$BABL Participation Rewards Program
In our previous post, we introduced the Babylon Finance governance token ($BABL) and shared that 69% of the tokens (690k) will be allocated to the community.
Today, we propose a participation rewards program that aligns the incentives of all the participants.
Participation Rewards Allocation
The most important goal of $BABL is to ensure that Babylon.finance is owned by its users.
The total supply of $BABL is 1M. We are proposing a Participation Rewards Program utilizing half of the token supply, 500K of $BABL, to extend over the next ten years.
This will leave ~190K in the treasury for other protocol initiatives including varied rewards programs and liquidity bootstrapping initiatives. BABL holders will decide the best way to allocate the remaining $BABL via on-chain voting.
The Hanging Gardens
Before we get into the details of the participation mining program, it is important to define the communities and the participants.
Babylon.finance is a network of investment communities where all the members are actively participating to allocate capital in the most effective way possible. These communities are called Babylon Gardens in honor of one of the ancient wonders of the world. Every garden has a different investment thesis with unique time, liquidity, and risk preferences. For example:
- A group of digital art curators may start an NFT Garden to collect and invest in the most sought-after digital art in order to later profit from their collected NFT’s.
- A group may want to access yield for their stable coins with low risk. They can create a Yield Garden that provides liquidity to stable coin pools.
- A Value Garden dedicated to identifying potentially overlooked investment opportunities based on fundamental metrics.
- A Macro Garden where the community is investing in commodities and forex markets through the Synthetix protocol.
Participants
There are four main participants in the protocol:
- 🌱 Gardeners. A Gardener creates a garden in Babylon.finance. The Gardener is responsible for defining the investment thesis and “growing” the garden.
- 🧧 Liquidity Providers (“LPs”). LPs contribute capital to a garden. After they become a member, they can participate in the allocation decision process by also assuming the role of a Strategist or a Steward.
- 🧠 Strategists. They ideate the best performing strategies within the thesis of a community. Strategists use a codeless interface to generate ideas and stake their participation, taking additional risks in exchange for greater rewards. Only a garden LP can become a Strategist.
- 📰 Stewards. Stewards make sure capital is allocated efficiently. By endorsing strategies, Stewards decide which investments become active and how much capital to allocate to each investment. Only a garden LP can become a Steward for that community.
How long?
Now that we explained the core concepts of the protocol, we can delve into the details of the program.
Let’s start with the supply curve. The supply curve is designed to optimize the long-term sustainability of the protocol. The rewards are front-loaded but they last for more than 10 years, slowly decreasing quarter by quarter.
Here is how we will calculate the rewards available for a given quarter E:
This creates the following supply curve for this participation mining program:
Now, we can go even further, and for any instant in the future, we know how many rewards we can distribute per second of a specific quarter or Rq(E).
We calculate the max number of rewards to distribute in a second by dividing by the number of seconds in the epoch.
Rewarding Strategies
To align the incentives of all the active participants, we only reward participants involved in active strategies. The active strategies are the strategies that have received enough endorsements to acquire capital from their Garden.
The rewards of a strategy are based both on the principal (denominated in ETH) deposited and the number of seconds that the strategy was active. Rewards will also be influenced by the amount of principal allocated to other strategies in the protocol during that same time period.
In short, the max rewards of a given strategy can be modeled as follows:
For example, if a strategy “i” received 1ETH and lasted 1 hour:
StrategyPower (strategy_i)= 1 * 60*60 = 3600 weight
If we assume that there were other 10 strategies in addition to our strategy with a total of 50 ETH (5 ETH each) during the same time period and that we are in Q1, where rewards are 53,571 $BABL:
ProtocolPower(E) = 10 *( 5 ETH* 3600 secs) + (1 ETH * 3600 secs)= 183,6K weight
MaxStrategyRewards (strategy_i)= 3600 / 1.836 * 10⁵ * Rq= 0.02 * 53,571 = 1,050.41 $BABL
Adjusting based on Performance
If the strategy had a positive performance— ETH returned was greater than ETH allocated — the strategy will get the maximum rewards.
However, if the performance was negative, the returns will be diminished and adjusted using the following formula:
StrategyRewards(E)(strategy_i)= MaxStrategyRewards(E)(strategy_i)*(1+NegativeProfit(strategy_i))
e.g. If 100 is the maximum amount of $BABL rewards that strategy “i” and it had a performance of -20%. It would receive 80 $BABL instead.
Rewards by Participant
At this point, we know how much $BABL to allocate per finalized strategy. However, we still need to distribute this $BABL amongst all the participants in the strategy.
It is important to note that besides $BABL rewards, a strategy also splits the potential returns among the participants. We’ll add these numbers in this section for completion.
In traditional finance, funds usually have a fee structure where the manager(s) get 2/20, 2% in management fees, and 20% in performance fees. Babylon splits the 20% performance fee amongst the participants and reduces the management fee to 0.5%.
🧠 Strategists
8% in $BABL Rewards + 10% of the Strategy Profits in ETH (if any)
e.g. 100 $BABL rewards are delivered to the strategy “i” in total, 8 go to the Strategist.
📰 Stewards
17% in $BABL Rewards + 5% of the Strategy Profits in ETH (if any)
All the stewards that endorsed the idea will receive their proportional share of the rewards based on the number of votes each of them cast in support of — or against — a strategy.
e.g. 100 $BABL rewards are delivered to the strategy “i” in total; 17 will be split between Stewards according to the votes cast by each.
🧧 Liquidity Providers
75% in $BABL Rewards + 80% of the Strategy Profits in ETH (if any)
All the Garden LPs will receive 75% of the rewards proportional to how much capital each of them contributed to the garden.
e.g. 100 $BABL rewards are delivered to the strategy “i” in total, 75 goes to LPs, proportional to their ETH deposited.
🌱 Gardeners
1.15x Multiplier in BABL Rewards
The gardener needs to be an active member of the garden. As the creator of the community, the Gardener gets a special bonus of 15% for all the activities performed as members.
e.g if the Gardener was to receive 20 $BABL rewards for participation, he would instead receive 23 $BABL.
Summary and Example
To tie it all together, here is a table with all the different participants and their expected payoff.
It is important to note that these are the starting points. The community can suggest different values through governance proposals.
Join the Discussion 🤝
This is a community proposal, and we welcome your feedback.
- You can check the numbers of a Montecarlo simulation with 🔢 200 strategies here.
- Join our Discord and provide feedback in the #mining-program channel.
We’ll refine and adapt the proposal based on the feedback received by the community.
Babylon is coming soon 🚀🚀
Legal Disclaimers
This announcement has been written and published by Babylon Finance, Inc. (“Babylon Finance Inc”). The directors and officers of Babylon Finance, Inc owe fiduciary and contractual duties solely to Babylon Finance Inc’ investors.
BABL confer no information, voting, economic, fiduciary, contract, or other rights against or with respect to the assets or personnel of Babylon Finance Inc. The interests of Babylon Finance Inc and its directors, officers, and investors may differ materially from the interests of BABL holders, protocol users, and other active protocol participants.
Babylon Finance Inc provides no guarantee, commitment, or undertaking to utilize any of its assets, funds, properties or personnel, BABL users, or other Babylon protocol participants. Babylon Finance Inc does not owe and does not intend to assume, any duties or obligations to BABL holders, users, and other protocol participants, other than duties or obligations arising under laws of general application, such as non-waivable torts. Moreover, Babylon Finance Inc has various legal, fiduciary, and contractual obligations that could conflict with the interests of BABL holders, Babylon users, and other Babylon protocol participants.
To the maximum extent permitted by applicable law, all software relating to the Babylon protocol is being provided on an as-is, where-is basis, with no representations or warranties being made to BABL holders, protocol users, or other Babylon protocol participants and with no liability to Babylon Finance Inc or any other person involved in the development of the Babylon protocol. The statements set forth in this announcement also are not intended to be representations, warranties, guarantees, or assumptions of duty or liability of any kind, and Babylon Finance Inc hereby disclaims the foregoing and will not be liable for any damages arising from the use of the Babylon protocol or BABL.
In the event of any conflict or inconsistency between this announcement or any other communication and the terms of any software license involved in the Babylon protocol, the terms of the software license shall govern to the exclusion of this announcement and such other communications.
The forward-looking statements in this announcement are subject to numerous assumptions, risks, and uncertainties that are subject to change over time. Such assumptions, risks, and uncertainties could cause actual results or developments to differ materially from the results and developments anticipated by us. Even if our anticipated results and developments are realized, such results and developments may nevertheless fail to achieve any or all of the expected benefits anticipated by this announcement.
We reserve the right to change the plans, expectations and intentions stated and implied herein at any time and for any reason or no reason, in our sole and absolute discretion, and we undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
This announcement is for information purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any interests in Babylon Finance Inc, any Gardens or any other securities.This announcement is not intended to provide legal, financial or investment, or other advice and we recommend that you do not rely on, and do not make any financial or other decision based, on this announcement.
