BIP 92: Digg Restructuring (V3 / Revised)

Category: Boost

Proposed by: @Live4soccer7 with help from council, community and team

Scope: [DIGG, Badger Boost]

Objective: Support the DIGG community by evolving and improving tokenomics

Adjustment to protocool: As this topic has already reached a reasonable quorum of interest, which prompted collaboration on this document. This matter shall move to snapshot in place of the original forum post forum post when either answer has more than 26 votes.

Current State:

DIGG was created as an uncollateralized re-basing asset targeting a 1:1 peg to the price of BTC. The original rebasing mechanism and subsequent changes to rebasing strategies have not maintained the 1:1 peg. DIGG currently trades at ~50% discount to BTC.

The bDIGG vault earns emissions in DIGG. The treasury has enough liquidity to continue DIGG emissions to the vault for another 6-12 months at which point there will be no emissions left.

BIP Summary:

This BIP makes 3 fundamentally important changes to DIGG tokenomics:

  1. DIGG / BTC Exchange Rate: Transition to Free-Floating Exchange Rate

    1. DIGG will be transitioned to a free-floating token and any peg to BTC will be driven completely by market forces.
    2. All re-basing of DIGG will be stopped
    3. Support for the wBTC/DIGG vault and all external LPs will end
  2. remDIGG Exit Strategy: Provide exit strategy for remDIGG holders

    1. The treasury will mint enough DIGG to allow for the 1:1 exchange of remDIGG (~53) for DIGG
    2. DIGG will be airdropped to remDIGG holders 1:1
    3. After the airdrop, support/boost for remDIGG will end
  3. DIGG Yield/Boost Strategy: Replace DIGG emissions with extra BADGER boost

    1. Stop all emissions of DIGG as yield
    2. DIGG in a wallet, bDIGG in a wallet, and DIGG in a BADGER LP will count for Boost as defined below
    3. remDIGG will not count for boost because it will receive a 1:1 airdrop of DIGG as explained in #2 above
    4. DIGG will be valued at BTC peg for purposes of boost (# DIGG * BTC Price = DIGG Boost Value).
    5. DIGG token contribution to boost will be limited to the total USD value of an addresses BADGER, remBADGER and BADGER NFT
    6. Based on these changes, DIGG Boost Value = (BADGER/remBADGER/BADGER NFT Value + (# DIGG * BTC Price) up to the value of BADGER/remBADGER/BADGER NFT

Tokenomics Considerations:

Boost Considerations:

  • DIGG holders who have no BADGER will lose their current boost. DIGG will have to be paired with other native assets to maintain their DIGG as a productive asset beyond price speculation.
  • It is estimated that this change may add up to ~$10m to the value of all boosted native tokens
  • This new boost will go to DIGG holders with other native token holdings and will dilute boosted yield for non-DIGG holders
  • Maximizing this dilution will require ~$10m - $20m in BADGER to be held by DIGG holders and purchases may create favorable BADGER price action

DIGG Price Action:

  • Many DIGG HODLers do not have a lot of BADGER and will end up without much boost. They will likely sell some DIGG to buy BADGER
  • Downward price pressure may result from increased DIGG in circulation when DIGG is printed and airdropping to remDIGG holders
  • Downward price pressure may be caused by DIGG holders seeking to reduce DIGG holdings to increase their other native holdings to maximize boost
  • DIGG buy pressure will come from BADGER HODLers looking to buy discounted boost.
  • Upward price pressure may result from wallets in boosted vaults who want to acquire DIGG for boost at ~50% discount

Native Asset Price Action:

  • If DIGG offers more boost value than it costs to buy, BADGER holders may sell BADGER to buy DIGG resulting in sell-pressure on the BADGER token.
  • There may be downward price pressure on native assets for users who wish to exchange those native assets for DIGG because it currently trades at an ~50% discount to it’s boost value
  • BADGER buy pressure may come from DIGGers who need BADGER to maximize boost.

Low Level Details:

Details taken on 2022/04/13 03:09 UTC

Total DIGG Supply: 520.98448791

Treasury Control: ~56.5 (about 40 of which are in LP)

Non-Badger controlled supply: 464.4844

DIGG market capitalization with DIGG at 0.611:1 BTC = 11.8M. (DIGG @ $25,326)

DIGG market capitalization with DIGG at 1:1 BTC = 19.2 (BTC @ $41,413)

DIGG market capitalization DIFFERENCE = 7.4M

Current Badger market capitalization is 91M. (Badger Token @ $9.14)

Business and Technical Requirements:

  • A communications effort from the Badger / DIGG communities would be required to educate users and build support (~½ day of comms time)
  • Dev team must implement new boost dynamics. (3-5 day dev time)

It may take a few of weeks to schedule and complete the work required to execute this BIP.

The Choices

  • Yes, this sounds like a good plan forward
  • DIGG is supposed to be BTC pegged algocoin, we should come up with another proposal that includes turning rebasing back on

0 voters

DIGG History:

DIGG was originally launched as an experiment to try to create an algorithmic bitcoin using Ampleforth technology. After initial success, DIGG suffered a hard drawdown and has continued to lose value. In July 2021, BIP-66, a community driven initiative to try to revitalize DIGG spent most of the remaining treasury DIGG supply on a short lived options program, and an allocation of 20% of supply to Treasury Controlled Liquidity. At this time DIGG was also added as a native asset to boost.

Digg did well and was trending up for as long as large amounts of tokens were being offered via the rebasing options program, but after one very successful month all of the treasury tokens were used up and the price began to fall again.

In October 2021, DIGG HODLers set up their own snapshot to vote based on DIGG holdings, and voted on DIP-1 which turned off negative rebasing. DIP-1 was then ratified by BADGER token holders here. From the time between November 2nd when this change was executed, and now, DIGG has fallen around 50% in value.

DIGG HODLers are now requesting that each DIGG be counted as 1 Bitcoin for Badger boost with the belief that the discounted boost will create buy pressure and help DIGG return to peg.

Mr Po and the Badger Economics team have pointed out since boost was first added to DIGG that this dilutes the boost of BADGER. In the beginning DIGG tokens were being emitted to Bitcoin setts, but in the last year DIGG has made absolutely no positive contribution to Badger Boostonomics in the form of emissions paid in, and has only paid out BADGER to DIGG HODLers based on boost. The supply has not decreased due to negative rebasing, so moving to 1 DIGG = 1 BTC for boost creates yet another dilution event for BADGER HODLers without any positive impact. This dilution should be somehow offset or managed in a way that brings some benefit to the BADGER HODLers.

Boost Changes Examples

Assumptions:

  • DIGG Exchange Rate: 0.5 BTC
  • BTC Price: $40k
  • BADGER Price: $10
  • CVX Price: $25

Example 1:

  • Address has:
    • 0.1 DIGG
    • 0 BADGER
  • Current State:
    • Boost = DIGG Holding * (# DIGG * BTC Price)
    • Boost of $2k = 0.1 * (0.5 * $40k)
  • BIP State: this address would have $0 native assets in boost.
  • Note:
    • In order to unlock $2k boost, this address would need to purchase $1k of BADGER tokens, or 100 BADGER @ $10 per.
    • This would then provide the address with $1k BADGER and $1k DIGG boost = $2k native assets in boost.

Example 2:

  • Address has:
    • 200 BADGER
    • 0 DIGG
  • Current State:
    • Boost = BADGER Value
    • Boost of $2k = 200 * $10
  • BIP State: Goal is to double boost value
    • This address could buy $2000 more in badger (200 BADGER @ $10 per)
    • The address could buy $1000 in DIGG (0.05 DIGG @ $20k)
      • For boost, DIGG is valued 1:1 BTC
      • The boost value is twice the purchase value
      • Because 1 DIGG is now treated as 1 BTC in boost, the 0.05 DIGG with market price 0.5 BTC counts as 0.1 BTC towards boost.
      • A Badger user looking to increase boost can take advantage of this discounted boost opportunity

Example 3:

  • Address has:
    • 200 BADGER
    • 40 bveCVX
    • 0 DIGG
  • Current State:
    • Boost = BADGER Value + bveCVX Value
    • Boost of $3k = (200 * $10) + (40 * $25)
    • Note bveCVX can only be used to increase an address’s native assets in boost by max 50% of the USD value of their BADGER holdings.
  • BIP State:
    • This address would have the opportunity to purchase DIGG to increase their native assets in boost by a max of $2k (BADGER Value)
    • Their bveCVX holdings are not considered in the DIGG boost calculation.
    • They could purchase 0.05 DIGG for a total cost of $1k to increase their native by $2k using the same calculations as in example 2.

Draft spreadsheet model for post BIP 92 boost impact and optimisation

Post BIP-92 boost model

The linked spreadsheet enables modelling of a wallet’s boost after BIP-92 based on the wallet’s mix of DIGG & BADGER. It also calculates the logical re-balancing between DIGG & BADGER required to optimise the wallet’s boost post BIP-92.

This can be used to model an individual wallet’s boost. Work is also in progress to extract current token holdings for all wallets. This data can then be dropped into the model to get an indication of the aggregate potential buy or sell pressure on BADGER & DIGG as a result of BIP-92.

Scope, exclusions & simplifying assumptions:

  1. Only attempting to model wallets receiving boost & with boosted assets. People not getting boost or not holding non-native boosted assets (ibBTC vault / bcvxCRV) have no need to rebalance native assets to optimise boost & therefore are ignored.
  2. Assume people will act rationally to re-balance their native assets (BADGER & DIGG) to optimise boost.
  3. Only consider re-balancing of existing holdings of native assets. Ignore the fact that people may not just re-balance existing native holdings… i.e. they may invest new non native or they may just sell up DIGG & exit, etc
  4. Ignore that price will obviously be volatile as people buy/sell/rebalance
  5. Ignore other assets that count towards boost (bveCVX / NFTs) in the reblancing calc - i.e. just consider DIGG & BADGER.

I hope this is useful to assess impact at individual level and more broadly once data for all wallets is incorporated.

Let me know if any issues with calcs, questions or corrections.

2 Likes

this proposal should go forth

1 Like

I am for this proposal. Thorough and DIGG needed a freshen up. Thanks team.

1 Like