MC Proposal to Cut Emission Rate and Target a Long-term Value Creation Approach Without Excessive Inflationary Emissions
Author:
Jordan Feintech
Summary:
The current model for emissions is extremely aggressive relative to the value it generates. The model is currently rewarding LP holders, well in excess of any level of risk that a real long-term investor would assess for an entity with $105M in yielding bearing intrinsic value. The Liquidity Bootstrapping Event raised enough cash to put a $105M valuation floor, and real investors will support that price by buying MC if it is undervalued relative to that number or their expectation of what we will do with the money which will yield significant interest even before it is deployed to in-game assets and NFTs. We need to cut emissions and allow any of the âfarm and dumpâ holders to exit the market so the team can be using the capital to deliver value instead of diluting owners out in favor of Liquidity Providers(less committed owners willing to sell). By reducing emissions to a reasonable 20% for MC Stakers and adjusting Liquidity Provider to a risk adjusted rate based on volatility with a floor of $105M or our growing Net Asset Value, we can use remaining tokens to finance future rounds of funds for growth once we have shown the ability to deliver profitably.
Abstract:
Proposal 1: Cut emissions to Liquidity Providers to levels that are calculated by using the volatility of well established DAOs and the LP yields that Uniswap provides to entities like Maker DAO and MKR/ETH pairs. The proposal will require a periodic update to volatility, which I propose to be every 2 weeks.
Proposal 2: Cut emissions to MC Stakers to 20%, which while still higher than most dividends is in line with inflation and interest costs for borrowing, which are all that true âInvestorsâ should need until the cashflow from operations begins.
Proposal 3: Once cash flow from operations is sufficient to compensate MC holders with that in part instead of emissions, a vote should be had to reassess this proposal and the use of capital and token issuance/emissions.
Motivation:
Improve the efficiency of capital, preserve the value we have raised instead of diluting investors, maintain a reserve of tokens to finance future expansion with further iterations of seed round investments from funds or from LBEs. The purpose of this proposal, as a holder that will lose significant rewards, is to ensure the DAO is not another farm and dump and not another copy of all inflationary DAOs and protocols that inevitably dump or are so overvalued realtvie to assets thatwhen the market corrects they are wiped out.
Budget: FREE or even Cash Flow Positive if we use the tokens for more funding, costs us literally nothing and ensures our stakes are not being diluted and regards are not being overspent to overcompensate the wrong motivations for holding MC.
Rational:
I support the LPs, I totally respect that they/we support the price while the market gains appreciation and footing for the future valuation of the firm as a well managed DAO fund. However, the holders of a true DAO fund which has a Net Asset Value and business model, should not need 5-15x the incentivization to the other investors. Something rarely understood stood in a world of AMMs(automated market makers) and HFT(high frequency trading), is that DEEP liquidity, the kind that supports you in a black swan event, comes from your holders not selling and in fact buying as they see the asset as intrinsically undervalued despite price action. No matter how you justify it, LPs arenât the real source of valuations, those that are NOT willing to sell anywhere near current prices areâŚthose are your stakers, and your MC holders that the LPs are selling their inflationary rewards to, depressing the price of the asset that the true long term investors seek to support and be patient with. Cutting emissions and saving the money overall for a secondary investment round once we have deployed capital and have a higher valuation seems better for all and of course some of that money could even support the price action if needed, though as always, capital should be used where is it most efficient on a risk-adjusted basis, and I see no need to be devaluing the asset by holding emissions high just to ârewardâ people for holding a fund that will already make money if they actually are investors not yield farmers and traders. I propose we reduce emissions until capital is deployed and then reassess rewards, If without LP 10x rewards our price falls to $3, then the real buyers that know the investment thesis and the math will be there to support the price with genuine buying action that will help the profile and commitment of our investors and ensure they are aligned with the goals more than the business of yield farming against the actual long term investors.
I also would consider that while everyone is loving MIM, and SPELL was right in moving off of just ETH(major strategic error by Maker DAO, that several of us including myself posted in their forum), and for all the issues with themâŚFor just a moment they were a real DAO/company almost, they didnt pay people to use their service, they actually charged for borrowing like economics requires to sustainably manage the value of money. For a while, DAI was simply useful and that was and is enough to make it organically grow to be the largest decentralized stable coin, created by collateralized debt positions and ultimately backed algorithmically by the value of the protocol to potential owners when under collateralized. I am explaining this because many donât know the story of the one of the first mega DAOs and non-âponziâ/incentivized based system for decentralized money. Here we are trying to do do something on that scale, possibly even larger, if we can own the right in game assets relative to the risk- adjusted yields and capital appreciation they offer, then we can genuinely own parts of economies in the digital world that we generate massive profits. In doing so, we are removing any need to rapidly incentivize holders beyond the high yield the business generates. Crabada on AVAX is a great example of a launch that was clearly something that with organized effort we could have owned a lot of possibly, which based on any of the price ranges weve seen will generate nice yields for us through players, so i dont think we need to have or focus on emissions, when all or most of us owners are her to find a way to collectively own a portion of the GameFi/Meta economy. Most in defi will probably hate this, but i would be happy with 20% yield until profits begin to flow, and the LP for any good name vs eth is under 100% . Ant holder that doesnât think we are a good name to hold shouldnât need more than the risk adjusted return on the volatility service they are providing, and in this case that includes the Implied Vol, needs to be based on any other QUALITY name if we want the holders remaining to be quality investors. I believe this DAO is one of the few that launched with enough capital, and from your proposal, clear discipline in cash management, I am shocked by the rate of emissions and I want to know if we can vote to commit to letting the team really build something and save the emitted tokens for a secondary sale to a CEX at premium or to a future or even to all or us once the DAO has operating profits and we dont want more funding(HAHAAHHAAHAH), but let this be something special and real in a world of inflation and uncertainty. I vote we build over everything and OWN THE FUTURE TOGETHER. - MERIT CIRCLE FLIPS MAKER:2022, just by announcing profits from Axie, Crabada, and NFTs that we are tied to and can reflexively help add value to.
Thanks for reading if you made it.
Jordan
PLEASE NOT THAT THE ABOVE WAS POSTED AS A COMMENT ON THE MERIT CIRCLE GEVRNANCE BAORD on 11/14, SO THE COMMENTS WERE LESS OBVIOUS THEN ABOUT SPELL. See: MIP-2 Broad investment mandate - Governance / Proposal repository - Merit Circle
Poll
If you support this submission as a proposal, please say so so we may determine the processs to open the discourse with a timetable of passing, modifying, or rejecting the Proposal.
âYesâ if you want to see this as a formal proposal to be up for amendments and voting.
âNoâ to not consider the proposal and continue with inflation at high rates.
Copyright and related rights waived via Creative Commons CCO, and all thoughts have been publicly discussed openly as I spoke with investors and potential investors as well as signatories of the DAO.
