Freeos Tokenomics: Part 2 — Locking Threshold
In some ways, Freeos is simple: come in, vote using sliders and check boxes once a week, and voila! You earn crypto!
But under the hood there’s a complex set of economic dynamics helping to create a system and a currency stewarded and generated by all of us.
Part 1 of this series covered the Distribution Dynamics, showing how POINTs, FREEBI and FREEOS tokens work, are used, and how they interplay.
In Part 2 of this series, we will talk about the Locking Threshold, and how this system works to help the community steward the FREEOS token price towards a healthy, useful and meaningful value.
LOCK & HODL
The Locking Threshold can be thought of as a “line in the sand” where the community starts to hold (HODL) a portion of their weekly earned POINTs — preventing some POINTs from being minted into FREEOS tokens that might be sold.
This restricts supply of the FREEOS tokens entering the open market, which can have a positive, or protective effect on the price — especially if paired with a demand for FREEOS such as the Mint Fee, NFT Auction, or other future use cases.
The way the Locking Threshold works is by temporarily locking a percentage of the weekly allocated POINTs by the same percentage that the current price is below the Locking Threshold value.
For example: Let’s say that this week’s Claim is 1000 FREEOS. If the Locking Threshold value is $0.0167 (the default threshold value), and the current price is $0.01336, then the current price is 20% below the Locking Threshold value.
This means 20% of the week’s claim amount (200 FREEOS), will be locked and 80% (800 FREEOS) will be freely available to be minted.
NOTE: If no price oracles are hooked up or go down, 50% of the POINTs are locked. Why? Because this ensures that the supply is temporarily protected during this uncertain time.
There are a couple of ways that POINTs can be unlocked.
- If the current market price is ABOVE the Locking Threshold value — each consecutive week the price is in the positive territory, an increasing amount of POINTs are unlocked. This is done via a Fibonacci sequence, (1%, 2%, 3%, 5%, 8%, 13%, 21% etc.)
- If the price is consecutively in the negative territory for 8 weeks, 15% will automatically be unlocked and then the counter resets and starts counting again.
NOTE: In week 8 of the AirClaim, 15% of the POINTs became unlocked as the 50% of all previous week’s POINTs were locked — due to the default percentage used when there is no price oracle data.
Participants have to manually ‘unlock’ the week’s POINTs, or they may lose the opportunity until the next time.
It is recommended to unlock as soon as the opportunity presents itself.
Vote for the Higher Ground
As mentioned, the default base Locking Threshold value is $0.0167, but this value is not entirely fixed — it can be voted upwards by the community. Just not voted downwards.
There are two major rules for voting on the Locking Threshold:
- If the current market price is below the default base Locking Threshold of $0.0167, then the participants can only vote twice the Locking Threshold.
- If the current market price is greater than, or equal the default base Locking Threshold of $0.0167, then the participants can only vote twice the current price.
Essentially, the community can decide on the value (within reason) of where they are willing to draw a line in the sand — deciding to be consensually in agreement that it is okay to risk having some POINTs temporarily locked to help support the FREEOS price.
If the open market forces also agree, and the current price of FREEOS exceeds the Locking Threshold, then the community can continue to vote for a higher value — stair stepping this “line in the sand” and signaling that the community is willing to throttle the supply of liquid FREEOS tokens until their voted price is respected by the market forces.
NOTE: For more on how the vote works see the article where we introduce the Locking Threshold Vote into the AirClaim—HERE.
Up the Mint Fee
In addition to determining how POINTs are locked, and unlocked, the Locking Threshold has an effect on the Mint Fee as well.
When the current market price is below the Locking Threshold, the Mint Fee price will be increased by the same percentage that the current market price is below the Locking Threshold.
This increases the amount needing to be paid for the Mint Fee, which also limits the amount of FREEOS minted into circulation.
Since the Mint Fee brings more value to the Reserve Pool, and also can burn FREEOS tokens (if the community votes to do so), these extra features may also help protect or uphold the price of the FREEOS token.
In tandem with the freezing of POINTs, the community is incentivised to hold and store up their POINTs over any potential crypto winter.
In summary, POINTs are locked and unlocked depending on the current market prices compared to the Locking Threshold, which can be voted higher than the default of $0.0167 base price.
This allows the community to throttle the supply of FREEOS tokens when the price is low, and also to try to raise the perceived, consensual value of the FREEOS tokens when the price is consecutively high.
Again, for more on the Locking Threshold vote works see the article where we introduce the Locking Threshold Vote into the AirClaim — HERE.