$IDLE Tokenmoics - Where we are
Over the past could days there have been many discussions about $IDLE, its tokenomics, and value capture proposition, and there have been two competing camps for this, high-value and fast (uniswap LP mining program), and slow but long term.
A uniswap liquidity mining program for $IDLE would quickly ramp up liquidity, for the short term, and as soon as the program finishes it is likely that that liquidity will dry up, and where do we go from there? Another issue which has been brought up is that this incentive program would attract pump and dump actors, which will have a devastating effect on the token at this young stage.
As Joel eloquently describes, there issues with tokenomics which promote ‘buy-back and burn’. To me, the most important point is that this does not boost the value of the token which didn’t already exist there. IE the supply shrinks, which causes the price to go up, but the market cap remains the same. Please read the full article for more insights into this.
How would a Smart Treasury Work for IDLE
Fees which are generated from the protocol can be redirected into the balancer pool, acting as a ‘buy-back machine’.
Say we create a smart treasury of 10,000 $IDLE, to begin with, split 90% IDLE, 10% stable coins from fees. As fees are generated from the protocol, a portion (or all) can be deposited into the smart treasury, and since the balancer pool wants to return to its defined weights, it will either become an opportunity for someone to sell IDLE to the treasury, or the price of IDLE has just increased.
As IDLE matures the protocol can vote to add more $IDLE tokens from the community treasury to increase liquidity or remove it can vote to remove liquidity to fund some grants to improve $IDLE’s community.
In addition to this, the balancer pool will be generating trading fees by acting as a liquidity provider.
Here is a crude diagram. Forgive me for the quality, it was late when I wrote this.
There should be little technical work to implement this, since balancer has already written the code for the functionality we require. @william you’re excellent knowledge and insight would be much appreciated from a technical view on this.
As a side note yearn community has had similar discussions regarding an idea like this: Link. The $YFI token is distributed differently to how $IDLE is, so bear that in mind when going through the comments.