Hi HugoFurioso, really appreciate your detailed comment. Love the reasonings and constructive comments like this is tremendouly valuable.
The core idea behind this proposal is to make AGLD and incentive token, the currency of the Loot metaverse, and to provide a basic layer of income for Loots & mLoots, so that they become yield generative assets and attract applications to be built upon, like how businesses in real life are built to attract people and entities with income to spend their money. Numerous community members including you have mentioned the idea to feed inflation into a DAO and fund projects (instead of issuing to Loots & mLoots), and we have considered that route as a starting point for a long time. I will explain below on why we didn’t issue the money to a treasury/DAO directly, and why incentivise staking instead of airdrop.
On funding devs: we understand that the community desparately needs incentives to go to builders, but since a few critical shortcomings were identified, we decided to not direct 100% of new issuance to that, but to establish a separate treasury mechanism:
- The issuance will become unpredictable, just like how central bank works, very bad for a decentralised economy. It sounds easy that people can vote in the DAO so the DAO can make good decision on what infra / tools / applications are worth funding. In reality, all kinds of politics will be going on within that DAO. Perhaps the DAO will decide to give out a ton of tokens within weeks (money printer goes brrrrrr), but for the next few months no new grants may be given (gov shut down kek). This whole process can be easily gamed by 3rd parties.
- Inflation to DAO will lead to more dumping. Imagine a few teams proposing to build a few incredible games using Loot and mLoot. Surely they are welcomed and received grants to build. The only option for them to pay employees is to dump those AGLD grants, either beforehand or following any applicable vesting schedule. We now have txt files + a few games, not a real economy with circulating liquidity. It’s like AGLD is the new gold mine, and the community has built a mining town on it. After the mine is fully extracted, the mining town ends up becoming a ghost town. However, if the inflation is more predictable (issuance always according to curve, no matter how many Loots & mLoots are staked), and that the projects provide services to revenue generating assets, builders are much less likely to focus on providing real value for Loots & mLoots in the long run, not focusing on gaming the system and getting that juicy grant.
- Central planning does not create a good economy. New token issuan should only be conducted in a credibly neutral way. If we look at what the Loot community has achieved, it’s absolutely impressive and all the early Loot holders & builders deserve that. mLoot is surely a great and welcomed addition to the community and deserve a piece of the pie. Given it is almost impossible to come up with an accurate market cap for NFTs, we believe that distribution according to the average floor market cap is the most fair and credibly neural way to reward those who have contributed value to the ecosystem. If Loot contribute 99% of value, Loot holders deserves 99% of rewards. If mLoot grow strong and capture just as much value as Loot in the future, they will deserve 50% of rewards within that future epoch. I understand the frustration to make the rich richer. However, the rich will always get richer in every system except for communism. A good system make the rich richer in a fair and constructive way. By doing so people are incentivised to build out stuff that’s valued by the market so they can be richer and have higher efficiency to capture value.
- We are already talking to community members / builders / projects on providing defi services to Loots & mLoots, such as marketplaces that save us from high fees on OS, lending platform that uses Loots & mLoots as collateral, and many more. The application will contribute some fees / revenue from those applications, and use the accumulated fees to fund projects. In return, users will have AGLD incentives to use those services, just as if their NFTs are staked. Whether it is fair for users of these projects to receive the full staking yield is still being discussed and we would love more inputs from the community on this. This should a great way to support good projects that the community actually wants: if people like the application with their Loots & mLoots, that project deserve part of the income those Loots & mLoots are entitled to, + the income they somehow generate from their own fees. Part of the fees generated will feed back into the value of AGLD, whether via buy back and burn, or goes to treasury. This creates a positive virtuous cycle that: Loots & mLoots income increase by receiving AGLD =>Loots & mLoots value increase => good projects income increase => feeds more value into AGLD => Loots & mLoots income increase.
On airdropping to mLoot:
We initially considered airdropping newly issued AGLD to Loots & mLoots, given that’s how AGLD were distributed in the 1st place.
- We believe that printed wealth (newly minted AGLD) is better off going to the bottom level of the economy than the entire economy.
- The market will decide where the wealth will flow to afterwards, but to kick start an economy, financial supports need to be given to those that need it the most. Loots & mLoots bought near floor price are the perfect example. Chances are, compared to their more expensive peers, they have less scarcity and probably fewer utilities in games & applications. Instead of having them sitting in wallets doing nothing, or getting listed on OS and dumped, staking is the perfect utility for them.
- By rewarding staked Loots & mLoots rather than airdropping to all, we contribute more economics resources to the bottom level of the economy, which helps solidifying the value floor of the ecosystem.
- Tho all Loots & mLoots are able to stake if they choose to, APR wise it make more sense to stake your Loots & mloots when you are bought cheaper.
On math problems: the long break-even time is intended and unbiased for both Loot & mLoot. You can download and play around with the curve here: AGLD Inflation - Google Kalkylark
AGLD staking reward looks very similar to an unemployement check: if they are too high no one would be working, if they are too low people will be starving. Looking into the numbers used in the example, you can find that on floor price, a Loot is 1300X more expensive than an mLoot, but only receives ~100X the reward. Primarily this is determined by the % of Loots & mLoots staked. Given Loots & mLoots different positionings, we believe that in the long run mLoots will be used in more applications while Loots will be holded by diamond hands. Therefore, staked mLoots should be looking towards a much higher APR% than staked Loots. Also the size of the check should not be a hard-coded number, which sets unrealistic assumptions for the future conditions of the ecosystem. Rather it should be adjustable according to the market and the utilities of Loots & mLoots. If for some reasons mLoots picks up traction and very few mLoots are staked, those staked should be entitled to a very high APR to reflect the market demand on mLoots. This helps the market to adjust the mLoot demand and supply quicker, consequently pricing mLoots more accurately, which leads to a fairer and more sustainable economy for mLoots in the long run.
Overall, we belive that having a predictable supply of new currency, distributed in a fair and flexible matter, partnering up with a market-driven treasury can help ensure Loot & mLoot a successful and sustainable economy, which has a much greater potential then give all of them solely as grants, or via airdrop. Hope the above explanation helps address your concerns and again really love the detailed reasonings.
