BIP 16: Badger buyback

[apogaeum1618]

Category: Other

Scope: Managing the revenue generated by Badger products

Status: Rejected

Objectives:

• Provide additional incentives to hold BADGER

Overview:

This proposal’s goal is to use the revenue generated from the DAO to initiate buybacks of BADGER. These buybacks will likely increase the speculative value of BADGER, further adding incentive to keep “skin in the game” for a longer time and increase the dollar value of the treasury’s holdings.

Details:

Three weeks into launch, the DAO has proven itself as a revenue generating machine. So far it has generated ~$350k and it will generate a lot more. At the time of this writing, the TVL is $400mm+ and at this size, if the funds were to be withdrawn it would generate $2mm+ in revenue. If we take this revenue and buy back the BADGER token, the following will likely happen:

• The value of BADGER will increase as speculators will see a more direct correlation between TVL / revenue and the BADGER token.
  • Further alignment of this will recruit community members who would like to contribute (e.g. funds) but need non-treasury compensation to make it worthwhile
  • The BADGER held by the treasury (7.35 million) will increase in dollar value greater than the revenue generated
• LPs/farmers (especially for non-badger setts) will be further incentivized to not sell as many BADGER.
  • This further aligns the important LPs/farmers with the future success of the project

Implementation

If you are in support of this proposal vote “For”; if you don’t support this proposal vote “Against.”

If minimum threshold of 40 votes is met with positive sentiment then we will proceed with an official Snapshot vote.

• For
• Against

[DeFiFrog]

I am strongly against BIP 16.

This BIP provides zero analysis on the economics of a buyback program nor does it breakdown the use of revenues. Poster solicited feedback in the discord and ignored comments that this must be further fleshed out before posting.

This BIP, as written, is just asking for a short-term, propped up price of the token, and does not take into consideration the sustainability of the program or the DAO.

I do believe a buyback program can potentially be good for BadgerDAO, but we need to get the economics down first before proposing “let’s use all of our revenue to buy back Badger tokens!”

@apogaeum1618

The BADGER held by the treasury (7.35 million) will increase in dollar value greater than the revenue generated

This is only a potential outcome and not a guaranteed outcome. You’re basically requesting that we use the revenue that we currently have in the treasury (which is only handful of Bitcoins) and converting that back into what the treasury already holds. I think that an efficient treasury should be diversified.

With that said, thank you for your proactivity - I think this is indeed a very important discussion we must have as a community. I hope that folks weigh in on this concept in comments below, but this BIP should not be accepted nor pushed forward to snapshot.

Edit: for future reference, when creating a poll, please show who the voters are.

[fabiotongson]

This proposal would make $Badger a speculative coin… which is a bad idea I think.

[VLK]

I think we should look at slowing down emissions a bit before we start buying badger back. Having some real money in the treasury is good. Not everything can be bought in badger. There’s some bills to pay, and maybe some people who want/need money in fiat to pay rent and shit. We could blow all our cash on badger, and then sell it when we needed cash, but that seems a lot less secure.

As DeFiFrog pointed out, should be something that is done with a huge amount of financial analysis that can’t be possible 1 month into a project.

[apogaeum1618]

Thanks for the response. To my knowledge I didn’t ignore comments, I asked for feedback and didn’t get much response other than doing a partial buyback. Happy to discuss here since some messages can get lost in the discord threads.

@DeFiFrog

This BIP, as written, is just asking for a short-term, propped up price of the token, and does not take into consideration the sustainability of the program or the DAO.

I don’t see how this would be short term. Buybacks are a method for delivering value to people with a stake in a project or company. For example, Berkshire Hathaway delivers value to shareholders via buybacks. That isn’t a short term act since streams of revenue will continue to flow.

The treasury has 7.35 million BADGER, currently valued at about $44 million. More than enough to fund bounties and initiatives it’ll need. It’ll have even more as Badger creates new products that offer value and my proposal is to improve the way the token captures it.

@DeFiFrog

I think that an efficient treasury should be diversified.

In personal portfolio management I agree. But, the DAO is specifically for Badger and should be reflected as such. It also better prevents a situation where there’s a potential moral hazard. If Badger stakeholders that tie their capital into the success of the project lose funds while the DAO doesn’t have to produce direct value to them, it’s not ideal.

By the way, this is why I love this community. We can have a situation where a random community member can debate the mods in the open.

[DeFiFrog]

@apogaeum1618

That isn’t a short term act since streams of revenue will continue to flow.

It’s short term in that the BIP does not outline an economic model for how value flows through the system. I’ve been thinking about this quite a bit, and we are working towards building out models. There are a couple of community members currently helping with building out financial dashboards, which is why my reaction to this BIP was so strongly against. We need the data first, and your BIP does not address the actual data/analysis.

@apogaeum1618

At the time of this writing, the TVL is $400mm+ and at this size, if the funds were to be withdrawn it would generate $2mm+ in revenue.

For example, this is not a good way to forecast revenue because there will also be performance fees, and there will also likely be a decent % of depositors that do not withdraw.

We need to:

1. estimate these revenues broken down by fee type
2. read user behavior to apply that to the model and forecast the revenues by fee type

---

Shifting gears:

As it stands, we have currently:

• Depositors seeking APY -> Badger Vault emissions paid to depositors -> depositors paying small fees which -> go to the treasury

At this moment, taking that revenue and buying back Badger would be short-sighted and unsustainable. There is value lost in the process and most of the value goes to the farm-dumper. We need to

1. shift focus to high profit-margin products (such as wBTC-ETH SLP) and
2. model out how value flows through the system (aka analyze the data)
3. from there, build how we can control that flow of value efficiently and effectively for the DAO

before we start using up the diversified portion of the treasury and before getting people too excited about turning on revenue sharing.

[cryptomooniac]

I am also against this proposal, in its current form and at the current moment (timing).

We are still in the liquidity mining launch, and $DIGG is yet to be launched. Focus is and should be in this, and in the development of those new SETTS.

Buybacks might be something worth discussing in the future, after liquidity mining launch is over, and after a thorough analysis of the economic implications. This analysis (model) should be presented together with the proposal so the community can analyze, enrich, discuss and take a decision based on data, not just arguments that can be easily countered.

[woodwadm]

Voted against for now. It’s an interesting proposal but needs more fleshing out.
Not opposed to Treasury buy backs maybe just a lil early.

[arkgenesis]

Voted against. I did mention a buyback program would be good for $BADGER in the long term in my post “PRICE SPECULATION” under General Discussions, but this proposal does not go in depth analysis of how it will work in the long run and is basically just a wish for a “pump” in price of the token by our revenue. This will only be a gain for speculators who will dump at first opportunity and not benefit the longevity/productivity of the DAO. Thanks for thinking about this. We should explore more of this.

[dgntec]

Buyback could be interesting, but it’s generally a hail mary strategy you use if the market consistently fails to see value. It’s not the case at all for Badger at this point.

[DeFiFry]

I had the pleasure of speaking with @jonto about this, and am now very much in support of it. It may not seem like a necessity now, but this is an important aspect of Badger we need to flesh out and implement eventually.

[bitcoinduke]

Against this proposal, more work needs to be done on it, as mentioned in this thread. Economics / details of this buyback program is unclear.

[Da-Crypto_Re]

Hello.

I am going to vote against this for now.
As already mentioned, it would be important to see data first. Different variations of it. The full package.

Might be a good card for back-up strategy bundle tho.

[Okeydokey]

Anyway even if this proposal goes against it is a good initiative because the revenue generated from the DAO must be discussed . Indeed this is the best way for the community to hold long term BAdger
Possible to get a new proposal about it?
Best regards

[DeFiFrog]

Failed to provide proper implementation details and technical scope. Failed to receive majority support. Rejected.