Given its current use cases, AADA lacks robust fundamentals to incentivize token holder retainment. The following issue spirals into a continuous loss of token value due to selling pressure. All these factors cause a reduction of the protocol’s power to use its native token as a liquidity incentive in the future. In this regard, introducing a buyback mechanism will counter the negative trend and present a robust use case for AADA.
Buyback - auction (bid AADA to win ADA)
A buyback mechanism in the form of an auction is an easy and efficient way of increasing token retention. Its primary purpose is to create an endpoint where the tokens will become part of the DAO treasury or be burned effectively.
Such a mechanism would work like this:
The ADA collected from the revenue streams is set at an auction. The auction participants bid AADA to buy ADA. After that, the AADA token inherits the value of the ‘purchased’ ADA, resulting in increased value for all token holders (in terms of price).
Auction revenue streams can be anything that collects ADA.
The auction rules are simple:
- The ADA used as collateral in the protocol’s smart contract will be staked in an SPO;
- The protocol will set a minimal platform fee;
- The revenue from both streams will be collected in a smart contract;
- When the number of ADA tokens reaches a certain threshold (i.g. 1,000 ADA), the sum will be offered in an auction;
- The highest AADA bidder wins the auction, swapping the AADA bid and receiving ADA in return.
The highest bidder wins the prize.
Technical requirements - AADA token auction
As a complementary proposal, we recommend that all tokens collected in the auction are burned. That way, we’ll facilitate a long-term positive price push for AADA with even the most minor auction price.
Script address in official cardano-node github - cardano-node/always-fails.sh at master · input-output-hk/cardano-node · GitHub
Address results into
Voting should be considered approved/disproved only if 10% of the circulating supply participates in the voting. The 10% of circulating supply is ~1.05M AADA.
No. Lets do neither of these. Use the Ada revenue to just buy AADA on the open market and Hodl in the treasury wallet.
Bidding on ada with aada undermines the aada/ada rate on dexes.
Buy AADA from open market with revenue/ada collateral staking rewards 2 times per month.
Half of this AADA gets in the treasury and the other half gets burned.
Make this an automatic operation.
No burning, that’s just desperate and silly. Why not gain more ADA from the fees collected via stake pool, depending on how much AADA tokens in the wallet you stake with you get proportional ADA share from the fees collected. Simple, efficient.
Great proposal! The only thing I would suggest instead of the auction, just buy the tokens from the open market (MinSwap or any other DEX).
Also, burning is good for this case, but consider putting some % back to treasury to fund future development.
Why not set reduced platform fees for using aada instead of something else?
I think ageek’s proposal makes the most sense. Very simple and the effect is the same. If the fees and staking rewards are high enough, the increased buying will be similar to the burn pressure.
The Issue with ageeks proposal is that they assume everyone who holds AADA in their wallet is entitled to rev share. This had never been planned. Only those that take on risk and deposit into the AADA security module were ever meant to get platform fees.
A lot of really good ideas here. I gotta ponder these proposals a little while longer. I THINK proposal 1 sounds logical.
In telegram the group proposal to use fees to buy back AADA off the market which will maintain value of AADA!
Lock up the AADA in two separate treasury for 1.future development 2. Safety pool --=Why two treasury? to protect the protocol from been totally drained in a hack in the pool lending and protect protocol overall.
In the first treasury Consist of Staked ADA and small portion of trading fees which locks in a timed smart contract where the particular treasury doesn’t unlock for 24 months which when release its used paying devs towards protocol upgrade and also future advertisings of the protocol. Second Treasury Consist of some of the trading fee’s which will be used to buy AADA and distributed to AADA stakers who stake for minimum stake period of 3 to 6 months!
The 3rd Treasury we use it for the high risk takers who would like to help support the safety module.
3 simple treasury and 3 unique use-cases!! This attracts many types of users and nobody can then complain
P.s= We might also want to have a fund for exchange listing only!
we need to focus on creating utility for AADA and not take shortcuts like burning. Let’s create VALUE for AADA. Please don’t turn us into a VC using our treasury!
Please check out my reply to this. p.s AGENT BULL
he’s got good idea i have sugested another idea which involves having 3 different treasury to also keep protocol safe and also buying off the open market.
So like offer ada via airdrop or some collectable means (ie dripdropz/tosidrop)?
Why not just buy AADA on the open market and use for providing liquidity? The more liquidity is available the more activity can happen, the selling pressure would also be mitigated and LP can become a supplementary revenue stream.
Yes, both valid options, for me the simpler the better, but via dripdrops/tosidrop has also a good outcome which is supporting another project in Cardano. Buyback AADA with treasury fund is not bad idea either, it can be another utility case. The AADA in treasury then can be used maybe to build further features on the app and use AADA as payment to develop, why does it have to be ADA. So, two utility ideas, no burning, which is such a waste of resources
Ahhh, crazy idea
- User stakes AADA in the aada app
- The AADA staked its used to lend
- The gains from lending will fund the staking % which should be variable and based on lending volume and part of it go to treasury too to fund buybacks (long one :))
That would make more users lend on the platform indirectly via staking, those who stay away now as that would be simpler. To make a liquid staking so that user can withdraw at any time, the treasury funds can be used, this is where buyback comes into place.
Good initiative, but I dont think burning is the solution, its like trying to increase demand for Aada by having less circulating, and keep in mind that the current capacity is low.
Another thing which I did not understand very well in the 1st proposal is why someone will make a bid? what is the incentive? as shown in example he offered 150 Aada to get 200 ADA but that is only valid if Aada is less than Ada, but when its the opposite I don’t think that anyone sees value in it, as 150 ADA will be higher than the value of 200 ADA. Anyways, I am glad for these suggestions and replies from the community.
I suggest a proposal to use fees to buy back AADA off the market which will help with value of AADA obviously, then lock up the AADA in the treasury for future development which takes that AADA out of circulation, we could perhaps put it in a timed smart contract where these particular treasury doesn’t unlock for 24 months. This is a more functional and rational idea, better than these idea of burning coins out of desperation we need to focus on creating utility for AADA and not take shortcuts like burning. Let’s create VALUE for AADA. Please don’t turn us into a VC using our treasury to buy risky assets, then When the assets fail we are scrambling like GENESIS TRADING, ALAMEDA research and 3 arrows capital.
it might like kicking the can down the road, yes might very well be but that time gives us opportunity to continue to build more utility for AADA, launch V2 and perhaps V3. also the idea of issuing some of the AADA bought back as staking rewards is fine, just not a lot, 20% for staking rewards, 80% for treasury. earning staking reward off fees can be considered a utility of holding AADA. getting 10% off transaction fees while using the platform if you hold up to 500 AADA, getting 25% off fees if you hold up to 2500 AADA and zero fees if you hold up to 10,000 AADA. these are some of the utilities we can incoroprate. Obviously voting for governance is another utility. Let us never use AADA as collateral for pooled lending as FTX used FTT as collateral now look where they at. Collateral should be ADA and stable coins PERIOD. We. We’d to remove all other protocol coins as collateral.
At this point, I feel that the token is almost useless, and most if not all public investors and smaller holders are down sizable amounts. Many have or are losing hope. The product itself is great, and we applaud you for it, and it’s an achievement for sure. So, this leads us to need further ways to create utility for the token. As well as this, we need explain and announce these utilities. In the V1 protocol, there are not many revenue streams that I know of. However I noticed that you said there will be a NFT-BOND marketplace. There is definitely revenue that can be extracted here. I would plead that the marketplace has some % of royalties for each sale of bonds, possibly 2%, and this revenue is shared among AADA holders. I also noticed the liquidation commission in the gitbook of 1.6% and would suggest raising to 2%, with the margin going to AADA holders. In the V2 protocol I can think of many more ways to extract value for AADA holders. One would be to increase & distribute protocol fees for borrowers that will go to AADA holders that STAKE somewhere within the protocol to earn fees. (I’d also assume the liquidity providers are compensated) If you’re familiar with the recent INDY staking for protocol fees, it would be similar to that. If this passes, there would be a tangible reason to hold AADA, which is not present as of now.