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veBOBA Tokenomics Update

Following the success of Curve Finance’s vote-escrowed (ve) token model, a growing number of DeFi protocols have implemented or hinted at introducing their own ve tokenomics designs, including many of the top projects by TVL.

Effective tokenomics offer incentives for project participants to take actions correlated to the project’s success, such as token rewards for providing liquidity, active governance participation, long-term token holding, and protocol development.

Vote-locking further strengthens these incentives by giving committed members a larger weight in decision-making and/or reward allocation (self-selection). By committing to hold a token for an extended period of time, lockers will be interested in the long-term health of the protocol, thus incentivizing them to make informed, time-consuming decisions.

A ve Token playbook for BOBA

In a ve token model, monetary policy is established from the start, and is seldom changed to provide certainty for vote-lockers. Key parameters such as token distribution, locking mechanics, and emission schedule incorporate incentives that can sustain the economic health of the project.

We’ve identified three core shared parameters in their designs:

  • Steady incentives to supply-side participants to bootstrap an economic flywheel
  • Sustainable schedule of emissions to support long-term protocol activity and ecosystem growth (see chart below)
  • Profitable long-term revenue model to cycle economic value back to token holders

In the section below, we include a detailed breakdown of the current ve tokenomics landscape, and deep dive into the most promising models.

With the above parameters in mind, we propose the following playbook for a BOBA ve tokenomic model implementation, with the following features:

  1. Launch a token lock system for BOBA holders, offering:
  1. Voting control over the BOBA token emission gauges (previously WAGMI program)
  2. An ongoing rebase to their locked token based on network fee accrual

Time incentive: The longer BOBA is locked, the higher its conversion to govBOBA. For example:

    • 1 BOBA locked for one year = 1 govBOBA
    • 1 BOBA locked for six months = 0.25 govBOBA
    • 1 BOBA locked for three months = 0.125 govBOBA

Liquidity incentive: Locked token balance held as a veNFT.

Intended behavior: High locking rates reduce floating supply of BOBA, provide price stability, and reward long-term holders. Grant governance rights to engaged participants (such as dApp developers, grant recipients). Expand utility for BOBA token.

  1. Add a whitelist process for gauge, aimed at incentivizing the BOBA ecosystem
  1. Existing protocols
  2. New projects (e.g., grants)
  3. Technology infrastructure

Intended behavior: Attract and reward high quality builders to the BOBA ecosystem.

  1. bribes for gauges enabling protocols to offer their native tokens to voters in their preferred pools

Intended behavior: Reward active voting and direct emissions to pools with higher demand. Bribes can be a cost effective method for new and established protocols to capture BOBA emissions using their native token. This functionality has proven to be successful in other ve-based tokenomics systems, and will be facilitated by Redacted Cartel’s Hidden Hand marketplace deployed onto Boba. Read more about Redacted Cartel’s Hidden Hand here.

  1. Implement additional fee generating models to reward token holders from value created in the ecosystem and / or create deflationary token supply forces

Ideally rewards come from real fees generated by the network, rather than token inflation. We’re looking into the following revenue streams:

    • Increased network transactions & transaction batching
    • Net positive MEV

ve Tokenomics Landscape

Three fundamental groups shape the economic activity within a protocol or network:

  1. Demand-side players drive cash flow growth in the economy, (e.g., traders, borrowers, other protocols) and are ultimately the group for which an application or network is built.
  2. Supply-side players provide the resources necessary for the economy to function, (e.g., liquidity providers, lenders, validators) and expect to receive compensation for their effort or risk.
  3. Token holders undertake the risks inherent in managing the key assets within the economy (e.g., team, investors) in return for sharing the upside in the economy’s success.

In most projects, token rewards are designed to attract and retain supply-side players, as their contribution to the economy has the highest scalability. A single liquidity pool can serve a large number of users. Demand-side players attracted by the liquidity gladly pay the platform fee in return for the lower slippage. Fee revenue then flows to owners and/or suppliers, supporting the value of the protocol’s native token and thus of emissions to suppliers.

These same forces can act in the opposite direction. A declining token price reduces the value of the protocol’s emissions, trickling down to lower supply-side participation and slowing protocol demand. Locking incentives can act as a countercyclical force by reducing the selling pressure on a token during periods of volatility.

Despite the Curve ecosystem’s success, experimentation around ve token parameters has only recently accelerated as projects search for a model that will differentiate them from the competition and increase their odds of long-term growth.

veBOBA Tokenomics
Update

Following the success of Curve Finance’s vote-escrowed (ve) token model, a growing number of DeFi protocols have implemented or hinted at introducing their own ve tokenomics designs, including many of the top projects by TVL.

Effective tokenomics offer incentives for project participants to take actions correlated to the project’s success, such as token rewards for providing liquidity, active governance participation, long-term token holding, and protocol development.

Vote-locking further strengthens these incentives by giving committed members a larger weight in decision-making and/or reward allocation (self-selection). By committing to hold a token for an extended period of time, lockers will be interested in the long-term health of the protocol, thus incentivizing them to make informed, time-consuming decisions.

A ve Token playbook for BOBA

In a ve token model, monetary policy is established from the start, and is seldom changed to provide certainty for vote-lockers. Key parameters such as token distribution, locking mechanics, and emission schedule incorporate incentives that can sustain the economic health of the project.

We’ve identified three core shared parameters in their designs:

  • Steady incentives to supply-side participants to bootstrap an economic flywheel
  • Sustainable schedule of emissions to support long-term protocol activity and ecosystem growth (see chart below)
  • Profitable long-term revenue model to cycle economic value back to token holders

In the section below, we include a detailed breakdown of the current ve tokenomics landscape, and deep dive into the most promising models.

With the above parameters in mind, we propose the following playbook for a BOBA ve tokenomic model implementation, with the following features:

  1. Launch a token lock system for BOBA holders, offering:
  1. Voting control over the BOBA token emission gauges (previously WAGMI program)
  2. An ongoing rebase to their locked token based on network fee accrual

Time incentive: The longer BOBA is locked, the higher its conversion to govBOBA. For example:

    • 1 BOBA locked for one year = 1 govBOBA
    • 1 BOBA locked for six months = 0.25 govBOBA
    • 1 BOBA locked for three months = 0.125 govBOBA

Liquidity incentive: Locked token balance held as a veNFT.

Intended behavior: High locking rates reduce floating supply of BOBA, provide price stability, and reward long-term holders. Grant governance rights to engaged participants (such as dApp developers, grant recipients). Expand utility for BOBA token.

  1. Add a whitelist process for gauge, aimed at incentivizing the BOBA ecosystem
  1. Existing protocols
  2. New projects (e.g., grants)
  3. Technology infrastructure

Intended behavior: Attract and reward high quality builders to the BOBA ecosystem.

  1. bribes for gauges enabling protocols to offer their native tokens to voters in their preferred pools

Intended behavior: Reward active voting and direct emissions to pools with higher demand. Bribes can be a cost effective method for new and established protocols to capture BOBA emissions using their native token. This functionality has proven to be successful in other ve-based tokenomics systems, and will be facilitated by Redacted Cartel’s Hidden Hand marketplace deployed onto Boba. Read more about Redacted Cartel’s Hidden Hand here.

  1. Implement additional fee generating models to reward token holders from value created in the ecosystem and / or create deflationary token supply forces

Ideally rewards come from real fees generated by the network, rather than token inflation. We’re looking into the following revenue streams:

    • Increased network transactions & transaction batching
    • Net positive MEV

ve Tokenomics Landscape

Three fundamental groups shape the economic activity within a protocol or network:

  1. Demand-side players drive cash flow growth in the economy, (e.g., traders, borrowers, other protocols) and are ultimately the group for which an application or network is built.
  2. Supply-side players provide the resources necessary for the economy to function, (e.g., liquidity providers, lenders, validators) and expect to receive compensation for their effort or risk.
  3. Token holders undertake the risks inherent in managing the key assets within the economy (e.g., team, investors) in return for sharing the upside in the economy’s success.

In most projects, token rewards are designed to attract and retain supply-side players, as their contribution to the economy has the highest scalability. A single liquidity pool can serve a large number of users. Demand-side players attracted by the liquidity gladly pay the platform fee in return for the lower slippage. Fee revenue then flows to owners and/or suppliers, supporting the value of the protocol’s native token and thus of emissions to suppliers.

These same forces can act in the opposite direction. A declining token price reduces the value of the protocol’s emissions, trickling down to lower supply-side participation and slowing protocol demand. Locking incentives can act as a countercyclical force by reducing the selling pressure on a token during periods of volatility.

Despite the Curve ecosystem’s success, experimentation around ve token parameters has only recently accelerated as projects search for a model that will differentiate them from the competition and increase their odds of long-term growth.