$LEVR — levr.ly’s value accrual token
Foundry is building a secondary DAO called Levr.ly to manage products like $dEth. It’ll have a governance and value accrual token meant to incentivise the use of leverage tokens created by the DAO. Foundry and FRY holders will benefit by receiving LEVR tokens as they are minted.
Head over to sale.levr.ly to participate.
So after we completed the $dEth product (which you can use over at app.levr.ly) and SmokeSignal (which you can use over at SmokeSignal.Eth.link) it’s become clear that to continue to incentivise the creation of such products and to ensure their maximum viability, we would need to spin products off as their own autonomous entities wherever appropriate. This frees up Foundry to focus on investing in projects as opposed to managing tactical decisions about individual projects. It also creates the incentives for product teams to approach Foundry for funding with the knowledge that if they hit one out of the park, they too can benefit beyond simply compensation for the cost of their time to initiate the project.
The first of these products being spun out is Levr.ly. Levr.ly will be a DAO focused on providing asset settled, generic leverage products across multiple blockchains. For an example of the first product along these lines we’ve brought live, please go check out levr.ly where we offer the $dEth Ether leveraging product.
Levr.ly is arguably far less controversial than Foundry itself and far less controversial than SmokeSignal. Therefore it only makes sense that we can segment the two products into different markets by giving them both their autonomy and allowing them to attract the kind of participants that their niche will contain. For example, Levr.ly will be able to follow more classical models of marketing — without having to constantly field questions that SmokeSignal would imply about the culture war.
Levr.ly will be a full DAO out the gate. There will never be a period where its treasury isn’t under the direct control of its token governance contract.
The primary product that the Levr.ly DAO will govern is called the “generic long/short pair” or LSP for short. LSPs are tokenised long/short positions that give any user the ability to build a token that goes long one asset and short any other available asset. For example, if you believed BTC would outperform ETH, then you could construct a LPS such that you can put BTC in, which then automatically gets used as collateral to loan ETH; the ETH is then sold and more BTC is acquired. In return you would receive a token specific to that LSP. Anyone could then trade that token, the value of which should reflect the over collateralised BTC value of the position.
In a later version it will also be possible to trade the two sides of the LSP and let the holders earn interest on those trades, much as AMMs facilitate today.
We are currently constructing the white paper for the LSPs and more information on this will be out soon.
$LEVR token — scarcity by design
The Foundry team has learned a TONNE about tokenomics since the $FRY launched a little over 14 months ago. From those lessons we’re building $LEVR with these concepts in mind
- Value-for-value — Almost no tokens will go to any participant unless that participant has provably contributed to the project. This means LEVR tokens will only come into existence in exchange for work done, liquidity provided or token value locked.
- Patient FOMO — $LEVR will be sold using a sale mechanism that guarantees that if there is ever a large bout of FOMO buying, wether that is on day one, or day 1000, the levr.ly DAO and its token holders will be the primary beneficiaries.
- Revenue of last resort — The $LEVR sale mechanism will not raise money for a treasury but instead raise permanently locked liquidity against $LEVR and two uncorrelated, low level assets. This means that $LEVR will have a pool of liquidity that will always grow over time and suck in all $LEVR tokens, even if no other profitable activity occurs. We’ll write more about this in the near future.
- Extreme scarcity — $LEVR tokens will be minted on an ever increasing value curve. So the first handful of tokens will be extremely cheap and the last few, extremely expensive.
$LEVR creation mechanism
To accomplish the 4 items above, we propose the following creation mechanism:
$LEVR tokens get minted on an increasing price sale. The price starting at 0 µEth (micro Ether) and ending at 328.35 µEth. 400,000,000 tokens will be sold this way, implying that a total of around 50,000 Eth could ever be raised by the sale. The purpose of this is party to create healthy FOMO among buyers, but capture that FOMO in a productive way, to the benefit of holders and the Levr.ly DAO. It is also set up such that, there is no date associated to the end of the sale, the sale only ends when 400,000,000 tokens have been sold.
The sale doesn’t send the funds to a treasury, but to a productive, high fee AMM pool. The pool will consist of $LEVR, $ETH, $dETH and $DAI. $dEth $DAI and $ETH were chosen because they will necessarily cause trade volume against one another as $RAI is stable and $ETH is volatile. $RAI was chosen as the stable because of its low governance risk. This ensures that over a long enough time frame, the trade on volatility of the $ETH price alone will be sufficient to generate an income that implicitly buys back $LEVR tokens. Because the funds are sent to this pool, it means that $LEVR will have a very high liquidity to supply ratio from the outset. Because the pool doesn’t belong to anyone (not even the DAO governance) it means that there will always be a pool to sell $LEVR tokens into.
For every 4 $LEVR tokens minted for buyers in the sale,
- $LEVR token will be minted to the $FRY treasury. This is to repay Foundry for seed funding it provided for Levr.ly.
- $LEVR tokens will be minted for the Levr.ly governance contract. This is so that there are funds for the DAO to spend on operational expenses. There are not team tokens, they will be under direct control of the DAO from day one. Another intent is to distribute this $LEVR to liquidity providers who hold LSPs.
- $LEVR tokens will go towards permanently locked liquidity.
- $LEVR tokens will be minted and sent to either a referrer who generated the lead or that amount will go to the levr.ly treasury.
So for every 4 $LEVR tokens sold in the sale, 6 additional $LEVR tokens will come into existence, none of them directly in private hands (except for possibly the referral reward). All proceeds of the sale will go directly into a productive AMM pool, which will ensure serious $LEVR liquidity and a “revenue of last resort”.
Bribery — I meant, uhm, “yield farming” :-P
Because Levr.ly’s primary income will be fees generated by the LSPs, the higher the TVL, the higher the implied fees to the DAO. So the special treasury of $LEVR tokens the DAO controls is recommended for use as rewards to LSP holders based on dollar value of the position(s) held.
Currently the recommended mechanism to distribute these rewards is to drop $LEVR tokens via a Merkle drop. I wrote more about the benefits of this here.
The idea would be that we can accurately calculate rewards off-chain and distribute them to users efficiently on a low cost side chain to Ethereum.
We also strongly recommend that the rewards be distributed on a schedule such that whatever funds the treasury currently contains, there will always be 94.5% of the funds left at the end of each month. This will give the treasury a half life of 1 calendar year and ensure rewards are slowly distributed for a long time. It will also ensure dumping of $LEVR tokens given as rewards have a very low impact on the price of the $LEVR token.
This distribution mechanism, will provide everyone with a fair mechanism to gain $LEVR tokens. It will seriously buffer holders against dumping and will permanently protect them against being rugged. It will also lay the foundation for the Levr.ly DAO to grow and gain traction as a true DAO from the first day of its inception.
Head over to sale.levr.ly to participate.