Discussion on possible 1INCH tokenomics

I believe we have to discuss all the available options for tokenomics to compare them and not just propose community to vote for or against one of the options. Since DAO have revenue stream I believe there are at least 3 options today (please comment with more options and we will compare them with others). Also I will provide list of properties to compare options.

Options for revenue stream:

  1. Reward 1INCH stakers directly. This is what happening now, DAO revenue stream gets converted to 1INCH tokens and being distributed among 1INCH token takers gradually over the week to avoid any staking front-running. This incentives more holders to stake and only stakers benefit.

  2. Buy 1INCH tokens and burn it (deflation proposed by 1IP-3). This mechanism was used by Kyber Network and MakerDAO and some other top-tier DeFi projects.

  3. Collect treasury and make it passively earn (this passive earnings could be distributed or collected). Maybe this is one of the most promising options which allows money to make more money.

Categories of the options above:

  1. Different APY

    1. Only 1INCH token stakers are getting reward, nowadays it is 48M (1/33 of total supply, can be tracked using st1INCH fake token). Current APY can be tracked here: https://1inch.deffo.xyz/
    2. Every 1INCH token holder are getting reward, even vested, locked, lost, deposited to CEX.
    3. There is almost risk-free way to earn 10-15% APY on stablecoins. After collecting $100M in DAO treasury it could passively generate almost $1M every month.
  2. Time alignment

    1. I believe this option is for short-term profit, it allows stakers to extract max profit from the network.
    2. Looks like long-term alignment for token holders.
    3. Seems like long-term alignment and allows to grow value of the network
  3. Value sustainability

    1. Low sustainability as the whole revenue stream gets distributed. Revenue stream could dry low in case of low trading volume.
    2. Low sustainability as the whole revenue stream gets distributed. Revenue stream could dry low in case of low trading volume.
    3. High sustainability as the protocol will continue to generate income even in case of low trading volume.

APPENDIX A: Timelocks

Community was asking about timelock mechanism for staking, similar to what Curve implemented. Basically timelocks would create secondary market of locked tokens, anyone will be able to create lock1INCH ERC20 smart contract to tokenize locked 1INCH tokens. To prevent this from happening Curve project allowed to lock tokens only from EOA wallets (non-smart contract addresses). But I believe it is half-measure since future hard forks of Ethereum could easily allow deploy smart contracts on EOA addresses and moreover it is super unsafe for some users to avoid using multisig smart contract wallets.

Let’s discuss what other options and categories are outta there and what are their pros and cons.

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Sticking with the current design (option 1) is the best option in my opinion

It reinforces the value of 1inch tokens as a claim on protocol revenues & produces great yields for stakers

When people stake, they are less likely to sell their coins due to direct yields - this helps to support the token price

This design is also the reason that Yearn has offered 1inch automated farming strategy which is great for marketing 1inch staking to potential passive investors

In my option, Makerdao is not as popular of an investment as it should be due to it’s indirect value accrual for tokenholders & we should not copy their design

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During reading you message I recognized that I forgot to say about short-term and long-term alignment of 1INCH token holders. First option as most profitable is most preferred for short-term vision. Second and third options are more about long-term profitability.

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I think the first model has no effect on 1inch tokens and many staking tokens can’t develop healthily.
I agree with the combination of the second and third. (Cake+Luna) Even the New ETH token burn+stable apy.

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I agree with you on that

But there are ways to keep the 1st model while also aligning tokenholders with the protocol over the long term

Curve’s token design is a very good example

In order to receive dividends each week, your tokens are time locked - to align stakers with the long term interests of the protocol

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I’m happy to see the team give suggestions to help improve the 1inch token

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How would distributions from a treasury be different than distribution from staking? Could you elaborate on what a treasury would entail?

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Agree with @GatheringGwei, I would favour current design (option 1) which could be enhanced by a time-lock mechanism similar to Curve that would boost rewards for long term holders.
It would also be interesting to make those locked token auto-compounding, meaning the accrued reward is automatically added to the locked balance overtime, instead of the users having to manually claim and stake), like Harvest Finance did with their FARM and iFARM token. Ideally, those locked token could also be use as collateral to borrow against.

I think it is also important that a share of the protocol fees are being redirected to the treasury to guarantee the long term sustainability of the protocol (the treasury being control by governance, any unnecessary excess could from time to time be redistributed to the stakers and/or boarder community).

On that topic, I wanted to look at the fee collected overtime, but could not find anything. Is there a dashboard somewhere showing the various fee streams overtime? Similarly, it would be good to be able to see the protocol expenses (e.g. salaries, grant paid, audits, etc.) from the treasury or any other relevant contract. If someone know where to find that, I would be very much interested, this would help for better decision making for governance.

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if we enhanced by a time-lock mechanism similar to Curve,why not (3) nearly to 10-15% APY almost without any risks?

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With Due Respect @k06a Sir , I’m Literally Crying to see you post a Discussion Here !!
Never thought I’d live to see this day :sweat_smile:

This is What I Wanted from 1INCH Team for a Long Time :grinning:

@flare @Philonggtvt @cryptoCMminer

Wouldn’t that be Great if We Can Blend All THE THREE @k06a points !

Got a Huge Load of Major Ideas , I’ll Share clean once finish :wink:

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There are some similarities with ETH after London hard fork?

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Please contribute with the team to give the best ideas. thanks

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As a stakers, I would personally prefer having the fees used to market-buy 1INCH and grow my exposure to the protocol while helping token price appreciation rather than invested in stablecoins. Ideally you could use this appreciating stake as collateral to borrow stablecoins and invest them at those 10-15% APY if you wish (I don’t know how long those kind of returns will least as capital continue to flow into crypto, but that is a different story).

Maybe a solution could be to let the community vote on weights between the 3 following options as part of the DAO governance:

  • X% of the protocol fees used to market-buy 1INCH and distribute to stakers
  • Y% of the protocol fees used to invest in stablecoin vaults (and yield can be either collected by stakers or re-invested)
  • Z% of the protocol fees going to the treasury to pay for core team salaries, grants, audits, etc. and generality speaking re-invest to grow the protocol. (How the treasury is invested should be a different discussion)

We could also add option 2 (buy and burn) into the mix, but that starts to be a lot of parameters to vote on.

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I wanna clear out few things here -

Check out this Post having an AMA with Anton as he explains exactly why Auto - Compounding & locking posed a risk at 1st place .

This is already Governed by Stakers Via Aggregation & Liquidity Protocol

Instead of Changing the whole protocol Fee Structure we can add new feature under reward distribution which is currently set at 20% ref & 80% Gov under Aggregation Protocol . I proposed that in 1IP-1 as DFC ( A special Contract that can act as a 3rd function along with those eg. 10% ref 10% DFC 80% Gov )


Watch the AMA 1st few minutes where Anton explains why time locks were not implemented

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Grants are managed by the foundation yet, since there is no treasury yet in the DAO. There is a 30% of total supply vested community fund for this. This could be managed by the DAO as soon the community introduce the treasury. Salaries for 1inch Labs members are yet paid from the investors money which the 1inch Labs got from the first and second round. As well the 350 servers which serves the swap paths are paid by 1inch Labs.

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Thanks a lot for that, just joining the party, I have quite a bit of catch-up to do!

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Thanks everyone for the feedback, I just updated OP to make it even more clear. We have several non-exclusive options and several categories to compare these options to each other. Please check if we need more options or categories or if we need anything else?

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How to collecting? who can deposit?
If the number of people increases, what will the yield be?

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Collecting means accumulating current revenue stream in treasury instead of giving it away to stakers.

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