Discussion and draft design: The $T token

This is my design of a token and distribution schedule to control the DAO resulting from the KEEP and NU merger. Please read on and let me know your thoughts.

The $T token
-Governance token of the new DAO, owner of the various apps like tBTC v2
-Can stake to work within the apps, will eventually be the only token usable to stake within the network

Goals and thoughts behind this design:
-Have a significant portion of the token supply be live when it first starts trading, and the main product (tBTC v2) launch shortly after
-Rapid distribution of T tokens owed to KEEP and NU holders. I believe we need the transition from NU+KEEP to T to be somewhat quick, not let it drag over too long.

Distribution breakdown:
100M $T in the first year after the staking contract + token is live

    -50M allocated to KEEP and NU holders, via staking and merkle roots
         -10M distributed via a merkle root
             -5M distributed as decided by the NU community
             -5M distributed as decided by the KEEP community
         -40M allocated to users that stake in the staking contract
             -20M allocated as decided by NU community
             -20M allocated as decided by KEEP community
    -20M sold via a wBTC raise going to the DAO treasury
    -30M in rewards as decided by tokens holders and stakers

Timeline:
Phase 1: initial distribution and non-transferrable $T:
-10M $T distributed via a merkle root + some of the T allocated via the staking contract, non-transferable

Phase 2: $T launch market event:
-Has to happen once tBTC v2 is ready to launch, only a vote away by the DAO to be live.

Multiple events happen at the same time:

-Token sale(s) offering 20M T tokens. The accepted currency is wbtc.
-T tokens rewards accrued by KEEP and NU holders become transferable ( I estimate it to be around 10M from the merkle root and 30M possible to redeem from the staking contract).

Net effects: 60M tokens become available on the market at the same time. Significant float versus expected supply after 1 year.

Phase 3: Launch tBTC v2 (days after phase 2)
-Rewards start being distributed in both wBTC and $T.

Merkle root, on the KEEP side:
Distributed equally between all KEEP holders, wherever they are:
-KEEP LPs (KEEP-ETH, etc)
-KEEP (simple holding)
-KEEP being staked
-KEEP in the process of being unstaked

Merkle root, on the NU side:
How T tokens from the merkle root should be decided or proposed by someone from the NU community.

Staking contract:
The staking contract is a contract that lets stakers accumulate staking weight in the protocol by staking their tokens. Users would have 45 days to stake their tokens in this staking contract before staking weight starts accruing. Those that have their tokens at start will receive an initial allocation of staking weight that is equivalent to half of the staking weight to accrue to staking contract stakers during the year. Which would be possible to redeem for around 20M $T, but will keep accruing to more than 40M $T after a first full year.

It will be possible to redeem one’s staking weight in the staking contract for $T tokens.

How users can stake in the staking contract, on the KEEP side:
The following KEEP holders should be able to stake in the staking contract, with all KEEP having equal weight:
-KEEP stakers
-KEEP grantees, vested or not
-KEEP-ETH LPs
-KEEP holders

How users can stake in the staking contract, on the NU side:
That part should be proposed from someone from the NU community.

7 Likes

Thanks for drafting the proposal @statelayer. I appreciate that it’s very early in the process and lots of details still have to be worked out. I have a few questions some of which may be too early but I will shoot anyways :slight_smile:

  1. Is the 100m token supply used in the proposal for example only or is it the actual proposed amount of tokens? I believe if the token supply is 100m, though it may not make any material difference as the NU and KEEP holders receive the tokens in proportion to their respective holdings, it may lead to a perceived loss of value(if KEEP and NU are eventually made redundant and replaced by $T) by the community. It may only be optics but can have some effect on the community sentiment.
  2. Is the token proposed to be fixed supply or inflationary? If fixed supply, when all the $T tokens are distributed are we proposing to pay the rewards only in btc? Not a concern just asking for clarity.
  3. For the Merkle root drop will the $T tokens be distributed to the holders only or to the stakers and LPs as well? It is there for the staking contract but not clear for the merkle drop.
  4. What’s your view on the plan for transition to the end of life for KEEP tokens in favour of $T as a part of this proposal? I think it would be useful to discuss it as a part of this proposal even if it’s at a high level.

Thanks,
M

1 Like

I have a question I am/was a staker but started the undelegation process before the new Keep Nucypher idea was public mostly due to lack of good amount of eth in my opinion to make it worthwhile and I was considering single side staking or LPing. What would happen to my situation since there seems to be merkle root rewards as well as staking ones.

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Thanks for the Proposal @statelayer!

Questions/Comments:

  • KEEP tokens have a fixed Supply (1 billion); NU tokens are inflationary (currently at 1.149 Billion NuCypher price today, NU live marketcap, chart, and info | CoinMarketCap). Would the new T token be inflationary like NU or fixed supply like KEEP?
  • Why would the new DAO raise money with the sale of 20 Million new tokens? What is the purpose of it?
  • What would be the new tokenomics of the T token? I expected TBTC V2 to provide enough revenue to fund Node Operators and Stakers with a good return (15%+?)? Would the return in TBTC V2 based on revenue plus inflation?
  • Are there other applications that in the near future could drive revenue for Node Operators? As far as I am aware, only TBTC V2 will drive revenue soon enough.

Hey M,

  1. That is the amount I propose, I think it’s good to have a decoupling so people don’t make too much comparisons. But BTW 100M is smaller than KEEP and NU supply so it should be probably worth more in $.

  2. Inflationnary, 100M was just for the first year after the token launches.

  3. It is specified in the post.

  4. I am not sure. I have no idea how people will value KEEP after this.

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As you can see there I propose we give the merkleroot to KEEP in all situations, including those being unstaked.

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The reason I want to have a raise is to have a good amount of T tokens available on the market to avoid the issue where the inflation is super high compared to the amount available on the market. Also, I would suggest the DAO could gradually sell its wBTC for tBTC, helping tBTC grow at the same time and then possibly distribute tBTC as rewards, which is a + for boostrapping tBTC v2.

3 Likes

Thanks for putting this together. A few questions after reading through it.

  • There is another proposal that would utilize the existing KEEP and NU tokens in the new staking contract while this proposes to create a new token - do you see these as complementary proposals, or is it an either or?
  • When would tbtc v2 launch in relation to the staking contract? Would people that stake in the staking contract be effectively staking for tbtc v2, and have to also run a node, or would tbtc v2 come after the staking contract completes (1 year after launch) and everyone has withdrawn?

In general, assuming I understand this proposal correctly, it looks like this essentially would generate a new token that would replace NU and KEEP and would act as a governance / work token for the new network and any new applications that launch on it. I’m personally in favor of this approach (new token) as it seems much simpler to explain to outside parties interested in participating in the network.

That said, one concern I have is around tax handling for this proposal. I’m no tax person, and this is not tax advice, but it would seem that (in the US) distributed $T (both from the merkle drop and the staking contract) would be taxed as income. Assuming this were true, I would expect some amount of selling of $T by participants to cover this obligation. Personally, I would prefer an approach that would retain the cost basis of my existing tokens and would not necessitate the paying of additional taxes.

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Definitely complimentary, maybe it wasn’t clear enough but this proposal would use the staking contract not to distribute T tokens, it would give NU and KEEP stakers staking weight in the staking contract, which can optionally be burned for T tokens at a later point as discretion to the users if they want. This is why I use the term allocated instead of distributed. It is merely an option for the stakers to turn their staking weight into T tokens if they want to. So the staking contract isn’t distributing T, it would simply be giving users staking weight in the protocol.

This basically is the same approach as earlier discussed with a staking contract but with the introduction of a $T token where staking weight in the staking contract can be optionally redeemed for T.

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Would users also be able to stake $T for staking weight as well?

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Yes, although this would be part of the ‘‘rewards’’ part of the allocation

Amazing work @statelayer! I like this proposal and for me it looks fair for both communities and token holders.

@statelayer thanks for putting these details together!

Do I understand it correctly that all $T tokens would become transferrable at Phase 2? Including the ones that were allocated (merkle root) through KEEP / NU that was still locked.

And regarding the KEEP / NU tokens staked / held and the potential for being burned for T tokens at a later stage. With this do you mean that existing holders of KEEP and NU basically have a reserved amount of T tokens that they could acquire by burning their respective amount of KEEP / NU? So basically you know upfront your min % share of the total allocation of T?

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Thanks for the hard work here @statelayer! This proposal works well with the shared staking contract we’ve been working on, and the staking weight idea is to LPs and other stakeholders is interesting.

This is a concern of mine as well. But…

I’ll ruin your day and say that I doubt this is possible with a new token. “All emissions” to staked KEEP and NU holders without a drop doesn’t solve this. It’s also going to be different for every staker’s jurisdiction.

This reminds me of a thread by @Rewkang… actually on reading he cited @statelayer ha. Interested in other people’s thoughts of a high-float approach

Any thoughts on how you’d want to do this snapshot, and when?

Do we really need a new token? Maybe. But I think that fairly distributing a token is fundamentally hard and we should try to minimize the choices that we can make in the process.

(Ignoring NU’s inflation) Why not just have a 1:1 conversion? You can trade your KEEP or NU for the same amount of token T. That’s it.

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We can’t ignore inflation. Both tokens have existing emission schedules :thinking: how are you suggesting that’s dealt with?

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to the last point:
One option could be to have the snapshot be taken 7 days before the T token launch. I don’t think we want too long of a period where KEEP has possibly less value and T is not live yet.

One way to do it would be for an external party submit the content of a snapshot to the DAO, and have it be approved by a governance vote (I imagine the voting would take staking weight into account, as T wouldn’t be live yet )

Whats the rationale behind the WBTC raise? Would that be a private sale to strategic investors?

Given the existing market caps for NU and KEEP that would seem to imply quite a significant raise.

Would the 30M in rewards be for liquidity / partnerships / stakedrop / coverage pool?

Ideally I think it would be good to see T tokens find their way to people who are going to stake and be active capital in the network, rather than farm and dump the token.

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But what about the “-40M allocated to users that stake in the staking contract” that seems like alot to lose out on would solo staking count towards that portion?

Refer to this post for the staking contract, I am suggesting almost every KEEP holder could stake in it and partake, including current KEEP stakers. I understand the working is a bit confusing since both are staking actions haha