Improve ANT tokenomics + buyback program

As per discussed with Alex Clay in Discord I’m putting forward a proposal that should improve the economy around ANT.

History

Aragon’s purpose is to develop an open source stack in line with its manifesto and in process of doing so embed solid tokenomics that benefits ANT holders. Investors swapped 275,000 ETH for ANT back in 2017 based on this premise.

The treasury in Aragon Association (AA) now holds over 190M USD as per June 2021 - likely way more than 200M USD now due to the recent ETH/BTC growth. Despite this, the market cap of ANT sits at only 185M. ANT is then priced lower than the treasury. Of the treasury, only 11 % of the funds are held in ANT. This is way less than most protocols out there.

In my eyes we need to implement more solid tokenomics and signal to the market that we believe on our own token.

The decentralization of the tech/treasury governance with the launch of AN DAO is a solid first step in the right direction, as well as making more Guardians stake in Aragon Court.

However there are a few additional steps we should take already now.

Proposal

I’m proposing three simple steps that should quickly improve the economy around ANT;

  • AA is increasing its allocation in ANT with 9 %, to 20 % by swapping BTC/ETH for ANT in such a way that limits frontrunning. These ANT should be added incrementally to the AN DAO along with other assets.
  • Require minimum 50 % ANT as payment for any proposal in AN DAO
  • Require minimum amount of ANT for making proposals in AN DAO (1000 ANT+)

Holding a higher % share of ANT in our treasury should signal a higher belief in our own token to the market and provide a better economy around Aragon products given ANT is required as payment for proposals. We are then not only buying back ANT at a reasonable price (seems to be priced very low compared to what it will be when more buying pressure are made with improved tokenomics), but we are also using them to foster and stimulate our own economy.

When contributors receive ANT as compensation, they are financially aligned to make contributions that grows ANT. It also leads to more decentralization – the more ANT that sits with contributors that believe in ANT long term, the better.

I think that these steps could set the tone for what could be a new era of Aragon with new products that has solid tokenomics embedded in them.

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Hey thanks for starting this conversation.

Strongly agree with you on these points

50% appears like a good split to me. Would love to hear more from the community as to what values work best to align incentives and keen to hear from @Mouyou on this in regards to his proposed retroactive funding model

My first thought is that yes it could signal higher belief, prudent tokenomics or be interpreted as bolstering sentiment, we simply can not say.

Imo possible signaling is not good enough reason. That said I certainty agree that there’s opportunity to further diversify treasury and if doing so ANT would be a leading choice, amongst others.

I’ll share your post I’d like to see a dedicated channel in discord for Tokenomics, it’s a very important conversation to hear from the community on.

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I also think minimum of 50% ANT are good

its an ANT/ANT+ bonding curvs so 100% ANT. users can donate Polygon DAI or USDC to Aragon+DAO pools to receive ANT+ tokens. the contributors get paid with USDC/DAI/Stablecoins via polygon from the pools money.

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Hey Jake,

Many thanks for starting this. I think there are some excellent points raised in your proposal already highlighted by @lee0007.

Firstly in the interest of Transparency I will be doing a post on the weekend on the current state of the treasury in advance of the Transparency report in Q1. Currently the portfolio is >300m.

I think it is crucial that value created by the community is transacted in ANT, I think 50% ANT is a good starting point. I would propose a Stable coin as well for the other 50%. Something interesting could certainly be done with a bonding curve.

Inflation
I would like to look back at @Mouyou proposal to use inflation for ANT here: DAO Guardian System

From this my thought would be to create an inflationary system whereby ANT is distributed to the AN DAO 50% and Guardians in Aragon Court 50%.

This would create the value needed for the AN DAO to scale/ provide value to contributors & dilute inactive contributors over time.

Questions
What do we think of Inflation rather than buy back?
Do we think it is a better way of distributing the Value?

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The Aragon+ DAO is a separate entity. You can think of it like AragonOne just a DAO. It is connected to Aragon through the ANT/ANT+ retroactive bonding curve. if a milestone is reached the ANDAO can, if ANTs agree, deposit ANT into the ANT/ANT+ bonding curve, so users who donated money into a pool and received ANT+ tokens (governance token of Aragon+) can exchange their ANT+ for ANT.

I think inflation is necessary when there is no more funds available in the ANDAO. before that i don’t see a reason to introduce inflation. Tellor.io is doing this with inflation (in the next Tellor version). The users vote to agree to mint more tokens for the dev dao. so i think it would make more sense to have a minting process once the ANDAO runs out of money. A prefer a minting process compared to a constant inflation because its more efficient in using funds. you have to consciously decide for what you want to mint ANT compared to just having an ongoing inflation.

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I think that to introduce ANT inflation having a 300M treasury in mostly non-ANT will be perceived very badly by the market just because it’s not good tokenomics and it discriminates investors even more than they already have been in that we still not have been able to implement ANT successfully in any of our products, except Court which is promising but still not proven.

I’d rather buy back ANT while its still cheap and spend the 300M USD treasury to grow the market capitalisation of ANT through creating products that require ANT staked.

Treasury funding → Development of products that requires ANT staked and makes it more scarce + for proposal payments → Higher market capitalisation of ANT in treasury → Some of the ANT could long term be liquidated to fund additional runway but at a much higher multiple (10x+ from this level).

Rewarding active participants in Aragon through ANT minting could be something we could look at if we are not able to create a sustainable self-sufficient economy using the treasury we already have - but only then.

I understand the point regarding rewarding active participants in the Aragon economy, but I think it’s a highly experimental feature and definitely secondary to introducing well proven tokenomics.

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I am new here!

I have read the very interesting proposal and will just comment with some sentences (as I still don’t have the full background). In my view, tokenomics is strictly connected to the type of organization, the value proposition, the governance structure, etc. There is obviously no one-size-fits all solution.

  1. I am generally against the buyback policy. It is not a measure that “warms up” the hearts of tokenholders. As Yearn tokenomics demonstrates, it does also not affect too much the market price action. Nevertheless, given the very peculiar situation of Aragon (treasury bigger than ANT capitalization), I think that a buyback is absolutely needed. I see it rather as a temporary measure, but it is needed!

  2. I would favor payments in ANT token for contributors, as it creates engagement.

  3. I would perhaps think about a staking and reward mechanism for ANT (connected to the time of staking).

I copy-paste the link to a Yearn discussion that may be of interests for us: Call for Ideas: YFI Tokenomics Revamp - #54 by storming0x - Ideas - yearn.finance

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The core premise for the buyback is not to affect the market, but that it is financially a smart move and monetisation strategy, since ANT is currently valued at almost half the treasury and to do this before we improve the tokenomics and create an economy around ANT at this low price seems like a nobrainer.

Since it seems that most of the core community members think its a good idea, I created a vote to get the ball rolling: Aragon Voice - the ultimate solution for creating and managing proposals and voting in a decentralized, cost-effective, and secure manner

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I like part of the idea and love that you’re taking initiative, and a signalling vote is all good. Just to be clear, if such a vote is implemented (scheduled for execution, meaning it wasn’t just signalling but an official vote) it could be challenged in Aragon Court and deemed illegal as the process doesn’t fulfil the requirements set in the Charter.
I’ll soon be working on writing a how-to guide for proposals so I’m just mentioning this here for clarity :slight_smile:

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Could you just explain that shortly would be great one sentence or a screenshot or copy the part of the charter would be interested

As I understand is the proposal process not violated. But the AN DAO isn’t the AA and the full transition of Aragon in a DAO is a process that is done slowly and takes a bit longer. This means the AN DAO currently can’t force the AA to do A or B. But this will definitely change and don’t worry the AA closely watches what the community sentiment is.

I’m pretty sure we will provide more clarity on the andao.aragon.org website in the next few days or next week.

I hope I do not steal the thunder here.

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ah ok thanks.
So it’s totally fine to have this vote without violating anything?
if it passes the AA has to do it?

Hey @Mouyou. For avoidance of doubt, I just wanted to re-iterate here that the Aragon Association and the Aragon Network DAO are wholly distinct entities. The AN DAO Charter sets out the governance framework and operating rules for the Aragon Network DAO and not the Aragon Association. This said, the Aragon Association may at it’s own discretion and on a case by case base, look at signalling from ANT holder votes.

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ok so if this proposal pass its just a signalling vote for the AA but nothing binding. Is there a roadmap of this transition.

In which scenario would this vote be binding and enforceable by the ANDAO? If all the funds of the AA are transferred to the ANDAO?

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Would this be the only part that would be against the AN charter?
AN DAO Charter
Aragon Governance Proposal Process Page 15 #4.a.i

I think there is nothing stopping the vote being binding for funds controlled by the AN DAO, providing the proposal complied with the rules set out in the AN DAO charter.

Rgd roadmap for the transition…the Aragon Association is initiating the first financial stream to the AN DAO (still waiting for a few more votes in the Budget DAO before it is activated, hopefully will be done tomorrow). I’d personally like to see a lot more of the Aragon Association funds transferred over to the AN DAO asap. Just want to make sure it’s safe and that the AN DAO and it’s sub-DAOs function well together.

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Building upon what Joe mentioned about the AA and the AN DAO being separate entities, for the AN DAO these are the options:

-signalling vote (non-binding): just do a vote whenever and whatever way you want as the only thing on the line is your reputation (not your xp, or score, just how likely people are to pay attention and hear your arguments in the future. So use this as much as you want but don’t abuse it).
-binding vote: depending if it’s a Financial Proposal or Election/Other type, the charter stipulates a minimum number of days something needs to be posted on the forum before moving to a vote and finally to execution. You can break the rules and have the forum post open for less than required, or the vote for a shorter period, but then when the action is scheduled in the Main DAO (which requires 50ANT collateral), someone could challenge it in Aragon Court and point that your scheduled action breaks the Agreement of the DAO (the AN DAO Charter) and so you might lose your collateral.

My point is not to disincentivise this discussion (I think it’s great), just to help educate on the Charter and mechanisms of the AN DAO so we can use them well :slight_smile:
That being said, I do find that voting too fast can create more polarisation as it doesn’t allow for more nuanced conversation than choosing between options, so I tend to suggest leaving voting for later after the initial idea has had good engagement.

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