AIP-2 — Emission schedule and tokenomics improvements

Alien Base
6 min readNov 23, 2023

Summary

We propose several measures aimed at restoring Alien Base’s position as one of the top DEXs on Base, as well as to ensure the long-term success of the protocol.

The first measure is to adjust the emission schedule to better fit the current situation.

The current emission rate is 8 ALB per second. According to our initial tokenomics, this emission should be cut to 7.5 ALB per second (a 6.25% reduction) in November.

#1 Emissions increase

We propose instead to increase the emission rate by 31% to 10.5 ALB per second for two months, with the start coinciding with the deployment of our V3 concentrated liquidity solution.

This helps increase APR across the board and give a much needed boost to TVL and volume figures. It will be directed to both ALB and non-ALB pools to both increase “blue chip” TVL and improve ALB liquidity.

#2 Targeted boosts

We also propose an option to use up to 2 million ALB from the DAO treasury wallet (currently 0xD9c14E5Ad86d06de762F0D179109661E5B60cC4d) for targeted boosts to promising V3 vaults including ETH/USDC, tBTC/ETH, or ALB pools during the initial V3 deployment.

#3 Revenue Sharing

Finally, we propose an alternative revenue sharing scheme. Up to now, Area51 income was nearly entirely directed to ALB holders via the Single-Stake route, while Alien Base income is claimed by the team to support operations. We propose a holistic 50/40/10 split for all Alien Base platform revenue distributed as follows:

  • 50% to the team
  • 40% to ALB holders via Single Stake and esALB systems
  • 10% to a DAO treasury, to be initially directed towards POL

#4 DAO Multisig

Along this, we propose the establishment of a DAO multisig that will have control of the DAO treasury. The proposed structure would be a 50%/50% split between the team and prominent ALB holders, ensuring that no operations can be conducted without at least partial approval of the other side.

The vote will begin on Friday, November 24 at 15:00 UTC using Snapshot, and last for two days. To vote, you must briefly unstake ALB from the single-staking pool before this time to ensure your vote is counted. After the proposal is published on Friday, you’re free to stake once again.

Execution timing:

  • Step 1, 2 & 3: at or shortly after the launch of V3, pending timelock, expected by the end of November
  • Step 4: Immediately after the approval of the proposal

More details for each proposal below:

Increasing emissions

At current circulating supply figures, the emission rate amounts to 28% monthly inflation. Given the current stage of the project, we consider this to be an acceptable rate as market forces can easily overpower the constant stream of new tokens, which are nonetheless crucial to attract activity to the DEX.

Increasing this rate would result in 36.6% monthly inflation, of which currently only 16% would go to non-ALB pools. The addition of new V3 pools would increase this percentage, but not substantially. Furthermore, many of the current V2 pools will be replaced with V3 vaults over time.

The benefit of increasing emissions is the ability to create attractive vaults with high APRs (targeting up to 600% on some concentrated ALB V3 vaults) that would be perfectly timed with the release of the new product, and kickstart the liquidity flywheel once again.

Drawbacks come from the obvious increase in emission, placing more downward pressure on price. However, the volatility of ALB is such that a 31% monthly increase in sell pressure can be easily counteracted by an increase in user participation and attention, especially if the increase is strategically targeted. Furthermore, the inflation would merely come back up to figures seen in September-October, where a smaller circulating supply meant larger relative inflation.

The boost is designed to be temporary, increasing the total supply mined by 2.5%, amply within our max supply threshold (currently, only 80.4% of the supply is allocated to emissions).

We also aim to feather in the reduction towards planned levels at the end of the two months, reducing at a rate of 1 ALB/second every week in the last three weeks.

Targeted Boosts

In a similar vein to the overall emissions boost, we aim to use the DAO treasury to provide extra rewards to specific pools. The program would be launched shortly after the V3 deployment, after initial statistics on volume per TVL have been collected. The most effective pools will receive boosts when required at the discretion of the team, potentially using external partners such as Beefy.

As before, the benefit is additional attention, liquidity, TVL and volume, and the drawback is larger selling pressure. However, 2 million is less than 6% of monthly emissions and thus should offer only a negligible impact on the supply dynamics.

Revenue Sharing

We believe that a 50/50 split across the board for the foreseeable future guarantees the best incentive alignment between the team (currently responsible for development and some operations) and the ALB holder community.

Alien Base V3 should offer a steady revenue stream via volume (including arbitrage, aggregator and organic volume), while Area 51 and other products can generate tremendous revenue once developed and marketed into their final product vision.

An uneven revenue split results in mixed incentives and an inconsistent holder APR, while leaving the team potentially unable to capitalize on a particularly successful alternative product. Given our ambitious roadmap, acquiring enough revenue to support development of new products (which may end up costing tens to hundreds of thousands of dollars in audits alone), is paramount to the success of the protocol at large.

Hence, we feel that a 50% collection rate to directly fund the team’s operations is necessary in the early growth phase of the protocol. The remaining 40% streamed to ALB holders can increase the attractiveness of holding the token and stabilize APR with Alien Base revenue, which is generally much more consistent than Area 51.

Finally, the remaining 10% streamed to the DAO treasury can be used to build up Protocol Owned Liquidity (POL) and seed the DAO with the hard cash it will eventually need to operate in full.

We believe that POL is an important part of the evolution of the protocol as it transitions from “dumb” V2 farms. The inefficiency of a full-range xy=k position means that very significant portions of the ALB total supply need to be locked up in liquidity pools to support a given market capitalization. This requires large subsidies to liquidity providers, even if LPing should be a profitable activity in itself.

POL deployed to our V3 would help build up strong liquidity reserves and potentially turn a profit for the DAO, reducing the need to give out subsidies. It would help backstop the token even if market liquidity dries up, resulting in a more stable and liquid ALB.

DAO Multisig

The time has come to begin the decentralization of Alien Base. In part thanks to our top holders initiative (a chat space for large ALB holders), the protocol acquired a core community who’ve been through hell and back and are aligned with the long term health of the Alien Base protocol.

By transferring DAO reserves to a community multisig, we can begin establishing a system of checks and balances between the team, holders and the community. The current balance is approximately 10 million ALB which will subsequently be locked and continue to be accumulated from emissions. Before transferring funds to the multisig, 400,000 ALB that was fronted by the team for a highly effective Beefy boost in the early days of the protocol will be returned.

We believe in progressive decentralization — a natural trend seen even in traditional companies. As organizations grow, additional governance structures start to become necessary to steer them towards their future. The community multisig is the first step towards that goal for Alien Base, and we believe it will help the protocol become one of the dominant players in the DeFi space as a whole.

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