$YAMI, Tokenomics 2.0

Designing the tokenomics of a cryptocurrency, i.e. its monetary policy, is much more complex than what has been considered so far.

The main problem is that few projects seek to truly customize their tokenomics. This is also why most reproduce the same pump & dump scheme.

This is not what we want for Artys, our artists, their fans and the $YAMI hodlers.

This is why we have designed $YAMI tokens in a different and innovative way, in order to solve the many problems encountered by most tokens, such as volatility or the lack of intrinsic value.

The YAMI, means of payment in the ecosystem.

One of the main obstacles to the use of cryptocurrencies as a means of payment is their volatility. Even bitcoin, whose main ambition is to be a global alternative monetary system, will only be able to achieve this objective when it has relative stability.

However, payments in cryptocurrencies offer many advantages such as low fees or almost instantaneous international payments, which we greatly need within Artys, for B2B exchanges in Umatch in particular.

The dual token models that seem to be spreading to alleviate this problem, a stablecoin for payments, and a governance token to capture value, are not as effective as they appear.

The use of a cryptocurrency for payment is one of the main sources of utility and value capture for a token through the velocity of transactions in particular. Using a stablecoin for this purpose is tantamount to amputating the governance token of a good part of its appeal.

In addition, a governance token does not usually give right to protocol revenues in order to avoid the qualification of security by the SEC.

To meet its challenges, we have imagined a mechanism that revolves around 2 pillars: the notion of Token as a Service and the use of a bonding curve.

Token as a Service

We have designed the $YAMI so that when the Artys ecosystem has reached a sufficient size (about 20 million members), the price of $YAMI will stabilize at $9.99, which is the price of a month’s subscription for a fan.

In this way, 1 $YAMI will give the right to 1 month of unlimited access to streaming, hence the notion of Token as a Service!

This price stabilization will ensure the legitimacy of $YAMI as a currency of payment for assets, income and real benefits within the ecosystem.

However, the $YAMI introductory price will be $0.50. So the question is how the price is going to be guided from $0.50 to $9.99 ? The answer lies in the use of a bonding curve to manage the issuance of tokens.

Token Bonding Curve

The $YAMI bonding curve is an effective but complex mechanism, to which we are going to dedicate an entire article. But here is a summary of the essential notions.

Token Bonding Curves (TBC) are common smart contracts in DeFi, especially to manage liquidity pools. But they can also be used for issuing so-called continuous tokens.

In this case, the tokens are minted and burned burn on demand, which makes it possible to permanently balance supply and demand.

On the other hand, the price of the token is determined mathematically according to the number of tokens in circulation via a customizable formula. For the $YAMI, we use a sigmoid function which corresponds perfectly to the different growth phases of the ecosystem.

First, a phase reserved for onboarding early adopters and building a strong community of artists and fans. Everyone will be able during this phase to take advantage of acquiring the YAMI with a large discount on its target price of $9.99, before the price begins its ascent.

After this launch phase, the arrival on the platform of new artists and their fans will be accompanied by an increase in demand for YAMI thanks to its many use cases, leading to a growth in the number of tokens in circulation. . This is the phase of acceleration of the price towards its stabilization plateau.

Finally, the curve is calibrated so that the $YAMI will reach $9.50 from 500 million tokens issued, then will asymptotically reach $9.99. In this last phase, the volatility of the token will decrease drastically since it would take a purchase or a sale representing nearly 10% of the supply (about $400 million) to vary the price by 2%. For comparison, only $20 million is enough to vary bitcoin or ethereum in the same proportions.

This reduction in volatility will strengthen the monetary dimension of $YAMI while allowing it to be given new use cases.

Allocation

The continuous token distribution model changes the way allocation should be analyzed.

For most tokens, the allocation is done empirically, often by mimicry with other projects. This means that a large part of the supply is concentrated in a few hands.

Here again, $YAMI adopts an innovative and fairer strategy.

After the initial allocation, which is essential to finance the project, allocate the team and build up the strategic cash flow, all the new tokens necessary for the ecosystem will be equitably issued by the bonding curve.

Thus, the supply emitted by the bonding curve will increase with the number of users. Mechanically, the participation of the team and the investors will be increasingly minority.

It’s a fairer model for the benefit of fans, artists and the entire Artys community.

Here is an illustration of the issuance mechanism where we see the gradual dilution of the tokens of the initial allocation, as the public and members use YAMI acquired via the bonding curve.

Issuance

A common problem with current tokens is the mismatch between supply and demand. More precisely between the inflation of the number of tokens in circulation and the real demand.

The problem comes from the fact that the emission characteristics of the tokens, the quantity and the periods of cliff/vesting for example, are fixed in the smart contract of the token at the time of the design, without anyone being able to predict with certainty the state of future demand.

This is one of the reasons for the significant devaluation of tokens during bear markets, for example, where tokens continue to be issued on the market while demand stagnates or declines.

With this kind of model, supply and demand are always out of balance, which generates high volatility.

It is to solve this problem that we have imagined a $YAMI issuance strategy in 2 components:

• a fixed component, the initial allocation, which includes all known issue parameters,
• a variable component, via the bonding curve, which algorithmically adjusts supply and complementary real demand.

As a result, there is no longer any need to define a maximum supply, to choose between inflationary or deflationary token. The issuance of $YAMI is managed dynamically and no longer based on uncertain assumptions.

The initial allocation is broken down as follows:

*Incentive: This category will allow us to seek strategic partners in the music industry such as major artists, labels, producers or influencer agencies that will help us accelerate our growth. All tokens will be cliff or vested, but we need the flexibility to negotiate the best deal.

The bonding curve will provide on demand the tokens necessary for the growth of the ecosystem.

We therefore obtain the issue graph below representing the schedule of the initial issue, “capped” by the variable issue via the bonding curve.

Liquidity

The lack of liquidity is also one of the main causes of the volatility of tokens, especially at the start when the capitalization is still low.

This makes price manipulation and malicious attacks easier. At the same time, large purchases can lead to slippage and significant price changes on exchanges. Despite this, almost all new tokens are made available to the public directly on these trading platforms.

To overcome these drawbacks and protect the remuneration of artists whose streams and Royaltips will be paid in $YAMI, we have designed a two-step liquidity provision strategy:

Initially, the bonding curve will be the only access point to YAMI, then, in a second phase, liquidity pools will be opened on DEXs and the token will be listed on centralized marketplaces.

As a reminder, each token issued by the Bonding Curve is covered by its stablecoin equivalent placed in escrow in the reserve.

This reserve of stablecoins plays a dual role:

• it reinforces the intrinsic value of the YAMI, in addition to its use value,
• it is an important source of cash.

For example, after issuing 250 million tokens, the Bonding Curve will have close to $1 billion in guaranteed liquidity.

The bonding curve therefore plays a critical role in protecting $YAMI’s value at launch, guiding the price through the issuance formula and then providing ample liquidity limiting volatility and slippage.

In a second step, the $YAMI will be listed on other DEX/CEX platforms in order to allow trading without going through the bonding curve.

On the other hand, it is preferable to wait until the bonding curve is sufficiently capitalized for it to fix the reference price.

Without going into complex explanations of the mechanics of DeFi, it should be understood that the most important source of liquidity determines the reference price. This is why we will open liquidity pools when we have enough liquidity in the bonding curve so that it is the reference price for the market liquidity pools.

The liquidity pools will be fed continuously by redemption fees in the bonding curve (1%).

They will be opened within 12 months of the initial allocation, which corresponds to the end of the cliff period for seed and crowdsale tokens.

Thus, unlike most tokens which are only tradable on the marketplaces, the YAMI will have a dual source of liquidity.

Decentralization Bounty

Artys’ primary mission is to put artists back at the center of the music industry’s business model, and the decentralization movement made possible by web3 technologies offers an unprecedented opportunity to achieve this.

However, caution and pragmatism are needed to achieve equitable decentralization. Experience shows that for many DAOs, power is concentrated in the hands of the big, not always benevolent, initial players.

This is why we have decided to innovate on this issue as well, and here again the tokenomics of $YAMI make it possible to align the interests of the various stakeholders.

Without developing here the details of the decentralization process of Artys DAO which will be the subject of a dedicated article, the $YAMI has been designed to guarantee its proper execution.

Indeed, to protect the Artys ecosystem from a takeover of the governance of the DAO by a few entities, decentralization will only occur when a sufficient number of artists, music professionals and fans have join the adventure.

At the same time, in order to guarantee to the community that we, the founding team, will proceed with the decentralization of the ecosystem, we have imagined for the first time in all the universe of web 3 a decentralization bonus. Indeed, the vast majority of tokens allocated to the team, 50 million $YAMI, will be sequestered thanks to a smart contract and released only when the decentralization of the DAO is effective.

In addition, the release of tokens will be very gradual and limited to a maximum of 2% per month of the supply emitted by the bonding curve.

By this strong act, we demonstrate our desire and long-term involvement in the construction of this ecosystem at the service of artists. Tokens make it possible to align the interests of stakeholders with a common project, and the presence of a decentralization bounty is a perfect illustration of this, which we hope will be taken up by other projects.

In conclusion, $YAMI tokenomics were designed to both capture the real value developed by the ecosystem, while reducing volatility and the impact of speculation on the price. Thanks to this equitable approach, the $YAMI serves the development and growth of the ecosystem by aligning the interests of all stakeholders in an indisputable way, to put artists back at the center of the music industry’s economic model.

Because never forget: You Are Music Industry!

PS : you can see full tokenomics here

Raphael Lefèvre
CFO & Head of Token
www.artysmusic.com