Thoughts on stopping new $JBX issuance

2024年3月17日 23:46:41

by zhape
This article are personal thoughts by the author of this blog post, it does not represent the position of JuiceboxDAO in any way. Any comments or feedback will be greatly appreciated

The proposal demanding to stop the new issuance of $JBX has been approved in JuiceboxDAO's governance recently. So long as the reconfiguration to JuiceboxDAO (short for "the DAO") project is queued and executed onto the blockchain by DAO's multisig, this decision will take effect in the next cycle.

Let's reflect on the evolution of the token economic model of $JBX, and think about the possible changes to token models after the halt of token issuance, as well as the effects brought about by those changes.

Former Token Model

The token economic model of $JBX took on a cadence of issuace corresponding to new incomes. Every time payments are made into the DAO's treasury, be it in the form of personal contribution or protocol fees from other projects in the ecosystem, there will be corresponding issuance of new tokens according to the underlying issuance rate of the treasury. After that, half of the new minted tokens will be reserved to the DAO's multisig according to the reserved rate (currently at 50%), while the rest half will be distributed to the payers. Also with the existence of discount rate (i.e. issuance reduction rate) set in the configuration of the treasury, the issuance ratio of a new cycle will decrease by a certain extent compared with the most recent cycle.

The design of this issuance mechanism stemmed from the consideration of providing future participants into Juicebox ecosystem possibly more fair entrance cost, while at the same time compensating earlier participants for their higher risks taken. This mechanism has by far been very fruitful in maintaining the openness of Juicebox ecosystem, as well as in attracting more talents and influential projects for the purpose of common growth.

Recent Changes To The Model

The core team of JuiceboxDAO has been successfully pushing forward various dev jobs one step in a time, which consist of iterations of the protocol from V1 to V1.1, V2 and V3, finalization of versioning work to ensure more safety and stability in the future, inclusion of NFT rewards to provide more options for projects owners to interact with their supporters, and most imporant of all in my opinion the development and deployment of Buyback Delegate (short for "the BBD") to help covering the gap between internal issuace rate and prices in secondary markets.

The Buyback Delegate has been officially attached to JuiceboxDAO's project and operating as intended since the end of Oct. 2023. Every time there are payments made into the DAO's treasury, the BBD contract will compare the internal issuance rate with those prices in the open market. If prices in open markes turn out to be lower, BBD will route the funds received to AMMs (things like Uniswap) to buy back the $JBX tokens, before distributing them to the DAO and the payers according to the predefined reserved rate. In the case of the issuace rate being more competitive, then the payments will be received into DAO's treasury as revenue, and in return new tokens are minted and allocated to the DAO and payers accordingly.

With this new mechanism of BBD, the token model of $JBX has changed quite dramatically. If the value of $JBX is under-evaluated in the open market, all revenue of the DAO will be routed to AMMs to buy back $JBX, which both supports the open market price and ensures the acquisition of most competitive prices by fee payers. But this comes at a cost also, as there will not be any increments of ETH assets in the DAO's treasury under these circumstances.

Core Appeals of The Proposal

In the proposal, the author thinks that $JBX has been in the face of a hidden danger of unlimited inflation under the current issuance mechanism, rendering the interest of token holders unable to be secured, which in turn leads to the lack of confidence among potential investors and participants towards $JBX, and the under-evaluation by the market without fully reflecting development prospects of Juicebox protocol. For these reasons, the proposal demands to put an end to the new issuance of $JBX token, in order to help elevating its investment value and fostering a virtuous circle of self-marketing to attract more involvement into the ecosystem. At the same time, the value of $JBX assets in DAO's treasury will increase along with rising open market prices, which will be favorable for the accural of funds in the DAO.

Short-term Effects By This Proposal

  1. First of all, there will not be new issuance of $JBX tokens, and the total supply will be confined to 2,081,715,670.33 (subject to changes before execution of this proposal).
  2. The revenue of the DAO, ETH payments either from personal contributions or fees by other projects, will not flow into the treasury any more. All income will be routed to AMMs (Uniswap V3 liquidity pool at this moment) to buy back $JBX tokens before distributing them to the DAO and the payers according to current reserved rate (50:50).
  3. $JBX is de facto a treasury-backed token, tokens holders can burn their tokens to redeem their share of assets in DAO's treasury. Stop of ETH inflow to the treasury actually is not good for the elevation of backing value of outstanding $JBX tokens. If ETH in the DAO's treasury continue to be spent without substantial supplements, the backing value for $JBX will also diminish.
  4. Although ETH are not flowing into the treasury, $JBX assets in the treasury will keep on expanding with the execution of more buyback transactions by BBD. With the increase of tokens price, these assets will be more valuable and can be used for various purposes such as payouts, airdrops, rewards and grants in the future.
  5. In the case that there is a need to maintain or elevate the backing value of $JBX, swapping of $JBX in the treasury into ETH might be a decent choice by then.

Intermediate Outlook

A team led by Jango is now working on the development of projects like Bananapus and Revnets, which might to a great extent influence the evalution of $JBX.

  • Bananapus is, as a matter of fact, a fork to the core contracts of Juicebox V3 protocol, but it has been updated with some specific improvements partiular for cross-chain operations. Same as the project of JuiceboxDAO, Bananapus acts as the fee-collecting project for the cross-chain protocol, and the $NANA issued from it will be backed by those assets in its treasury.

    As far as I understand, when $NANA is officially launched, there will be a substantial amount distributed to JuiceboxDAO, together with a boost for certain period of time (planned as two years for now). So, $JBX might be more involved in the future growth of $NANA and benefit from it.

  • Revnet is a scoped template of projects without any project owners or payouts, and the assets in the treasuries can only be accessed through redemption of project tokens. All the parameters will be locked in place at the launch of a revnet without the possibility to be tempered. This model may suit for projects that have steady cash flows and requires the joint efforts by their communities where devs, investors and users are all treated equally.

    Among the first cohort of revnets that will be deployed, Bannyverse will be the first one that has a plan to airdrop tokens and allocate boost to JuiceboxDAO. As far as I know, other revnets, most of which have received support and fundings from JuiceboxDAO, might very likely consider similar arrangements. With the growth of these revnets, there will be more value added to $JBX in the future.