Call to Prayer #14

On March 13th, 2022, the fourteenth Call to Prayer was conducted. This is a recap of that discussion. For a tl;dr, check out the Codex Twitter thread.

CTP 14 Chinese Translation
2022年3月14日,CTP14如约而至。 你可以通过TempleDao Soundcloud聆听回放 可以在Twitter线程上查看文字总结 Yielding Tokens回顾 在runway奖励的尽头会有一个过渡。对于OGTemple来说,我们将在runway末端大幅减少APY。 由于国库的巨大增长,我们的APY相对较高。如果我们让temple的价格在这段时间内飙升到IV价值的1000x,我们可能会有更多的回旋余地。但也有从1000x跌回1x的风险。 所以我们将按照OGTemple的机制来维持价格。我们都知道,在12月,yielding token市场完全崩溃了。我们也没有什么不同。幸运的…

The Runway

The runway will end, and TempleDAO staking rewards pool will be fully distributed around March the 26th at the current APY of 1,177%. The vaults system will not be quite up and running at that time, so we will go into a transition period of offering 10% APY until the vaults are ready.

Yielding Tokens Recap

Our APY has been relatively large because of the tremendous growth of our treasury. We obviously would have had a lot more runway if we let the price pump to 1000 times intrinsic value during that time. But then there was the risk of crashing back down from 1,000x to 1x.

So instead, we kept the price as per the original Temple mechanics. As we all know, the yielding token market completely fell apart in December. And we were no different. Fortunately, we were somewhat saved by our mechanics. 6x fall is still something that hurts, but it's certainly a lot better than 100x fall.

Still, the market changed, and it became impossible for us and all other yielding tokens to continue growing their treasuries. Every token in this space had to shift its model because it was no longer sustainable.

How TEMPLE performed against other tokens.

End of the Runway

In January we talked about the idea of dropping the APY to extend the runway, but community sentiment was against that, most people were counting on the Temple APY staying high until the end of the runway. So we decided to keep it at 1,177%, knowing full well that we would run out at around the end of March.

We would have preferred to have launched the Vaults product before the runway runs out. The team had a discussion and debate around whether to force it by March 26, but in the end we decided that it's better not to rush it and just announce that it's not going to be ready quite on time.

So what happens now? We want to give the short-term players their intrinsic value rather draw out the process of paying out rewards. After the runway ends, we prefer to drop the APY significantly lower, below what we plan to offer with our vaults, and give people a choice:

  • They can sell at that point if they don't want to continue with this project. They are welcome to cash in for intrinsic value, and rewards.
  • Or if they want to stick around, we'll be paying out a low, low 10% APY on OGTemple for just a few weeks between the end of the runway and when the vaults themselves drop.

To make it clear, the risk-free 1,000% APY era is over. And if you're interested in the next evolution, I want that expectation to be super precise. We're not going to be launching a 1000% product. But we will be launching a product with APY that's better than any other farming option. So if you want long-term rewards, that's better than stable coin farming, then Temple is still going to be the very best place you can do it.

We continue to seek to be the investment choice in between stablecoin farming and high-risk degen plays. As the markets continue evolving and changing, Temple will continue evolving and adapting with it to make sure that we continue to offer the very best return that's better than stable coins. Lower risk and lower return on risk assets.

Q: What if a lot of people sell, is that a problem?

The exciting thing is, it's not a problem for the people long term. If people sell, they'll sell into Temple Defend. The price at IV will be defended. Everyone should understand that the more people that sell into Temple defend, the greater the leverage of the Treasury for the people that stay.

Let's say a ton of people sell into IV, and the circulating supply reduces, and the Treasury reduces. The funny effect then is that the amount of Treasury per token goes up. So we are in this funny situation where even as people are selling into Temple defend, the economics is getting better for everyone else.

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If anyone's interested in Temple Defend details: If you sell above intrinsic value, you will experience the full slippage on the AMM, which might drive the price a little bit below intrinsic value. But the next sell will activate Temple defend. So my advice to anyone who has a huge bag and wants to sell it is not all at once because you end up getting a worse price. Sell in a few transactions, so you activate Temple defend first with less slippage. 

Q: Is it possible that the Temple Defend contract can run out of funds?

No. We don't put ALL of the funds into the Temple Defend contract because we want them to keep farming and earn yield. But if the Temple Defend contract funds are getting depleted, we will refill them while protecting our IV of $0.65. That's the whole point of intrinsic value, that there are enough FRAX in our farming contracts to support every single Temple token being sold at IV.

Temple Vaults

Temple has a large treasury currently invested in what we can call "the primary farming strategy." It can change over time, but the FRAX in the treasury is invested into Curve, getting LP, stake on Convex, earn CVX, 3CRV, etc. So that's our primary farming strategy right now. And the way the vaults work is that you will pick a vault and stake your Temple tokens into it. And that represents your claim to a share of the primary farming revenue. So let's say in a month, the primary farming revenue was $100. And there were two vaults, and they each had the same amount of Temple tokens in them, each vault would get $50 each.

If you put it into a medium-term or longer-term vault, say for three months or nine months, then it would be able to be reinvested and compounded. For many smaller players, it is not very gas efficient for each person to have to go into contracts and claim reward tokens. So the idea is that Temple will claim all that for you regularly and reinvest it. And those reinvestment returns will get compounded. And by the end of the vault period, it will all get liquidated and converted back into TEMPLE and given back to the users. That's roughly how it works. Vaults are cyclical; one might be a one-month cycle, another a 4-month cycle, and another might be a 12-month cycle.

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Update from Butlerj: Contracts have been written and we are testing them like mad now. We are aiming to have a test version of contracts and DAPP in Rinkeby around 2 weeks from today, then we'll drive on with the UI and contracts from investment automation and the accounting perspective. After we're live on Rinkeby, we'll open up testing to the rest of the community and get a better feel for how many weeks before we can launch publicly.

Investment Strategies

So as it stands, vaults will use mixed investment strategies. A hybrid strategy of the best possible yield farming with leverage applied, together with some reinvestment automation. We can't give a guarantee on what the APY is because it depends on

  • The circulating supply is relative to the size of the Treasury. e.g., there are 50 Temple tokens in circulation, but the Treasury had $100 worth of assets in it, then every token would have $2 worth of assets being farmed for it.
  • the performance of the strategies
  • and how much leverage we use.

The APY offered in the vaults will be a lot less than 1,000%. If you've been watching the market, there are not any tokens out there offering 1,000% anymore. I'd be betting on something less than 100% just to set expectations. We want something far more attractive than stable coins and stable farming. Anchor is standing out at 20%, but most of Convex is in the mid 10%. Those APYs will change naturally, and we'll be using many leveraged strategies with many dollars per token being farmed, and so on. So that's how we'll do better than standard stable coin farming. We always have been something between stable coin yield and full-on risk assets, but we're going to be moving closer towards the stable coin yield side because the market is pushing us in this direction. But we're still got the same issue that we've always had, which is to provide the best "stake and chill" option out there.

Q: Will the new Temple contracts be audited?

We have an audit booked in with the very best auditors in the game Trail of Bits. But I think our booking is still a few months out. It's tough to get high-quality audits. But we'll do the same thing as we did before.

Minting and How it works

At the end of the vault term users will be paid out in TEMPLE. But if the price is too low, we'll probably buy Temple from the AMM and give it to people at less than 100% of revenue instead of minting. This means no new minting, no dilution, and a price bump.

And if the price is above a certain threshold, we would mint Temple directly and give 100% of the revenue. That's the way minting will work in the future. So it won't be pegged at 6x IV anymore. The price of the AMM will drive it.

And then, of course, the other way that minting will occur is also in the AMM when excess demand or price is sufficiently high. So if the Temple takes off, and people realize that it's a fantastic low-risk way to farm, many people buy Temple, which will drive the price up.

Leveraging and How it works

So leveraging is an essential part of getting a great return. And there are two types of leverage. One is internal to the product. So that's where TempleDAO itself takes out some leverage. And it uses that to end up with more assets than it could have otherwise. And in doing so, it will be able to invest more assets, assuming the interest it has to pay is not too great.

The other type of leverage we can do is where we allow users to borrow against their collateral at IV. So that's the other potential source of sorts of leverage. And we're working on this. We've had several chats with some of the big stablecoin protocols, obviously FRAX, TERRA, FEI, and others. We talked to them about what a potential partnership would look like if they gave us a big chunk of leverage for one or both of those options. And we've had some excellent initial conversations. But things do stall a little bit with some of those conversations because we're asking for a lot of leverage, you know, more than $200 million. So what we're doing right now is we're currently putting together the whole package about why this is a really good opportunity for some of these DAOs to extend their supply to us.

How to Get Leveraging for TempleDAO

We want to get some of the leverage happening before we launch the vaults as we'd love to launch with an outstanding APY. And the leverage is going to help that. So there are three ways we can make this happen.

  1. We can make a big partnership with a stable coin-oriented DAO like FRAX, FEI, or TERRA. They can provide us with many stable coins, and we can make both internal and user leverage happen.
  2. We can integrate with some platforms like Fuse. We can add Temple as collateral, and we're currently exploring this as probably a second preference option.
  3. We just straight up do it ourselves. It wouldn't be that difficult to add a system that allowed us to issue our stable coin and borrow against it, the same as many other protocols, like Alchemix. So one way or another, we will get an excellent leverage deal applied to this product; it's always been part of the vision.

We're working through those three options right now; we prioritize number one just because of the partnership. If we can't get that on the terms we're looking for, we'll go for the second option, external protocols. We've already scoped into understanding it and can build a special oracle that makes sure that the price could never go below IV, providing some liquidation safety net for people. Or else we can go with option 3.

TempleDAO on L2 chains

We're also looking to expand our LP onto a bunch of other chains and a bunch of L2s. So the idea is that it's simple. We separated the trading and investing activities from the accounting activities in the current design. Vaults themselves are just accounting entities - it's a very elegant way to account for who owns what part of the investment returns. This accounting is easy to do on lots of chains, and because we run on this monthly cadence (as we scale up, maybe we'll end up making it like a fortnightly or weekly cadence), it just means every month, we need to sync up the accounting from all of the L2s. And we've got a whole system for that. Meaning we can easily join a bunch of L2s with our product.

Obviously, on day one of launch, we'll be on Mainnet, but this whole thing is designed to allow us to be on multiple L2s, and it's going to be a trivial piece of work to launch. Multi-chain is coming soon to the Temple.

What happens to FAITH?

The intent of faith was that it would be a reward for playing the buy the dip game. But you can't buy the dip if it's just a crash. So that kind of ruined the buy the dip game. The market killed it for us. As we pivoted to revenue share, we needed to account for this revenue share. Why don't we call it FAITH?

But if you've been following along these Call To Prayers, we talked about simplifying how the revenue share would work. We still have revenue accounting, but there's no need for us to call it FAITH anymore. It's just an extra concept; we want to keep everything as simple as possible and focus on user growth. So we got rid of many concepts that we talked about, including FAITH.

Now a bunch of people already have FAITH the got airdropped to those that held during the Great AMM War of December 2021. So for people who have faith, it will eventually convert into TEMPLE. The ratio of FAITH:TEMPLE will be decided on soon. This will be drawn from the bonus pool as well.

The Bonus pool

The bonus pool will be used for a few purposes:

  1. We talked about expanding the LP on a bunch of L2s, so we're going to need a bunch of Temple for that.
  2. The other thing that we'll use some of that Temple for in the bonus pool is to allow us to accumulate some strategic assets, like FXS, to boost our returns. So we currently have a Temple FRAX LP, which is staked on a FRAX gauge and its earnings and FXS. The more FXS we have, the more we can boost that gauge, the more APY we can give. It also helps grow the FRAX ecosystem.
  3. We will draw on some of that bonus pool to pay out the small 10% APY while we transition to the new vaults product
  4. We will also pay out some FAITH holders in temple tokens from the bonus pool.

That's the collection of things we will do with the bonus pool.

Q: Can we get a calculator for the APY we would receive?

We can give you a calculator on exactly how the vaults work. But, investment strategy performance will depend on how it performs in the market. So we won't be able to give you a calculator on the fixed APY that you'll get.

However, Bob has been driving some chatter around whether or not we could offer a fixed income return vault. It's certainly possible within this structure. So if a fixed APY vault was valuable for people, that is something we can look at.