of this and will fuel SHARE Scarcity:

-During positive rebase when a SHARE holder goes to claim their rewards, 20% equivalent of SHARE value will be burned. This fee gets transferred to the farming contract to be farmed by USD holders and part of it gets sent to treasury to be redeemed during negative rebase.
-All sell transactions involving SHARE are taxed 5%. This tax goes to treasury and farming contract. No tax is implemented when buying SHARE. This provides more upward pressure on the price and less downward pressure
-Hefty 10% tax on USD holders who sell USD below peg. This tax is used to buy SHARE on market and is sent to the farming and treasury contracts
-Hefty tax on SHARE holders who sell their SHARE during negative rebase. This tax will always be greater than the current discount rate of SHARE redemption. So if discount is 5%, selling SHARE will be 6%. This tax is sent to farming and treasury contract
-5% tax on USD farmers when claiming their rewards. Tax is sent to farming and treasury contract

All tax rates can be changed by SHARE governance. These are just examples and numbers taken from CORE.

In theory this makes SHARE highly desirable from a DeFi perspective. We will no longer have to worry about SHARE dilution, and during positive rebase, users are incentivized to claim their pro rata distribution daily, using profits to buy back their portion of SHARE that was burned. This should push the price of SHARE up, and the higher the price, the more attractive it is to farmers and the more value created in the treasury for discounted SHARE redemption during negative rebase

I understand this is a lot of work on the development side and would be an entire relaunch of the protocol. However, I think a FOT model is the only model that makes sense with what DollarProtocol is trying to implement. It gives SHARE holders so much incentive in holding SHARE as there is a lot of buy pressure and little sell pressure baked into the protocol. I hope this idea is considered by the team as I feel like this is the type of innovation on top of CORE that will make a project gain market share, as there have been many CORE clones but they have flopped because they haven’t created any innovation. By adding an element of rebase via USD, this will attract many CORE fans and DeFi crowd in general

“I understand this is a lot of work on the development side and would be an entire relaunch of the protocol”

Therefore I’m not in favour

We haven’t even entered the first positive rebase since Robert change it to stop auto burning share

I want to see what that does first before we change things further

Fair enough.

But on the other hand, I’m not a developer and don’t actually know how complex this would be. CORE is an open source project and a lot of it would just be copy/paste. Sure there would be some developmental effort, but not sure how much.

I agree we should see how this current model works, but I’m not sure it’s enough yet. SHARE dilution is still a problem, and it will always be a problem. The FOT model solves it.

I would also like to add something:

In the current model for SHARE during negative rebase, what I have observed is when someone presses the rebase button and SHARE gets discounted, the market dumps SHARE to the discount value, but the number of USD needed to burn doesn’t actually decrease. That’s actually becoming an obvious problem because USD holders aren’t necessarily incentivized to burn right now. Hence, we have to wait for the buyers to return to push the price up, as the supply isn’t retracting.

If we transition to a FOT model, we can design it so the tax of selling SHARE will always be greater than the current discount value based off of the 12 hour TWAP. This will create a REAL incentive that people will take advantage of.

I also went back and looked at all the transactions today. $20,000 worth of SHARE was sold. If we implement a tax that is greater than the discount amount which is 19% (!) on the day, then sellers would’ve been taxed 20%, which is pretty massive. That would’ve been $4k worth of SHARE going to the farming and rebase contracts on just sell transactions alone. Then you factor in 10% tax on USD sells below peg, and 5% tax on claiming SHARE reward from farming, and you can see how the rebase and farming contracts will always be supplied with funds. The APY for farming will be calculated based on the average of fees over an X amount of days. The higher the volume, the higher the APY for farmers. I expect very high APY during positive rebase. Lower APY during negative

FOT model will lead to no more inflation, no more dilution, and no more death spiral for SHARE

The protocol is tax heavy but the tax is designed to push the price of SHARE up and keep the price of USD at $1

We can learn the advantages of other projects, but I think we should decide which measures to take based on the business scenario of this project. I always prefer the project to be a new stable currency system, and the consensus basis of $share for this system is long-term value. $usd is a stable currency for circulating applications. The measure we should take is to increase the consensus strength of $share, through the effective combination of short-term benefits and long-term incentives, and drive the price of $share into stable growth through benefits, so as to promote the long-term development of the system.

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We need stronger technicians

totally agree, now people dont treat SHARE as a asset only a output of liquidity mining for speculating which lack the consensus strength of $share,

and strong hands but first of first is the core vision of the protocol

I agree with SHILL on his perspectives about the lack of SHARE incentives.

In the current model, the only rational action is to arbitrage away immediately the difference between the SHARE price and the discount. This has put extremely high selling pressure on SHARE continuously for days now. The current model has arbitragers selling share for USD, then immediately burning their SHARE and repeating the process. This in my view is just resource extraction and it’s not beneficial to effectively restoring the peg.

I agree with SHILL that there should be some sort of “tax” to stop the constant arb on SHARE. It should be timebased and correspond to the current rebase discount. I think the proper time period should correspond to the % of discount, with 1% being removed every hour. So right now we have a 27% discount, so in effect the tax would start at 27% and it would take 27 hrs to fully wear off.

This turns the Burn share system into something like a short term bond, which should bring ease the constant SHARE selling.

Well put. Establishing a tax system with a fixed supply and 0 inflation makes dollar protocol one of the strongest projects in DeFi.

I see some people have disagreed with the tax model so let me describe it in a different way:

In the current tokenomics, there is a tax, people just don’t fully understand it yet. This tax is in the form of manual seigniorage. Whereas in the tax system I have proposed has a 20% tax on manual seigniorage, the current system has a 100% tax on it. So let’s compare these numbers with an example:

USD is trading at $1.20, and the system undergoes a positive rebase. Bob is a SHARE holder, and receives $200 in USD rewards in the form of USDX (166.7 USDX). Now this is how it breaks down in current tokenomics vs. the tokenomics I have proposed via FOT model

Current Tokenomics:
Bob goes and claims this reward, and $200 in equivalence of SHARE value just got burned from his wallet. Although this is good for the tokenomics of SHARE as it is making it deflationary, Bob just transferred value from one asset to the other. He didn’t make a ‘profit’ although the argument could be made that he profited on the SHARE/USD ratio depending on when he bought his SHARE, but I won’t dive to deep into that because I don’t think your casual crypto person will care about that. Bob, not knowing this would happen, is upset and figures there isn’t much incentive in holding his SHARE, so he sells and walks away (we saw this last week with users complaining about SHARE burn)

FOT Model
Now in the FOT model, when Bob goes and claims $200 of his USD rewards, only $40 equivalence of his SHARE stack is burned, and this $40 is sent to the farming and treasury contract. This gives Bob a net gain of $160 USD. This is interesting because now users are turning a profit, meanwhile the underlying asset that is working for them (SHARE) is gaining in value because it isn’t getting diluted from farming or from negative rebases. So now Bob has profited $160, and can do a couple things with his extra cash:

  • He can use this profit to buy back his SHARE that was burned, increasing his reward for positive rebase, and at the same time, pushing the price of SHARE up (positive feedback loop - the higher the price of SHARE, the higher the SHARE/USD ratio (less SHARE burn), and the higher the APY for farmers)

or

-He can accumulate these USDX rewards and have funds available so when the protocol undergoes a negative rebase, Bob -as a SHARE holder - can participate in the USDX burn and get discounted SHARE, increasing his SHARE stack as he gets ready for the next expansion in rebase rewards while helping get USDX back to peg faster.

The FOT model provides SHARE holders with different strategies to profit from the system. The key here is that when they receive rebase rewards, they can profit from them, giving SHARE holders a lot of incentive to accumulate SHARE. And with the sales tax on SHARE being larger than the discount during negative rebase, these SHARE holders who hold on to their USDX rewards are incentivized to redeem these discounted SHARE knowing they are receiving a real discount based on market prices.

All the FOT model really is, is a redistribution of the 100% manual seigniorage tax the current system has, and re-distributing these taxes to different transfer functions within the system, all designed to keep USDX pegged to $1, and allow the price of SHARE to climb as high as possible

@Robert do you see any flaws in what I have proposed here? What are some cons that I am missing. Would appreciate some feedback as I am sure I have overlooked something. Would this even be a feasible design, for starters

This plan looks good, at least much better than it is now. The current $share holders are burned when $usd>1.05, and are inflated when $usd<0.95. There seems to be no benefit to holding $share, so naturally there is no interest. People will use $usd to mine $share. Therefore, we must restore the consensus of $share to make $share holders profitable.

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Yes I am thinking of making a snapshot proposal but would want Robert’s go ahead first.

In addition, when $usd<0.95, where can I see the total amount of additional issuance of $share? This part of the proposal will also be returned to the national treasury in a certain proportion in the future, and part of it will be burned in the market for market adjustment.

Yes the reserve fund for the negative rebase redemption of SHARE will be in a smart contract for all to see. This can be implemented in the UI quite easily I imagine. Users in the protocol will be able to see just how much SHARE is in the fund ready to be redeemed for discounted USD. In theory this fund should never be depleted but I am not sure if there are any attack vectors I am missing. As users sell USDX below peg, as farmers claim their SHARE rewards, and as users sell their SHARE in negative rebase, this fund will be filled in a higher proportion than the fund for farming SHARE. During positive rebase, we can flip the rate at which these funds are filled to make farming more enticing for USD holders.

And on the topic of farming, we can incentivize ETH-SHARE pool by increasing its APY compared to the USD-ETH pool during negative rebase. That way, USD farmers are incentivized to burn their USD for discounted SHARE to join the SHARE pool. On positive rebase, we can either create an equal APY rewards or skew it in favor of USD to incentivize buying it and farming SHARE

With the FOT model, we will have plenty of options for creating profit taking strategies for everyone involved.

Good suggestion, but this may not be within Robert’s technical scope.