Current and Future Token Distribution

Earlier today, Lion’s Mane released its Quarterly Report to Tracer DAO, following the completion of its first quarter being one of Tracer DAO’s Service Providers. In that report, Lion’s Mane reported its financial position and laid out a roadmap for the quarter ahead.

One aspect of road-mapping that was omitted from the Lion’s Mane’s Report was token distribution. How Tracer DAO’s TCR governance tokens are distributed is a matter for all Tracer DAO members. In recent weeks, conversations around the effective distribution of TCR governance tokens have been observed in Tracer’s Discord and Discourse - for example, on the topics of airdropping and Service Provider consideration.

Token Distribution

We have prepared an interactive spreadsheet to facilitate structured discussion between DAO members, and the Tracer community, about the distribution of TCR governance tokens. Have a look here:

Tracer >|< Current and Future Token Distribution

Lion’s Mane recommended distribution:

In the initial tab of the sheet we have detailed the current distribution of TCR. In the second tab, we have detailed a draft allocation of how tokens might be distributed in the future. We are keen to see the thinking around future token distribution evolve via community discussion.

Share your thoughts

By commenting at the bottom of this thread.

Or, by following this process:

  1. Right click the “ [Template] - Future Token Distribution ” tab, then click “ Duplicate ”;
  2. Right click the new tab, then click “ Rename ”, then rename the tab to your name in the Tracer Discord;
  3. Click on the editable fields (shaded grey), and replace the stated percentage with your desired percentage; and
  4. Once you have finished, add your thoughts at the bottom of this thread.

The successful distribution of TCR governance tokens cannot be overstated. Successful distribution will attract valued new Governors into the Tracer community who can introduce desirable perspectives, expertise and experience to the development of Tracer DAO. On the other hand, poor distribution will result in stagnant governance, poor community engagement and loss of direction.

We remind all community members that the TCR token is a governance token only, which means it allows holders to participate in Tracer DAO via its governance mechanism and provides no ownership, financial or economic rights of any kind.

We’ll now touch on the kinds of distribution mentioned in the “Future Token Distribution” tab:

1. Ecosystem Developments

We have seen Governors (the initial 100, plus 52 successful applicants), Service Providers (Lion’s Mane, RMIT BIH and, most recently, DeFi Pulse) already be engaged, via proposal, to work with Tracer DAO. Applications have now reopened for Governors to join Tracer DAO, you can apply here. The DAO has recently passed a Proposal to allow 100 Alpha Testers to join the DAO to test the Perpetual Swap contracts. Those Alpha Testers will be welcomed in the coming days, once the result of the off-chain Snapshot vote has been pushed on-chain.

We believe that, in the future, additional TCR governance tokens will be distributed to incoming Service Providers to Tracer DAO or other individuals or entities whose incentives should be aligned with Tracer DAO to govern its financial ecosystem. If you are interested to become a Service Provider, or know someone else who might be, read this article.

2. Market Incentivisation

The users of Tracer’s financial contracts deserve governance rights over the contracts with which they interact. Liquidity mining is a great way to achieve this. Tracer DAO could run a variety of liquidity mining schemes, based on its priorities at those points in time. For example, as Tracer’s initial focus is to win market-share in the Perpetual Swap market, Tracer DAO could distribute tokens to prominent users of the Tracer Perpetual Swap contracts.

Over time, there will also inevitably be certain market behaviours that Tracer DAO should wish to incentivise, which Tracer DAO can be reactive to. Our question is, what market behaviours should be incentivised?

3. Public Distributions

Targeted airdrops, based on the needs of the DAO, can have great outcomes in terms of governor quality and engagement, if executed correctly. We like Badger DAO’s work here. For all readers, it is worth considering, how would you like to see a Tracer DAO airdrop, if any, rolled out? And what criteria would be relevant for the airdrop?

DAOs are looking to solutions like Balancer’s Liquidity Bootstrapping Pools (“LBPs”) or Gnosis Auction to facilitate public token distributions. The LBP path is now fairly well trodden, with recent examples including Perpetual DAO’s PERP LBP and Illuvium DAO’s ILV LBP. The newer mechanism of the two, Gnosis Auction, uses batch auctions to enable fair price discovery, where the market sets the price for the portion of tokens being sold.

Let’s Discuss

When it comes to the best way to distribute TCR governance tokens, we should all be sharing our thinking and attempting to gain consensus as a community. We welcome the expression of any views regarding token distribution.

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Depends on how the perpetual swaps are funded. Are we going to be establishing a funding pool ourselves and get people to deposit tokens, or are we going to hook ourselves up to a lending protocol like IronBank (don’t think other protocols can handle as much leverage as IronBank atm, but their history is shoddy at best). Or maybe a combination of the two, where if we run out of inhouse liquidity, we defer to an outside protocol.

If we’re running liquidity mining events to attract funding, I’d argue we should do it with vested rewards that releases over time (kind of like sushi). This will minimize short-term price impact for TCR, and it also ensures people who farms TCR will think of the long term prospects of TCR.

As for attracting swap volume, we can set up milestones where we reward users if the total swap volume reaches certain milestones ($100m, $500m, etc). This, compared to a one-time airdrop, would keep the community engaged and can grow the community as it will be easier to reach certain milestones with a bigger community. (However, I do think we should avoid what HEGIC did, the way rHEGIC was implemented promoted the selling of HEGIC instead of confidence in HEGIC)

We can also use a portion of the revenue from reaching certain milestones to buy back TCR if people choose to sell them, which can establish a floor for TCR and promote confidence in Tracer. This will in turn make talent acquisition easier as a stable TCR will be more palatable for new talents.

Also, once TCR is stabilized, this will open a lot of doors to funding Tracer’s day-to-day operations without the need to sell TCR.

tl;dr: Ensure distribution in a way that doesn’t compromise TCR stability. Once everything’s stabilized we can fund Tracer through a combination of protocol revenue and TCR grants.

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Hey Tracer DAO community!
I’m Chen, the product manager of Gnosis Auction.
As you approach the decision of how to conduct your token distribution, I wanted to give you a quick run down of Gnosis Auction, hopefully contributing to this decision process.

Gnosis Auction is a platform for conducting fair, transparent, and decentralized token price discovery.

Some of the benefits of using Gnosis Auction are:

  • Front running resistant - Gnosis Auction prevents front running bots from extracting value, by not allowing them to purchase tokens early and sell later at a higher price (sandwich attacks).
  • User friendly bidding experience - In contrast to other mechanisms, Gnosis Auction enables bidders to participate at their leisure, without needing to time their activity in order to get the desired price.
  • Full control over participation price - One of the advantages of Gnosis Auction is the bidder’s ability to limit the price at which they are willing to buy. In contrast, IBCO requires the bidder to commit to participation without knowing the token’s eventual valuation.
  • Fair pricing - All bidders will receive the same clearing price, which is determined when that auction concludes.
  • Order Settlement - Auctions can settle more than 10,000 bid orders with the same settlement price.
  • Permisionless - Auctions can be deployed without the need to ask for permission.
  • Composable - Auction setup is modular enough to satisfy many different use cases’ needs.
  • Gnosis Auction is built on the proven success of past blockchain-based auction developments.

Here’s some useful links:
Gnosis Auction
Docs

Please let me know if there are any questions or feedback!

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I can also attest to Gnosis Auction’s ability to conduct token sales at fair market value. The premium for YFI buyback with Gnosis Auction was within 0.25%.

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@Beepidibop I can’t agree more on liquidity mining rewards being vested.

I think the milestone airdrop idea is a great one for down the track, but to attract initial volume it won’t be as effective as a one-time airdrop to targeted users to grab initial attention.

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On the matter of Public Distributions I’d like to also through my weight behind the initiative to leverage Gnosis as the auction partner.

The only viable alternative to an auction I think would be launching on a curve like Maple Finance did recently.

However, Maple had some substaintial price discovery prior due to the rounds they’ve raised, and for a governance token like $TCR where the future value is much more speculative an auction is probably the best price discovery method. Open to feedback here from anyone with stronger opinions on the value of $TCR

Doing an auction rather than launching on a curve seems generally more friendly for initial investors in the IDO as it will find the best price for $TCR without disproportionately profiting from people who overvalue the asset. Also worth noting that our venture partners mStable leveraged Gnosis Mesa (what Gnosis Auction is based upon) to perform their IDO and they had a good experience.

@AJ.Mycelium

On the matter of Market Incentivisation which protocol’s users do you think you would target for $TCR airdrops? The DAO might consider engaging a data analyst to figure out how to optimise this strategy for users who leverage their airdrops and participate in governance.

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How about we do vested transaction mining instead of vested liquidity mining? This means the more you trade, the more TCR you get. Then we can introduce pool1 staking for TCR tokens where the more and the longer you stake, the heavier weight you get to multiple rewards.*

This should attract initial volume and minimize short-term price impact for TCR.

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@DEFIpunts I see transaction mining being classed under a similar bracket to liquidity mining. It’s an idea that has been discussed previously, how would you see it being played on a vesting schedule?

Staking rewards for TCR is also something that has been considered, definitely something that will provide a lot of strength and growth for the Tracer protocol.

@Agyle As you’ve alluded to, the LBP route like Maple have recently tracked through has been effective for the protocols that used this strategy given their prior context before the LBP sale. However, I tend to agree with your sentiment toward the Gnosis Auction.

Open to ideas for targeted users for the airdrop but I could see some of them potentially including:

  • Avid perpetual swap users (traded above certain volumes on competing protocols)
  • Wallets that have interacted and voted on “10+” proposals on other whitelisted DAOs.
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I really like the idea of targeting users who have actually leveraged passed airdrops and continued to provide value to the protocol. Using the Uniswap airdrop list directly to target early defi users feels a bit cheap, but a subset of Uniswap airdrop users who held tokens and actively participated or delegated would be cool. You could then go and apply this to any protocol that has done an airdrop and in which you think active governors or valuable community members could be found.

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A big one in my opinion would be incentivising insurance pools that are depleted. This would be extra important for volatile markets.

Depositing into a Tracer Perpetual Insurance pool could already be seen as a form of yield farming (you receive insurance funding rate payments). We could then boost these payments with additional $TCR incentives.

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Hi Adam, I like your suggestion to airdrop to avid perp users, I agree this is our target audience.
What protocols do you have in mind?
I would say the top decentralised perpetual protocols in daily volume.

  • However your second point to airdrop to whitelisted DAO wallets with 10+ votes on proposals is a bit too much in my opinion as we wouldn’t include a wider audience we would like to include as many active DAO members would be excluded from that list.
    To reach a wide DeFi audience I would suggest DeFi DAOs with established DeFi members the way Badger chose their airdrop participants in their Merkel tree.

  • I would propose active DAO wallets with 3-5+ votes on their respective whitelisted DAO would do the trick. (What if they joined their DAO in a later phase, they would feel left out while being active members, this generates a negative feeling in the wider DeFi community about Tracer).

@DEFIpunts I think LPB with vesting is the way here. Transaction mining is a cool concept, but harder to grasp for a wider public as I’ve seen happen with Furucombo.

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@JustASushiChef I agree in terms of top daily volume. Potentially the likes of dYdX, McDEX etc. but happy to hear more suggestions from the community.

I understand your concern regarding the 10+ number of votes. 3-5+ could play out well. The main thing here is to find a balance between finding great candidates and people free loading - we want to attract the most passionate users in the space.

What’s your reasoning behind an LBP over a Gnosis Auction?

Yeah it’s a frothy time in the market and I think strong scrutiny on airdrop eligibility will pay dividends. You can always do additional airdrops in future when the short term players have been shaken out of the market.

cc @adam.mycelium
Another thing worthy of consideration is to look at the following sites to find good governors and coax them over to Tracer.

https://www.withtally.com/
http://deepdao.io/

^^ Using DeepDAO you can see the most active DAO governers in Ethereum. :wink:

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DyDx is definitely on top of that list, I’ve traded there myself and I like the platform and DAO.

Do we have some analytics for decentralized perps trading?

I agree, freeloading users are not the people we need. That’s why I thought 3-5 would be better. We also have to think about different wallets used for different DAOs.

I wasn’t commenting on the Gnosis Auction, as I think that’s a more interesting option for us. So Gnosis auction > LPB > transaction mining.

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I personally like the idea of undertaking a Gnosis Auction. All the points mentioned resonate with me. It also sounds as if a number of people like the sound of this approach as well.

What’s the next steps moving forward @cmagan ?

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Hey @Magnus, thanks for the interest

Setting up a Gnosis Auction is a fairly simple process. There are few parameters to decide on like the amount of tokens to be sold, the minimum price of the auction and the duration.

Some additional things to consider are:

  • Would you need a whitelist / KYC
  • Any other requirement you might have
1 Like

When handing out TCR for participating in markets:
Per trade can be exploited, holding derivative can be exploited *(two wallets holding opposite amounts), simply using platform can be exploited (multiple wallets).
I think the best use of liquidity mining funds is to give them to makers on the order book.

A simple maker rebate could also be exploited though for the same reason per trade can be exploited, so the proposal I made internally recently is for any order that sits on the order book for over an hour before getting taken to get liquidity points proportional to time on the order book. Every month or so, the airdrop amount is divided proportionally among everyone that has liquidity points.

The hour threshold will protect against self trading and any advantage a bot would have, and will favor regular users trying to get a good price to actually participate in the market. Basing the amount of reward with time spent on the order book will help protect the insurance funds of new markets because having liquidity sitting around on the order book a long time waiting for a counterparty protects the fund from traders liquidation slippage and bankruptcy.

Thoughts? Perhaps incentivizing limit orders far enough away from market price that they are predicted to take over an hour to clear is too far, perhaps 10 mins is better, but would give more advantage to bots who can rapidly cycle and replace? Is there another way to announce in advance the action needed to get TCR for providing liquidity or participating in a market that can’t be exploited?

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Hi all, we’ve been giving this some thought, and we’re not convinced that this is the right approach.

All of the ideas about how to disperse the treasury are good ideas, but our strong recommendation to the DAO is not to commit to any of them (with the exception of the Gnosis auction) at this stage.

The argument we made in this research paper was that a large treasury has an economic function in and of itself - from credibility building to providing a competitive moat. Big treasuries are costly signals that enhance the attractiveness of participating in the ecosystem in the short term and are a powerful resource in the long term. Central to that is ensuring that it is very hard to spend the treasury.

The Gnosis auction is however essential - we (and the defi ecosystem more generally) need TCR to be priced in order to observe the dollar value of the treasury. So our suggestion would be to launch the Gnosis auction as planned, but not specify at this stage how the balance of the treasury would be allocated. (We’re going to take a look at the Gnosis parameters shortly.)

In general we favour supermajority requirements over treasury spending. There is an important exception - it is possible we will need a ‘fighting fund’ to respond to market opportunities if they quickly arise, and we wouldn’t want the DAO to miss those opportunities due to slow governance.

We’d be interested in everybody’s thoughts but as we see it there are a few options for the fighting fund mechanism:

  • put aside a certain amount of treasury for the fighting fund that requires less of a majority or quorum to access - like a petty cash fund
  • or require proposers to put up matching funds. For example, if Lion’s Mane wish to grab an opportunity in the market, they would have funds matched subject to a lower governance requirement.
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A bit off topic, but this is actually an idea I’ve been thinking about recently as well. A protocol can potentially offer a close to 1:1 collateralized (or even undercollateralized) “loan” to trusted/voted entities to utilize for time sensitive opportunities.

This allows trusted/voted on entities to leverage the power behind Tracer’s treasury, while Tracer gets to participate in opportunities it otherwise couldn’t have and a bit of extra income.

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