Beethoven X
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Beethoven X

The Evolution of Music — fBEETS X Reliquary

Dear Friends and Fellow Ludwigs,

The only certainty we can all be sure of is that change is inevitable; music is no different. Everything must transform and it becomes more of a question as to how we respond, how we adapt. DeFi is such a nascent space, infantile at best and although we have seen an incredible amount of innovation in a short space of time, there is always room for improvement, for progression, for evolution.

The evolution of our music is what lies at the heart of our progression. We are in a constant search for perfection, one which we know has no end. We are in love with the process and strive to build a protocol that lies at the forefront of an emerging industry.

Change is inevitable and that is something we have come to learn to embrace. Rather than resist the ebb and flow, we have learned to dance in the unknown and harness its mysterious potential for growth. Instead of conforming to a norm and becoming sheep at the mercy of a meta-narrative; we chose to stand outside of the herd and innovate. Create.

Locking

In April of this year, our community voted in favor of a pivotal proposal to introduce a locking mechanism for fBEETS. Extensive research was conducted to help us determine how best to implement this strategy and make sure we were making the most informed decision as possible for that time.

The introduction of Locking was never an initiative taken lightly or undertaken simply to fit in with the crowd. In fact, we were acutely aware of some of the inherent limitations, but like many things, it comes down to a balance between pros and cons.

The timeline for its implementation was set for the beginning of Q3, however, due to a cascade of events that affected the wider market and the release of V2, the launch of Locking was postponed. In many senses we could look at these events as a blessing in disguise; what it has provided us with is a moment to reflect and potentially readjust the course of our direction.

So much has changed since then and the question now arises: given the current climate does it still make sense for us to go ahead with this initiative?

Before we explore alternative solutions, let’s ask the important questions…

Why lock in the first place?

Essentially, locking was introduced as a solution to help align incentives between users and the protocol. Often users are prone to abusing incentive models in pursuit of profit. In a bid to ensure that users have the protocol's best interest at heart, veTokens forces users to lock up positions for extended periods of time. In a space that can be volatile at the best of times, this creates a dynamic that can put users at risk and left without the freedom to readjust exposure — cultivating a culture of entrapment.

When locking positions for the maximum time frame, users would then unlock the full governance voting power as well as a boost in rewards. The belief is that users who have capital locked are further incentivized to see the protocol succeed and will therefore act in the interest of the protocol. But, is forcing users into locking the best solution, and does it ensure diversified community participation?

For whales that hold large amounts of capital, locking tokens is easy. They can simply write the capital off and secure a large portion of governance. But is this true for everyone? Smaller fish can’t enter with as much freedom and in order to gain substantial governance power, they must lock a large portion of their capital. Locking is not a welcoming endeavor for everyday users and carries far more implications than just financial. As with everything, emotions dictate human behavior, and writing off a portion of one’s capital carries huge emotional responsibility.

Locking is also seen as a solution to combat another key area — price depreciation.

Does locking reduce price depreciation?

As beautiful as DeFi is and as wonderful as many Ludwigs are, not everyone in the space has noble intentions. Capital is mercenary and flows freely between protocols. Capital chases yield, and when it subsides, that capital moves elsewhere, negatively impacting long-term believers. Users should always have the freedom and choice to enter or exit a position, but when this process is amplified, it can raise an unsustainable foundation for projects to build on. Locking is a response that removes a user's freedom of choice, but is this an ethical solution?

With the introduction of the vote escrowed (ve) model, it becomes possible for a large portion of governance tokens to be locked away to prevent / stagger holders from selling large amounts of a token on the market at any given time. Instead of incentivizing users to hold, locking removes the ability to sell. Surely once these tokens have been locked, price depreciation is reduced? Well, not really. Locking has not proved to be a reasonable approach to mitigate a fall in price and many tokens have followed similar price movements to non-locked alternatives. Often users who want to sell, won’t lock, and users who lock first will then sell large positions when they unlock.

At first glance, locking tokens seems like an effective solution to mitigate the dilemma outlined above but does it effectively solve the problems it set out to resolve, and is it really an ethical approach?

Let’s dig a little deeper

What are the pros and cons of locking?

Pros:

  • Users who lock are incentivized to participate in the democracy of the protocol
  • Users can earn a boost in rewards and participate in governance
  • Protocols give extra votes for longer time-locks
  • Align the protocol and holders incentives, those who lock hope to see the protocol succeed.
  • Incentivizes larger holders to lock up as they can gain more control of the protocol.
  • Capital is “stuck”

Cons:

  • Users who lock are forced to participate in the democracy of the protocol
  • Whales and DAOs can max lock a small portion of their tokens and control a majority of a protocol
  • Users can still vote in their own self-interest, not the protocols
  • Traders who want to sell won't lock
  • Users want to hold liquid assets, locking removes any freedom a user has
  • Users who lock first benefit most and can sell on unlocks
  • Not actually the most efficient mechanism to reduce price depreciation
  • Inefficient use of capital
  • ve protocols quickly turn into whales just owning them
  • The largest LPs are also the Largest token holders
  • Impacts your ability to de-leverage

A questionable model.

As we peel back some of the layers on a system that has had such a profound effect on the industry as a whole, it becomes ever more clear that there are still major drawbacks that make the ve locking mechanism a questionable choice for future implementation. Sure, it has been tried and tested but there is definitely room for improvement, there is room for evolution

So are there any alternatives?

Solutions have arisen, but they have yet to prove themself. Financial NFTs are one promising example that aimed to combat the issue surrounding liquidity. The technology allows users to lock their veTokens within an NFT and receive both the underlying yield and governance power while unlocking the ability to sell on a secondary marketplace. However, fNFT sales have yet to see substantial demand on secondary markets, and hence, users holding these positions are inclined to sell fNFTs below the market price to ensure a buyer. Although a promising technology, fNFTS are not a fully liquid solution and have yet to be fully utilized. So close, yet seemingly so far. Fortunately, this space evolves fast, and we have another option.

Introducing the Reliquary.

The reliquary is an innovative primitive that offers an alternative solution to the shortcomings of the current vote escrowed model.

Through the use of financial NFTS, the reliquary offers users the freedom and flexibility to build sustainable positions over time that align users' incentives with the desired outcomes of the protocol in a more ethical manner. An unexplored evolution, the reliquary encourages the diversity of the community by redistributing dominance hierarchies, bringing power back into the hands of the people.

An innovative solution.

The Reliquary allows users to deposit LP positions within a Relic; unlike ve mechanisms a Relic can be exited at any time. There is no locking. Instead of users needing to lock a position to gain voting power and boosted emissions, the Reliquary incorporates a concept known as maturity.

Maturity

Rather than “force” users into a locked position, maturation through Reliquary encourages users to align with the protocol whilst keeping the user's “freedom” intact. The Relic persuades users / DAOs to earn additional incentives/governance power by cultivating a position over a given time period. The longer a position is held the more potent it becomes.

How does it work?

The idea is pretty simple, maturity will be broken down into various tiers or tranches with each tier progressively unlocking more rewards. Both emissions and voting power will scale up as users approach a higher level of maturity until the maximum level of maturity is obtained. Users will not obtain maximum emissions nor voting power at the creation of the Relic, they must obtain the different levels with time, trust and patience. The key here is that users are not forcibly locked and can exit their positions whenever they choose.

But, what if you wish to add to your position?

Depositing will impact the degree of maturity (impact is weighted by the amount invested compared to your entire position).

Unique to the Reliquary, user positions are stored as NFTs rather than attached to addresses. This unlocks a whole range of creative possibilities; users may hold multiple, transferable positions, merge positions together or even engage in trade on secondary marketplaces.

For a more detailed exploration of the intricacies of how the Reliquary works, take a dive deeper into the technicals with Skly here:

What are the advantages?

Let’s keep in mind why we are here, and that is to build a system that is future-oriented, efficient, and constantly evolving with the times. Reliquary is innovative and it could provide our platform with novel opportunities that have yet to be fully explored. Here are some of the key advantages of its implementation:

  • Reliquary shifts the focus of an incentive model from “forced” to encouraged.
  • It solves the issue of illiquidity as positions can be exited when desired.
  • It fosters a system for protocol alignment that is more reflective of the community we are trying to cultivate
  • It brings the power back to people, those who believe in the project’s success will wait for maturity.
  • It offers every user the ability to engage and participate in governance.
  • It opens up the potential for a secondary marketplace where mature positions can be traded.
  • It is innovative and seeks to evolve the current systems we have
  • It has scope for future development; if successful all of our emissions could be channeled through this model.
  • Potential to unlock a huge amount of inefficient capital currently sitting on farms

What are the disadvantages?

  • Reliquary is a new piece of technology that hasn’t been battle-tested, it has several audits, but smart contract risk is always a consideration.
  • The earlier users lock, the more power they obtain
  • Change requires adoption and education. Convincing users to shift paradigms takes time and effort
  • There is no guarantee this new model will be successful, there is always the risk of failure.

Given the advantages listed above and the considerable improvements on the ve locking model, we believe the Reliquary is a promising alternative to locking and as such put forward the proposition to adopt this pioneering technology over the outdated veModel.

What does this mean for our current plan for locking?

If a proposal were to go to vote and passed, it would mean that Beethoven would no longer implement the current locking initiative. Instead, the development team would look to prepare our infrastructure for the adoption of the Reliquary. The team has already done extensive research into the underlying architecture and they are confident in its adoption. The specifics of the rollout still need to be determined and hinge on the collective decision from the community.

What will happen to fBEETS?

As the Reliquary integrates a new contract, it provides an opportunity for the fBEETS pool to be remade. The composition of the pool can stay the same but there is also the potential for it to be changed depending on community consensus. Following the creation of the pool, it would be a simple migration for users and only require a few clicks to enter and deposit the BPTs into a Relic. The whole process would be seamless, built straight into the Beethoven X UI. The migration allows not only for the evolution of infrastructure but an evolution of fBEETS.

The effect on governance

The maturity curve dictates a Relics position, and Beethoven X has the freedom and flexibility to choose specific time frames and levels that most effectively encourage participation. Yield and voting power can even operate on separate curves. As such, the Reliquary unlocks the possibility for an on-chain governance system. Instead of relying on random snapshots to reduce the chance of users gaming the governance system, every user must engage in a period of maturity to gain voting power, limiting the ability for users to buy a position to vote and sell straight after.

It is also pivotal to ensure that protocols build off and leverage the Beethoven X ecosystem. The team has analyzed and debated the most efficient time frame and tranches to ensure active participation from Liquidity-as-a-service protocols (Convex, Aura, LiquidDriver). The specific maturity schedule is yet to be defined by the team, but the goal is for maturity to be modeled to reach a maximum within 8–12 weeks.

Encouraging inclusivity.

DeFi unlocks the ability for everyone to engage in a fast, fluent, and fair financial system. We foster new relationships when everyone participates in a system collectively. Diverse, welcoming systems are vividly richer and harness the power of synergy. The Reliquary allows anyone to enter Beethoven X and engage in governance as users are not constrained to lock away capital. The technology also allows for fun and intriguing new possibilities to further foster community interaction.

What could the future look like?

We love to explore, we love to innovate and Reliquary opens up multiple new paths to wander down.

The migration of fBEETS into Reliquary is only a starting point. The beauty of this technology is that there is room to build toward a flexible future. The implementation of fBEETS and Reliquary would open up a pathway where Beethoven X could integrate all pools with the contract, allowing users to deposit every BPT on the protocol within a Relic. Users who hold long-term positions could then benefit from increased emissions alongside maturity. Not only is locking governance tokens inefficient but there are also billions of dollars of assets sitting idly on farms. The Reliquary has the potential to unlock this capital, and glimpses of a capital-efficient and composable future are on the horizon.

Beyond the scope of voting power and incentives, the Reliquary is a flexible base layer that offers ample room for our creativity to flourish. While a position grows with maturity, fNFT artwork can also evolve with it, further playful initiatives can also be built alongside the core functionalities to help further align users with the protocol. There is scope to integrate different discord roles, channels, NFTs, and prizes to users who obtain certain levels of maturity within positions helping to cultivate a stronger, more connected community.

Conclusion

We stand at a frontier, an unexplored precipice of opportunity. Change may be inevitable, yet we have come to embrace its potential. Exploration and curiosity are the drivers of our growth and our evolution. The space we live in changes at an incredible pace and the ability to adapt skillfully to our environment is critical for our success. Locking has proven to be outdated at best and consequently demands that we step outside of the norm to seek innovative solutions. Reliquary stands as a promising solution for the future growth of not only our protocol but the community at large.

The shift towards the adoption of reliquary will undoubtedly take time and effort but we were never here to be normal.

“The person who follows the crowd will usually go no further than the crowd. The person who walks alone is likely to find himself in places no one has ever seen before.”

We stand at a frontier and we are pioneering a future we believe in.

Imagine.

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Beethoven x

Beethoven x

Your decentralized investment platform