There’s lots of discussion around rebases & sustaining price. Lockups to keep people from gaming rebases, increased apy for lockups etc. The problem is that ultimately these are not solutions for the elephant in the room: dilution. It doesn’t matter what you might believe, math is math & a crazy high APY brings more problems then it solves. Compounding cannot outpace it on its own. Let’s prove this now:
Supply of TIME is now roughly 500k. At the current APY, supply effectively doubles approx every 40 days. This means that, if APY remains at its current level, supply will be:
In 40 days: 1 million TIME
80 days: 2 mil
1 year: 256 million TIME
Let’s say you compound for 1 full year, since the APY is most effective by this long term compounding. If TIME supply is 256mil, at a $5bil marketcap that comes out to only $19 per TIME. Calculated out, after 1 year you would be making a 3x return IF the marketcap of TIME is $5bil upon selling. Your return is not actually 81,000%, in reality you’re looking at 200% apy due to those price drops from supply dilution & only if market cap is over double its current $2.3bil.
If we want to see actual large returns, something must be done about this dilution. The best way to do this is reducing base APY. We can burn tokens, we can find various ways to plug the dam, but the torrent will continue & get progressively larger as long as a highly unsustainable APY continues.
Here’s a rough idea of what I propose, for the sake of argument:
We reduce base APY, meaning the APY given to stakers without lockups. We would need to cut the rate by at least half in the next couple months to create a meaningful dent in the problem, but preferably lowering it to 10-20,000% APY would do a lot more. This is still an enormous APY and remember, because of dilution it would actually end up being more profitable through TIME price than an absurd APY.
Voluntary lockups for higher APY’s: this would be a great way to incentivize remaining staked & not gaming rebases as many have mentioned already. However, if we just spike the APY past our current rate, we aren’t solving the dilution problem & really it’s a mute move. It won’t actually help anything, fresh paint on a turd. But if we had a lower base APY for non-lockups, and then say (for arguments sake I’m not suggesting these exact numbers) 3, 6, 9 & 12mo lockups with a tiered APY that increases say 2500% per 3 mo. We would also want these lockups to have hard caps on the pools to offset the increased dilution. New pools could be opened periodically etc etc. This could be done in various ways.
Hard cap supply: If supply is infinitely inflatable, dilution will catch up to us no matter what we do. If we hard cap it though, we can create a stopping point. What this number would be & when can be decided by the DAO as all things are. It can create a timetable for the evolution of Wonderland into whatever we end up being; VCs, an RPG, whatever. We can continue to make money rebasing without dilution killing our returns, continue bringing in treasury funds with mints & using that money towards our goals, and we can kill once & for all the FUD that is generated (FUD that is backed by math & common sense) surrounding dilution.
As we evolve, slowly & comfortably, we will likely move beyond being a mere rebase protocol. If we go with Daniele’s initial vision, we will become Frog VC’s cultivating the future of the market & Frog Nation, and create an NFT RPG that creates utility for TIME/MEMO. Burn mechanisms could be incorporated in an RPG, we have many options there for controlling supply. My point is we don’t know what we will become, and the factual reality is rebases cannot continue ad infinitum. We need to have these harder conversations, however uncomfortable they may be for those who don’t understand them, if we want to be successful long term & all make money as todays TIME investors.
Hoping to gauge the appetite here for these kinds of changes & bring this topic into the forum. Thoughts, criticisms? Cheers frogs