People I talk to with experience with rebasing assets always say that the biggest risk is subsequent negative rebases triggering panic amongst holders and a “death spiral” as people run for the exits. Below is my thought on what would hopefully be a gamified mechanism that would break the negative rebase.
The Rebase Game
The game is simple, bet on if the next rebase will be a positive one using bDIGG(DIGG deposited in DIGG only sett) for everything as it makes the example a lot simpler.
Start with a prize pool from the treasury (1 bDIGG)
When there is a negative rebase a “Betting Pool” is generated
It is a standard erc20 that can accept deposits and issues a token to represent the deposit (like any of the setts)
Anyone can then deposit bDIGG and get bett-bDIGG 1:1
If the next rebase is positive 50% of the prize pool is moved to the betting pool and that iteration of the game ends. all bett-bDIGG holders can redeem their portion of the pool
If the next rebase is negative half of the betting pool moves to the prize pool and the new price to mint bett-bDIGG is .5 and the game continues
Additional parameters
1% withdrawal fee on betting pool
Betts cant be placed within 1 hour of rebase eligibility
The goal is to bribe someone into manipulating the price to force a positive rebase. The fees taken from withdrawals can be a source of revenue for the treasury (or sweeten the prize pool). This could be done with no intervention beyond sourcing the first prize pool. It would be a standalone page where one could see the prize pool balance, the current active game if one is live and all previous games. Each time there is a new “first negative rebase” following any number of positive ones a new bett token contract is needed so that and the UI would need to be dynamic. It could also be configured to only kick off a new game if the price is actually under the peg by a certain % (more of an “emergency measure”).
Went through a rough example here. Mainly looking for feedback and seeing if its worth scoping for dev effort. Smart contracts should be simple but may need a decent bit of UI.
Hi @jonto, never heard about that concept before !
I have a very naive, maybe stupid question. But I thought that during a negative rebase, the idea was to buy more token in order to be closer to the peg (and sell in case of positive rebase).
So in this case, you put (stake, bet …) your DIGG. But when it’s a negative rebase you lose some DIGG (because the betting pool moves to the prize pool). So basically when it’s possive you have more and more DIGG , but as you also add the withdraw fee, and DIGG are deposited in the sett , it means that if you want to sell your DIGG you have several transactions to do (so it can be expensive for small users) before being able to sell it.
And on the other side, when the rebase is negative, you basically lose money as you bett-bDIGG are sent to the prize pool . So you have less DIGG at the end.
This concept looks interesting and it looks like you’ve put a lot of thought into it. I like the idea of gamifying the system to promote positive outcomes for our protocol. Indeed it would require a very attractive and almost casino like UI for users to get hooked into throwing their funds in their for the prize pool. I like that this results to more revenue and agree that it should be put back in the treasury and also a little bit to $BADGER stakers for incentives of holding $BADGER. Looks good. I’m curious as to how the rest of the community will respond to this. I really like it!
The math for someone interested in playing the game would be
probability of positive rebase * prize pool > potential deposit * withdrawal fee
The goal is to deposit right before the positive rebase, it isnt a “set it and forget it” type of thing. if you deposit and arent right about the negative rebase then you potentially lose 50% of your deposit. It isnt something for the ill informed or faint of heart.
This sentence is key here. And if we do it, this should be written somewhere in BOLD, BIG and RED. Elastic supply is already complicated , and i saw a lot of people , even people supposed to know about crypto, who said that AMPL was a scam. Just because they didn’t understand how it works. So we should really be careful with this type of option. Because even if things are clear, people will always try it, get rekt and complain. And even if it’s 100% their fault, it will give a bad reputation for badgerDAO.
I agree. When Binance first launched their BTCUP, BTCDOWN tokens, a lot of people got rekt and blamed Binance. Then they were reactive to the situation and started posting WARNING signs when a user would get onto that side of the website. I think we should be PRO-ACTIVE and have a pop up warning with links to in-depth tutorials on how the system works before launching it. It could spell disaster if not, and would cost the reputation of $BADGER.
I am a proponent of eventually having an “ape zone” in badger. I feel pretty strongly that financial instruments should be incredibly boring and simple (lower r/r) or highly volatile (higher r/r). the middle ground is unlikely to gain much traction.
So yeah totally agree we would need to have it emblazoned with warnings. There have even been discussions of badger “levels”, things you need to do to get some badge that unlocks certain aspects. Could be something like “holds X amount of BADGER LP sett shares” or even something tracked over time. I also think ape zone could be a good part of the process of rolling out new setts on their way to full audit. dont want it to devolve into an “exclusionary” thing but i think we can use some rough on chain metrics to determine “is this address likely to understand wtf is going on here”.
I’m in for the “ape zone” This will attract a lot of risk takers and it’ll make some winners and losers, but most of all - if we design it well enough - get some people really addicted to the badger “ape zone”. As long as we do our part and forewarn them plenty, then I believe it will be OK. We should take inspiration from online gambling websites as those UIs (graphics, colors, sounds, etc) are designed not just by UI designers but more than likely psychologists and sociologists as well. They are meant to keep the user engaged and invoke a physiological chemical response with certain events (kind of like notifications on a phone). Of course, this is all just for the “ape zone.” Marketing uses this all the time like malls and offices (certain smells, sounds, colors will increase appetite, spending, etc).
Hmm that’s cool you guys are talking about badger “levels”, I think that’s great because it keeps users engaged and keep wanting to achieve higher levels. Again, making it sort of like a game, hopefully a never-ending game at that.
I really like this thread, I think this can bring in a lot of users in our ecosystem as well as provide revenue to keep in treasury for buyback initiatives, $BADGER holder/staker incentives, and overall business development.
@jonto I really like the idea of “levels”. In the coming market cycle there will be a ton of newcomers to the space who will suddenly have access to extremely complex and volatile products. Currently our society limits access to these products to qualified investors- while the metrics that define “qualified” is up to debate, the need to protect users is not.
I can see this being a HUGE friction point for DeFi in the next cycle. While Levels could slow initial growth they could end up being a much stronger long term foundation.
basically bet on yourself and then bid $digg like hell in all pools (sushi $digg/wbtc & uni $digg/wbtc) if u think the conditions are favorable. am i understanding correctly? @jonto
Honey Badger zone… hmm. I like it. We can make it a game with badger graphics and such. This will be interesting. There’s so many other priorities right now, but I think this will ultimately be developed. I think the lending/borrowing side of BADGER takes priority over this or maybe of equal importance. @jonto@cryptouf . Have you guys started drafting overall blueprint for lending/borrowing products?
Over what ? the “level concept” or the rebase game ?
me ? no. Don’t know who is “responsible” for this. I was thinking we could have a pinned topic with official team members and their roles. So then it’s easier to @ members.
This will attract a lot of risk takers and it’ll make some winners and losers, but most of all - if we design it well enough - get some people really addicted to the badger “ape zone”. As long as we do our part and forewarn them plenty, then I believe it will be OK. We should take inspiration from online gambling websites as those UIs (graphics, colors, sounds, etc) are designed not just by UI designers but more than likely psychologists and sociologists as well. They are meant to keep the user engaged and invoke a physiological chemical response with certain events (kind of like notifications on a phone). Of course, this is all just for the “ape zone.” Marketing uses this all the time like malls and offices (certain smells, sounds, colors will increase appetite, spending, etc).
.basis.cash uses this idea and it works,