Optimistic Liquidity Model and Tokenomics

Oct 2, 2021 · 7 min read

Disclaimer: just in case, check in with our news channel: https://t.me/aletheonews or our discord announcements: https://discord.gg/rDd5sAHQ4S in case if there are any changes not reflected in the article.
Aletheo tokenomics heavily rely on Optimistic Liquidity Model, which in turn heavily relies on implications of marketing and on social contract between Founders/liquidity providers and other participants.

Starting supply: 100000 LET tokens

Total supply: 3 million LET tokens

Yearly emission: up to 800000 in first year

Initial emission distribution:

Every 28 million FTM blocks(~ 3 months), starting from FTM block 28 million, all emissions except Founders, Posters and Airdrops emission decrease by 20%. Founders’ emission decreases faster, by 50% every 3 months. Genesis Posters will be able to claim their rewards from airdrop allocation. Refunds will also be claimed from airdrop allocation. DAO will be able to allocate more emission to Posters if it will be found reasonable.

Optimistic Liquidity Model

Optimistic Liquidity Model — a liquidity model with strong enough incentives to keep liquidity without actual liquidity lock, regardless of impermanent loss and general market volatility. 90% of FTM in liquidity pool is free to exit after block 26000000, yet the pool is extremely unlikely to be drained from most of it’s liquidity.

Founders’ liquidity is locked until block 26000000, liquidity providers get their liquidity locked for ~25 days everytime they stake.
Optimistic Liquidity Model uses two rewards pools(not to be mistaken with liquidity pools) for two groups of liquidity providers, Founders and liquidity providers(Founders are liquidity providers with a special status):

  • First is the rewards pool for initial liquidity providers known as Founders which starts with 10% of LET token yearly emission. It’s impossible to stake more liquidity tokens as Founder after claiming status Founder. If a Founder exits, remaining Founders rewards increase, they also do have increased rewards in LET tokens and more architect voting power. Rewards for this pool and architect voting power are following deflationary model
  • Second pool is for liquidity providers who enters liquidity pool after trading starts. This rewards pool also starts with 20% of LET token yearly emission. Anybody can stake more liquidity tokens at any point in time, so rewards for this pool and architect voting power are following inflationary model

tknAmount — amount of LET tokens in liquidity shares at the time of staking for liquidity provider. So not at the time of creating liquidity tokens containing FTM and LET tokens, but specifically at the time of staking. The formula is:

tknAmountLP = amount_of_LP_shares * amount_of_LET_tokens_in_the_pool / total_LP_shares

Rewards a liquidity provider gets depend on tknAmount, the lower is the price of LET token at the time of stake transaction, the more rewards share liquidity provider will be getting. The less is the total supply of liquidity tokens at the time of stake transaction, the higher share of rewards liquidity provider will be getting. As long as liquidity provider continues to stake the same amount of liquidity shares, tknAmount is constant. If a liquidity provider is to stake more liquidity on top of his already staked liquidity, then previous tknAmount simply sums up with new tknAmount. However, if a liquidity provider is to unstake a part of liquidity then tknAmount is being subtracted by a percentage of unstaked liquidity shares. For example, if a liquidity provider stakes 1 LET-FTM LP token and gets tknAmount of 1000 LET, then stakes one more LET-FTM LP token with tknAmount of 500 LET, so gets total of 1500 LET. And if this liquidity provider unstakes 1 LET-FTM LP, leaving 1 staked, he loses 750 of tknAmount, a half of unstaked.

On unstake a Founder or a liquidity provider gets 90% of liquidity shares, 10% is left forever in the pool with all LET tokens out of those 10% at the time of unstaking being burned to treasury, which results in slight price increase as a hedge against liquidity providers exiting.

Every transaction to the liquidity pool burns a % LET tokens. Burn starts from 10% and linearly decreases to 0% over a year.

Time-lock is a proof of poster dedication and integrity. Decentralized moderation requires it for efficiency, also it’s a way for holders to earn passive interest, and another way to gain architect voting power(still it’s inflationary). Behind it’s importance to the balance of Aletheo, time-lock is a very important part of tokenomics.

  • Stakers receive rewards according to their locked share. If only 1 wei of LET token is locked total, it still gets a third of all architect voting power(Founders hold another half). It also gets all time-lock rewards which is 10% of total LET emission
  • Time-lock is currently 20 million blocks long on Fantom, which is about ~25 days. So a staker can always exit before EIP-3561 upgrade. Read in previous article about EIP-3561 game theory
  • Posters must lock 420 LET to be eligible for post-to-earn rewards. The lock entry is required as a protection measure against spam, and minimum requirement will decrease as system grows
  • Eventually access to Aletheo data will only be possible with time-lock staking.
  • On unstake, 5% of LET tokens is being burned to treasury.

Utility, the core of Aletheo OLM incentives

Optimistic Liquidity Model assumes that at least some Founders are willing to extract value from managing an army(or a small group) of promoters on demand regardless of market volatility for long enough, until more liquidity providers aiming to eventually claim Founder status join the pool.

Is there anything to precisely measure to involve game theory in this basic assumption? Here is something to look at:

A correlation of 91% with Google searches during early adopters stage(historical data up to 2017 peak) for Bitcoin. As that early adopters stage was left, the correlation between price and Google searches now continues to decrease with time. Can we use this? Correlation does not always equal causation, or does it in this case? We can definitely find countless papers on how advertising attracts retail attention and how fundamental it is to any brand, and why marketing is a huge industry. More accurate will be a saying, that correlation does not precisely equal causation in case of awareness vs price action, however there is indeed mutual influence of both on each other.

The variables in comparison to above Bitcoin example and DeFi today are drastically different: market is more oversaturated, market has much more participants with different levels of education and enthusiasm, and more importantly, overall market heavily correlates with Bitcoin price, and Ethereum DeFi in particular strongly correlates with Ether price. So does the story change for first movers in crypto/DeFi today? It most probably does, but not completely. Everything has it’s own awareness cycles on top of price correlations with major cryptocurrencies’ price movements. Here is an example of a very popular Ethereum DeFi token, let’s see how big is the difference to above Bitcoin example:

Average weekly USD price of UNI token in USD value vs Google Trends values for last 52 weeks

Historical correlation between UNI token USD price and Google Trends for Uniswap during the last year is 0.633. Still, an extremely strong correlation. Note: increase in awareness predates increase in average(not necessarily actual) price. Note: significant awareness around Uniswap as a brand existed before the token release. Note: this chart is mostly a major bull cycle for all cryptocurrencies.

DeFi, as it seems, oversaturated to a point, when there are tokens which barely correlate with the market at all, tokens, of which general audience, sensitive to overall market movements, is not aware of. In fact, cases like this always have existed in the market, even before DeFi, but in DeFi it’s even more pronounced. Examples are several if not many, these tokens’ bull and bear cycles can be completely independent from general market movements. The lack of awareness around those projects makes them independent to market movements.

Posters can create awareness around a project on demand. Founders and stakers can either distribute campaign influence individually(unlikely before Aletheo grows poster base, but possible) or by cooperation in a group/groups and choose specific projects for promotion. What could be the APY of buying into unknown projects and then promoting those projects? The value of Founder position is to be discovered, however it’s certainly not the case with typical holder vs liquidity provider returns.

Architect tools are not ready yet and may or may not be available when trading opens. If architect tools will be ready before Founding Event conclusion, then Founders who already contributed will be managing the campaign and posters with voting power % according to their contributions.

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A Frankenstein of Proof of Concepts