Replace burn with buyback-and-[something]

There have been some scattered mentions of this article by placeholder vc. It would be good to have some focused discussion. The central idea is that instead of buyback-and-burn you can buyback-and-[something], and this can add more value long-term than destroying the tokens.

The [something] can be broken down like this:

  1. Put funds in a treasury :socks:
  2. … :grey_question:
  3. Profit

Where :grey_question: can eventually be a full-fledged smart treasury that supports token price, funds development, generates more returns… basically lots of awesomeness. But the space has not been explored much so it makes sense to start slowly until we better understand the options.

As a relatively low-complexity first step may I suggest one of the following two options:

(a) buyback-and-save :dollar: : put the tokens in a multi-sig wallet and decide later what to do with them. This is a low-risk, low complexity move to stop burning tokens and keep all options open.

(b) buyback-and-uniswap :unicorn: : A bit more complex but with benefits for the ecosystem: put the bought-back tokens in the Uniswap PICKLE-ETH pool to support PICKLE liquidity. Extra liquidity is a good thing because it stabilizes the token price. Treasury funds would also generate returns from trading fees. Remember: Long-term, PICKLE emissions drop and therefore so do the incentives to provide liquidity to the the PICKLE-ETH pool. In order to maintain a healthy ecosystem, PICKLE needs to be liquid, and liquidity needs to come from somewhere. In the long run, balancer seems to be a better option for this smart treasury (as per the article) but uniswap seems like a good first step.

What think ye oh briny picklers?

15 Likes

I love this idea of buyback and uniswap!. I think PICKLE-ETH LP profits and $PICKLE generated from the “community LP wallet” should then be sold and distributed to $PICKLE holders and pJar liquidity providers.

Very interest economic consequences!! :clap:

6 Likes

Thanks for kicking this off brinosaurus_rex!

The buyback-and-uniswap is an idea that hasn’t really been thrown around but I love it. Increasing liquidity in that pool is key for the protocol and for PICKLE holders. Also, PICKLE holders and/or pJar participants will eventually see tangible returns coming from the fees, as opposed to just hearing that PICKLEs elsewhere went poof.

The smart treasury is an admirable goal for sure, but it takes a lot to get there, including a full token migration. This idea could do some good in the interim.

8 Likes

I support the “B” proposal / idea as well. Buyback and Uniswap addresses multiple concerns, including a direct benefit to pickle holders (assuming we receive a portion of the fees). As an LP and holder, this would be very attractive to me long-term.

1 Like

Yep it’s indeed an interesting topic. Utilising this buyback tokens in some way would be preferable. Option B or something similar - where this tokens accumulate over time and are used to generate even more wealth by buying back even more… and more… and more… like a soverign fund on steroids ;-D We can call it Royal Brine Fund ^^

If you combine that with the periodical release of funds for devs & community projects…

1 Like

Buy back and pool is an interesting idea. There could be a point where liquidity from the current ETH/PICKLE uniswap pool isn’t deep enough since the APY is most likely going to go down with all the halvings.

This could help with that. If we decide to go this road, I think we should do it on Balancer in a 80/20 pool type of thing. Otherwise in a traditional 50/50, it means only half of the “burn pickle fee” is actually used to buy PICKLEs.

3 Likes

I really like the buy back and pool idea. A Balancer pool makes it even better IMHO. Balancer offers a lot more flexibility (such as the 80/20 split mentioned and customizable fee), adds a second option to avoid being solely dependent on Uni, and once whitelisted would also earn BAL.

The latter could be very important, as the BAL earned by the buy back pool could be used a number of ways:

  1. The BAL could be sold to buy more PICKLE to add right back to the pool, creating yet another positive feedback loop
  2. The BAL could be distributed to PICKLE stakers
  3. The BAL could be sent to the team to help fund operations (allowing them to sell BAL for expenses instead of PICKLE. It probably wouldn’t be enough alone unless this pool was very big, but would help)

I personally like both #1 and #3.

7 Likes

It’s great that there is almost unanimous agreement that buy back and burn will not benefit pickle as much as buy back and use. Particularly now that the inflation has been capped so much compared to when the burn mechanism was introduced.

Love the Uniswap/Balancer ideas.

2 Likes

I vote for buyback-and-Uniswap/Balancer. It benefits both the protocol and the Pickle’s holders.

2 Likes

Glad to see the positive reactions. :cucumber:

For what it’s worth - I think ultimately a balancer-like pool is the best option and provides the most flexibility, however initially I would suggest Uniswap as the better alternative for a couple of reasons:

  1. Lower complexity
    Uniswap is a simple fire-and-forget option that doesn’t require ongoing maintenance (no need to adjust token weights, trading fees, etc.)
  2. Existing liquidity
    This is the main reason to use Uniswap over Balancer IMO. We need a minimal liquidity buffer to bootstrap a pool and we already have this on Uniswap. On Balancer, the liquidity would have to be taken from elsewhere (for example, an initial offering of PICKLE tokens via auction, or a coordinated attempt to incentivise existing liquidity to migrate from Uniswap to Balancer).

Some numbers

Back of the envelope calculation: Assume $400M TVL, 40% pJar APY, 1% profit buyback. This translates as (400 * 0.4 * 0.01) $1.6M annually to the treasury pool, which is about 15% of current pool liquidity.

It’s debatable if this will be enough to offset natural liquidity depletion, but it’s a good start. As the treasury share of liquidity increases to the point where it can live on its own (ie. it represents a significant enough portion of total liquidity), we may decide to transfer it to a more full-featured balancer-based pool.

Another possibility: Scrap the buyback, instead add pickle to the treasury pool directly from new issuance. So for example if the block reward is 1PICKLE, put 0.1 PICKLE per block in the treasury pool and distribute 0.9 among farmers. In other words, divert X% of all new issuance to the treasury pool. This might make for a more predictable increase in treasury funds and ultimately a larger pool. (If someone can do the calculations on this option that would be great, I don’t have the time unfortunately…).

2 Likes

Another option > Buy back and distribute , distribute the PICKLE to PICKLE holders.
Alternatively, don’t buy back, go direct - distribute directly to PICKLE holders in stable, thus adding value to PICKLE in different ways.

1 Like

Apparently direct distribution is not practical, neither code-wise (airdrops are hard, apparently) nor tax-wise (every pickle award would potentially be a taxable event).

Think of it this way:
By buying back and pooling the token, there is constant small buying pressure that increases the value of all pickles. Every pickle holder makes capital gains and can choose when/if/how they want to cash this in.

1 Like

Re: distribution among holders. How about pooling into Uniswap, then transferring the LP shares to the Pickle Power farm, so they are automatically distributed among all stakers proportionally.

Not only it is simpler to implement, but I like it better than distributing among mere Pickle holders anyways, as LPing in that pool requires significant commitment to Pickle, since you risk losing your Pickles and the pooled ETH should Pickle price drop to zero.

This way also Pickle Power can keep a high APY without relying only on inflation (assuming healthy fees are collected, which is the other side of the coin) which should be good for marketing.

Edit: under this proposal, tax wise this would only trigger capital gains when unstaking.

4 Likes

I agree that the balancer/uniswap idea is definitely a better idea than a burn, and using it to fund a treasury or allocating different %

2 Likes

I like this idea, in particular how it rewards stakers who have extra skin in the game. However:
(a) we would lose the benefits of a community-owned treasury (funds for audits, development, guaranteed minimum liquidity level).
(b) LPs in the pickle-eth pool are arguably already incentivized through trading fees. If the trading fees are not sufficient to offset IL risk, we could migrate liquidity to a balancer pool with higher trading fees, for example.

I think there’s a balance to be struck between direct rewards to pickle holders (ie. numbah go up x%) vs. the less tangible long-term rewards a treasury pool would give to the project as a whole*.

IMO there’s a chance this could create a virtuous cycle of: better liquidity => price stability => lower IL risk => more LPs => better liquidity (=> repeat).


*Not saying I know where the balance lies btw. Just to be clear: my only experience with tokenomics/incentive design comes from 4 years of crypto obsession. I have not studied this, I don’t work in the space.

Fair points. Perhaps the balance can be found by having part of the LP shares are allocated to the team’s multisig, and the rest distributed via the farm. Then to spend funds all the team needs to do is pull liquidity to pay themselves.

That said I don’t see a problem with having Pickle Power participants double dipping on liquidity fees given how much risk they are carrying, and given that APYs are going to crash on every pickle-halvening.

Here is an idea:

PICKLE tokens as a claim on the treasury pool.

Send all gains from pJars go to the treasury. No airdrops, no dividends, no buybacks, no burns, nada. Pump the treasury, keep it under control of the community (PICKLE holders).

Now, at any point, you can exchange your PICKLE at the treasury for your share of the profits. So, for example, you hold 1% of all PICKLE in circulation, you can exchange that PICKLE for 1% of the accumulated treasury.

That’s it. That’s the idea.

Some advantages of this:

  • other PICKLE holders are not diluted, the value of their share of the treasury remains the same.
  • however, the proportional claim on treasury assets of each remaining holder has now increased! So any future increase in treasury holdings has a greater proportional effect.
  • there is an incentive to hold PICKLE rather than cashing in since the treasury will increase in value. If you claim your treasury gains now, you forfeit any future earnings (which will go to the remaining holders).
  • upward pressure on PICKLE price:
    • treasury size is increasing as long as strategies are effective and attract LPs (% of pJar profits) so if you keep the same share of PICKLE (through staking or whatever), the equivalent value of your PICKLE increases.
    • PICKLE holders cashing in and forfeiting future gains increases expected future gains to remaining holders => higher future cash flows => higher token value.

Basically the PICKLE price will be based on expectation of future cash flows and expectation of how many people cash out, thus increasing everyone else’s share of the pool.

Also holders have the reassurance of knowing that PICKLE market cap can never drop below the net total value held in the treasury. Ie. there’s a backstop on the price since you actually own a claim on some underlying value.

10 Likes

thats… VERY interesting idea - combine it with using some of the Royal Brine Fund to sponsor:

  • dev
  • promotion

and you get a huge incantive for holders to promote token, make it better and more expensive!

Idea worth a king indeed!

1 Like

Yes the treasury would be under community control, so funds could be use for development, audits etc. as needed (and voted for).

Also the bought-back PICKLE could be selectively re-issued if needed to raise capital, provide incentives, devs, audits…

1 Like

Yeah that approach would also resolve the issue of Incentivizing Pickle Holding

It reminds me of the Swedish Sovereign Wealth Fund but a bit more flexible with possible payoffs and benefit of everybody in the community taking care of a protocol.

I really dig this - as a pickle LP provider I feel that this would work for me long term :stuck_out_tongue_winking_eye: