Bonding curve modifications

So in the community call yesterday, it was discussed by many that the bonding curve currently suppresses DXD to have organic price discovery, not only, it also allow people to mint significant amount of DXD at very low cost and slippage that can quickly dilute active supply.

Since the bonding curve is meant to raise $ for the treasury and the DAO now has a good stash of ETH now, during the call, some people mentioned that we could consider either halt bonding curve until it needs more, or make curve significantly more exponential so that it is much harder to mint DXD.

Lets discuss and a governance proposal will be submitted after this

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One of the things that I think would be helpful regarding making modifications to the bonding curve is doing some sort of analysis that kind of breaks out some of the pros and cons associated with taking some sort of new action on the bonding curve. So far I have spoken informally to several dxd community members who have ideas ranging from pausing the curve indefinitely until there is a desire in the community to turn back on the curve to raise funds, to some suggesting that the curve only mint new tokens when the curve the market price of dxd (which i assume could point to some uniswapv2 twap oracle).

My fear as an investor who is very much aligned with the long term vision of dxdao is that we are “paralyzed by choice” of what to do with this pesky bonding curve and we very much have a largely non-technical community that lacks the ability to reason abt what the actual implementation of this pause would look like.

On the positive side however, I believe that john? said that there was some analysis that was being prepared regarding the bonding curve and its impact on token price and our ability to fundraise. Perhaps, we’ll have more clarity after that?

At any rate, I would propose that we run an informal telegram poll (or you can run polls here but i think participation in these forums is still smallish and not nearly representative of the larger community) of the communities feelings about the bonding curve and its impact on token price.

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From a technical perspective, pausing the minting from the curve is significantly easier than changing the mechanics of the curve.

The pausing can be achieved by setting the _minInvestment parameter to a large number, say an order of magnitude greater than the ETH supply. See an earlier post I made which lists the bonding curve parameters that are changeable by the DXdao: Configuration Template for Fundraising Decentralized Application

To make the curve exponential would be a significant dev effort, adapting the smart contracts, getting an audit and upgrading the current curve.

I have drafted a longer form post about DXD (~ 4 pages in Word) which hopefully will ground the discussions around it. Getting some peer review now and aiming to publish on Thursday.

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To make the curve exponential would be a significant dev effort, adapting the smart contracts, getting an audit and upgrading the current curve.

maybe can pause and in the meantime figure out how to make the bonding curve exponential, afaik many projects have exponential curve, or exponentially harder to obtain supply

Someone just voted against the proposal to stop the bounding curve.
This person is probably one of the founders of DXDao, he should make these arguments publicly.

Voter gnosis safe = 0xed6fA573B2ddB34F6a9a6941b53f7833bF283b02
<= Owner 0x08EEc580AD41e9994599BaD7d2a74A9874A2852c
<= Initial ETH Fund 0xC4B60a931929d3ed0AC423F9Ea80e5962726dA73
and this address create what I think it’s the first draft version of DXDao token (0xe64953d346eea776c4c6bb0a819dfc16cdb29339ff1d6ce3f0ec8337c4c06cb1)

I am satoshi,

Like I commented on the proposal:

Before voting I invite you to read more about the DXD design here https://github.com/levelkdev/openraise-dapp/blob/master/docs/ContinuousOrganization.md, which is a Contonious Token Offering contract this mean that besides de common ERC20 methods it offers the buy, sell, pay and burn functions. This functions are intended to be used to help regulate the supply of the token and the buy back reserve.
Instead of halting the curve, which goes against the continuous offering principle we should use the sell or burn methods.
The DXDdao has a vesting of DXD of 100k for three years, currently it has like 7k tokens and there is a circulating supply of 35k.
I will create two smart contracts, a burn relayer and a sell relayer, this contracts can be used to burn and sell tokens, where any amount of DXD that we send to the burn or sell relayer it will execute the burn or sell, depending on what we use.
I encourage to explore more on that solutions, finding a solution that will maintain a ealthy inflation rate of DXD allowing the organization to continue receiving funds.
Important thing to note is that the more ETH that is raised by the curve the more funds available to be invested and generate more revenue that will be sent back to the curve, so in the long run pausing the curve makes even less sense, we should focus on raise more ETH and put that ETH to work, IMO.
From the my developer side I can develop and provide solutions to any requirements needed to put the treasury to work and start generating revenue.

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The pausing can be achieved by setting the _minInvestment parameter to a large number, say an order of magnitude greater than the ETH supply.

This is an awesome workaround and something that I hadn’t considered when evaluating the spec. Thanks for sharing!

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Sorry for my late reply to this thread, I thought I’d jump in to share my perspective here.
There are many statements I don’t understand here:

  1. “the bonding curve currently suppresses DXD to have organic price discovery”. I don’t see what is the reasoning behind that argument. Can you explain what the bonding curve has to do with “suppressing DXD price discovery” because I fail to see it.
  2. “it also allow people to mint significant amount of DXD at very low cost”. How come? Right now, I see the price on the curve is 0.8591 ETH and 0.80 ETH on Uniswap.
  3. “so that it is much harder to mint DXD” Why would you want to do that? I don’t get it

If there is one thing to do that would be cool, I think it would be to actually blend integrate the DXD/ETH uniswap market directly in the UI (I mean https://dxtrust.eth.link/#/) so that, whenever someone buys, it optimizes the trade by buying where DXD is cheaper, which means buying from the Uniswap market, the curve, or both (in case of a large buy that could cause a large price slippage).

I had started writing a specification for it (but it is still a draft):


That would make the market more efficient than it is today.
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  1. When the price rises it causes dilution of the earlier investors, which inevitably has a negative effect on the price.
  2. The term mint is probably a wrong choice, but if someone wanted to buy a big amount of token it would cause a significant slippage in the market and thus make it more expensive.
  3. A DXD holder want an appreciation in the price of his asset so the reason seems obvious to me.
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I’d like to jump in here to state my opposition to this proposal. As @thibauld stated above, the bonding curve does not have a material effect on the price of DXD. If there is a price impact from dilution it is minimal and in the service of aligning long term interests of token holders

the proposal by @thibauld solves this problem nicely. If I understand your concern correctly, you are worried that people are buying from the curve at a higher price than market and therefore increasing supply when there is ready supply to be bought lower. This may have a small short term price impact, but if the project is successful and can direct funds back to the buy back reserve, people buying from the curve is a net positive for DXD holders in the long run.

A mechanism that first buys off an AMM and then goes to the bonding curve also solves this problem. If you set the slippage rate for the AMM, for large orders it could pull from both the curve and AMM to give the best price.

I think this line of reasoning is flawed and is derived from the standard crypto-centric idea of scarcity. In my opinion, the value of the DXD token is in the buy back reserve or other dividend-like mechanisms that distribute a portion of the treasury to token holders. The beauty of the bonding curve model is that the token is generally as scarce as it needs to be. There is infinite supply but the more you make the more expensive it gets.

Big picture, if the DXDao is not successful in creating revenue, then it doesn’t matter what the supply is. If the DXDao is directing revenue back to the reserve then new people buying from the curve means that earlier holders have de-risked their investment with a price floor. (Buyers from the first day of the continuous offering are not that far off from being able to sell back their tokens at the price they bought them.)

I’m also a little confused as to why there is concern about the fate of DXD holders when the price of the token has increased 15x against ETH. Changing the bonding curve due to some fear of dilution when dilution clearly hasn’t had a material impact on price seems very short-sighted to me.

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Allowing someone to buy a large quantity of token via the bounding curve at a lower price than in the secondary market has a negative effect on the price. I don’t even see how you can argue against o.O.

As for the criticism that I would summarize by “It’s not good to want to get rich in the short term”, I think we should sincerely stop expecting people to behave properly.
The basic principle of crypto is to offer such an incentive that you don’t rely on the goodwill of a group of people to get something done.

The proposal of @AugustoL seems reasonable to me but without a vote that would confirm the direction to take it remains only an informal proposal.

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That’s the whole point of the c-org model :slight_smile: In this model, dilution is good because it is correlated to (1) price (and so market cap) increase (2) more funding for the organization. So, as an investor in a c-org, you actually want the price to increase. I don’t think this forum is the right place to discuss the c-org model but I encourage you to give it a read (if you haven’t already of course!).

Ok but sorry I don’t see how it would translate into the ability to buy DXD at very low cost :thinking:

Agreed. And the best way for DXD to appreciate is to give the dxDAO the means to be ambitious and achieve global domination… not to cut the funding and change the rules by adding a supply cap out of nowhere to make sure previous investors get a short term price increase :wink:

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We will probably never agree on the way to proceed, but at least we agree on the objective ^.^

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Again, how would you pull that off? Let’s say Uniswap has a DXD price of 0.9 and the curve has a price of 1. One buyer shows up and wants to make a yuuuge buy which, if purchased on Uniswap (case 1) will make the price jump to, say, 1.2 whereas if the purchase was done on the curve (case 2) then it would make the price jump to 1.1. I guess that’s the case you’re referring to.

First off, I’ll start by saying that to create such a price slippage, given the current size of the liquidity pool on Uniswap of roughly $300K, the investment should have to be quite sizable, which makes it quite unlikely. But ok, let’s assume it happens.

Second, it’s important to point out that, if the liquidity pool on Uniswap is large enough, the price increase caused by the purchase might actually be bigger on the curve than on uniswap.

Third, uniswap and the curve are always correlated. If the price jumps on the curve, you can expect the price on Uniswap to rally as well.

Fourth, if the price on Uniswap were to surpass the price of the curve, arbitrageurs will very quickly size the opportunity and buy on the curve to sell on Uniswap until price of Uniswap = price of the curve.

Fifth, as I mentioned in my previous comment, work can be done to blend both markets (uniswap and the curve) on a unique UI that will take care of optimizing each trade.

So, bottom line, what you want is simply put a supply cap to the number of DXD under the argument that “dxDAO has enough money now, let’s reward investors”. Well, I, for one, am totally opposed to cutting the source of funding and jeopardizing the future of the dxDAO not even 6 months after launch simply to create a short term signal so that investors can pump and dump. That’s totally not the spirit of the dxDAO. Investors that are not happy with the performance can sell at anytime, it’s fine.

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Sorry but this is factually wrong, a purchase of $70k (which is very small for a professional investor) would have bought ~146 DXD via Uniswap and bought ~205 DXD via the bouding curve (40% cheaper).

This is also wrong in my opinion, because the secondary market price will necessarily arrive at the primary market price which will again provoke arbitrage in favor of the primary market which will slow the price. And I’m not talking about whether it’s a good thing or not, just that it will have that effect.


The last points are just your opinion I’m not going to talk about it because it’s not really worth debating. You won’t change your view of the world and neither will I. Hence the interest to have an incentive that way no matter your vision of the world, everyone has an interest to go in the same direction and that’s why I find your “Investors that are not happy with the performance can sell at anytime, it’s fine.” dangerous.

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Ok I have a better understanding of your position now. Agree to disagree :slight_smile:

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Why is this a bad thing? Doesn’t it prove there is value in the bonding curve issuance model in that large orders can be accommodated without relying on 3rd party liquidity?

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Why a free market ?
I give up o.O

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The issue is that these networks and the price associated with the tokens, grow exponentially. This is NOT all about price. But it is about appropriately aligning incentives, and price is important from that perspective.

Under the current implementation, DXD is bounded by linear growth. Rather, the distribution should be exponential. That way at least the distribution isn’t hindering the growth of the price.

Where is there not a free market? You have the choice to buy from either. If there were more liquidity in the uniswap pool, the price would be better there. I don’t understand what the concern is. I can see wanting a higher buy back price, but halting the bonding curve doesn’t help with that. What am I missing?

@filll Can you elaborate on this? When you say DXD, do you mean the price or availability of it? So as more is bought from the curve, the cost to buy raises exponentially? If so, does this not hurt the DAO’s long term prospects to continue raising funds from new investors as it quickly becomes pointless to buy from the curve?