On September 6th at 3pm UTC, our very own Master Decenmaxi held an impromptu AMA in the Temple Discord just a few hours before Ascend launched. Here is a summary of that discussion:
What are the parameters of the Ascend pool?
It will be 30% TEMPLE and 70% DAI and will end up being 30% DAI 70% TEMPLE. Over 60 hours the weights change every block linearly between these two end points. This means if there was no buying or selling, the price would rise (non-linearly) as the weights change.
What price will the LBP rise to?
OK, to answer this we need to give proper context.
As per the last few C2Ps, there are two paradigms in TempleDAO right now.
- One paradigm is from people who bought earlier this year at ~70cents, who looked at current user-owned circulating supply vs total treasury assets and said “the assets per current user owned token is much higher than current price” so we deserve more value right now.
This is a legit perspective, just very different to:
- A second paradigm held by the team and OG templars focused on the original promised mechanics in the Fire Ritual medium articles, which stated very clearly that as Treasury grows Temple would be minted via Safe Harvest into four buckets: staking rewards, LP pool, bonus pool, and DAO tokens. And that all staking rewards, bonus pool, and DAO tokens would eventually enter circulating supply. Staking rewards have, only a fraction of the other two have so far. Therefore, if you take treasury assets divided by all “eventual” circulating supply, you end up at IV. Therefore we cannot support any price higher than IV.
This is a legit perspective as well, which has been stated from the very beginning as it relates how the protocol will run.
(And to add a little side note to that, circulating supply is artificially low right now - because TempleDAO had no upfront issuance of cap table to founders, to core team, or to investors. Early team self-funded the capital required, and were only paid for work they did as they went. A much larger % of DAO tokens / token supply would have been already in circulating supply if there was an upfront issuance of tokens.. instead it was intended that this be paid out over time to align incentives of early team to continue delivering good work AND to allow for new community members to rise up and earn part of that cap table if they delivered as much or more value as early founders.)
OK, so we have these two perspectives and they are at odds.
One problem has been that the people deep in each perspective didn’t even understand that the other perspective existed for a long time. We should have bridged this gap and explained the second paradigm far more clearly far earlier, it was just assumed to be understood.
So by letting the two perspectives exist for months without resolution, we end up here - and we now need to find a middle ground between these two perspectives that maximizes happiness across all Templars as much as possible.
If the goal is to maximise happiness across all Templars, how do we do this?
If IV and RFV are the targets of the two groups, we’re going to need to end up in the middle somewhere. There are two consequences to the price rising, and balancing these two consequences will be what determines the final prices of the LBP.
But why can’t you just let LBP run up to $1 or book value or above?
Factor to weigh up #1: As price rises more Temple tokens need to be burned.
If LBP is giving exit prices to people wanting to leave the Temple at higher prices than IV, we will need to support the price ongoing at something near those levels (it won’t be quite as high, but somewhere near) via the soft floor mechanic. If we don’t do that, we create an unfair situation where people who dumped got more value than people who stayed.
OK, but if we support a soft floor higher than IV, we need to burn Temple tokens to sustainably support the price at that level. Because with current supply, we can only support the price at IV.
So, the higher we let the price go on the LBP, the more tokens need to be burned.
If we let the price rise all the way to BV, and then support price at that level, we would need to burn all bonus pool and all DAO tokens. This would mean the protocol is now a static, lifeless beast without any further development or support. This doesn’t seem like the right end state.
If we don’t let price rise at all, its unfair to the BV paradigm people who want to exit at a higher price.
The team has already decided that they will burn all the bonus pool, all the unclaimed Faith tokens, and part of the DAO funds in order to sustainably support a higher price.
But of course the lower the price, the more sustainable the protocol can be in terms of ongoing implementation of decentralized governance, nexus experience, user led vaults 2.0, STAX upgrades, etc.
So as a result, if price gets too high in the LBP we will stop Ascend - to be fair to Templars choosing not to exit (so that we can support a price similiar to the LBP prices), without burning the total token supply. ****
I heard there was a limit to the amount of Treasury that could be allocated to LBPs, is this true?
Yes. This is the second factor - to continue the story from above.
Aside from the ability to continue to develop product, manage treasury, strike partnerships, etc - the other big source of value of Temple is our Treasury.
If we let Treasury shrink too small, we lose the strategic ability to make large partnerships. So if we want to balance the ability for TempleDAO to continue to create ongoing value for holdooors, we cannot let Treasury shrink too far.
This means that at some point, LBPs would also be cancelled due to a ceiling on the amount of stables that can be afforded to be provided.
But can’t you give actual numbers?
If the goal is to maximize happiness of both groups, there is no way to give actual numbers upfront.
There is a greater cost to the holders the higher the price rises, and the more treasury is provided to LBPs. But we don’t know where the right balance is yet.
So we will assess market action. If every time the price rises to 92 cents there is a tonne of selling dumping it back down, we know there is still a lot of pent up sell pressure looking to exit.
If we get to a high enough number and there is no selling, we will assume that a lot of people have already had a chance to exit.
This is going to be balanced by watching the trading activity and by team making consensus decisions as we go through, trying their best to balance the situation.
Could the LBP end at any time?
If we find no further selling, if price rises too high, or if the treasury has provided too many stables, the LBP Ascend Festival will end.
So what is this soft floor level you mention?
After Ascend Festival, when Temple tokens are burned as described above, the sustainable price Temple can be bought at will rise. This is essentially raising IV.
But.. we also want to change the way the Temple Defend IV floor works.
Right now we have a hard floor (IV) which is set at $0.65.
The thing with hard floors is that after they’re tested, the price stays static a few cents above them.
Team wants to experiment with a new type of price support which is not hard but soft.
This means that instead of always buying when price is below a certain level, it will randomly buy below that level. This will introduce more volatility, price trading through a range, which the Treasury can profit from by buying below the sustainably buying level and selling above it - which means that the soft floor level can rise (or additional tokens can be provided as yield.)
What is the mechanics of the soft floor specifically?
There are two mechanics.
The first is Randy the bot. Randy is always on and always raring to go, but is kind of soft. Randy will buy randomly sized amounts at random times, based on random number generation. It applies buy pressure below the soft floor in an unpredictable way to reduce front-running.
In addition, we can trigger additional LBPs. If the price stays sufficiently below the soft floor for too long - ie, randy is too soft for the amount of selling - then an LBP will be triggered. LBPs are much harder, but not on all the time. So when an LBP gets triggered, there will be an increased force of buy pressure soaking up any excess selling at that time and bringing price back towards the soft floor level.
Will the unclaimed faith pool be burned as well?
You said that there would not be any future opportunity for a short term profit driven trade, what did you mean by that?
If we didn’t implement the increased soft floor, the best strategy now would be to sell at the top of the LBP (wherever that is), and then let price crash after Ascend back to 70cents, and re-buy and start lobbying again for RFV.
This obviously would not hit the goal of community re-unification, maximising happiness, or allowing focus to return to solid product dev.
So we introduce the soft floor ensuring that the gap between average LBP price and the soft floor is not so large. This means that people that believe in Temple can be comfy staying and staying exposed to the good stuff that continues to be built.
But if you want the best possible exit price, you should exit now because the top of the LBP will be the best price, if you can catch it.
And of course, there will be opportunities for price speculation in the future as the floor is soft and price will trade in a range, but this will be within a narrower band than the prior RFV trade lobby.
The soft floor vs LBP level?
We want the soft floor to be as close to the average LBP level as possible - for max fairness - but it obviously won’t be at the same price level as the peak of the LBP. It will be something below that because of the mechanics and volume of the LBP.
Team is trying its best to balance all the factors here but it is a tricky thing. All focus is on maximizing collective happiness across the board.
In the future what percentage would you say would be bought by Randy vs something like an LBP?
There is no way to say. I know how it will happen but I can’t tell you what will happen. Randy will buy randomly and sporadically. If price stays low for too long an LBP will be triggered. How often will that happen? No one knows.
What happens if Randy gets dumped on?
If hypothetically we changed Randy to “Constance”, who would constantly buy every hour then it would be easy to front run by counter-trading Constance’s buying.
But Randy is not Constance, Randy is unpredictable. So it is very difficult to preempt when the trade from the DAO will occur, and therefore very difficult to take advantage of.
Well.. so we believe. We will monitor and calibrate as we go to ensure minimal value leakage.
How will you communicate on when the LBP will end if it reaches a level you deem satisfying?
It will be made obvious through announcements from the team.
I’m locked in Vault D will I get a chance to participate?
We’re sorry about this.
We’re working on a zap feature to allow people locked in vaults to participate, but its not ready yet. We will also have LBPs after the Ascend Festival so there will be opportunities to participate then too.
We did consider waiting until zap was ready, but the team decided the cost was greater to wait, given the communities great desire for the devs to do something within the three month window. And if we were to delay a further three weeks - this was seen as the wrong balance of happiness.
The majority of temple are staked in Vault A, but we do acknowledge that this is unfair.
We will work on zaps asap, and also do our best to get the soft floor right + create a tonne of value for stayooors in future releases.
How much liquidity was pulled?
See our medium article.
What happens if the first $3MM is depleted before the 60 hours? when will the next lbp start?
This can’t happen because as people sell the price drops, which will stop the selling. So the full $3m can’t really be drained.
But the question of “what happens if there is more selling than the LBP scale allows” is valid, and will be assessed each LBP considering current price levels, selling action, and amount of Treasury that has been allocated to LBPs.
Won't bots just arbitrage between the AMM and the LBP, so it will be constant sell pressure until BV is reached?
I think this sell until BV is a meme. I hope it is. Or if there is some way to sell a token to the moon please share your secrets sansei.
But yes there will be arbing between the LP and LBP. This is why we removed liquidity to reduce the scale of arbing. However we don’t control all the LP (some is user owned) so we can’t remove it all.
Do you need to choose to trade in the LBP or AMM?
Yes you will have to choose. If our custom AMM gives you a better price via slippage or just pure price, you should trade there.
What about pausing the AMM instead of arbing?
We did discuss this in the team but it seemed it might be unfair to people who have supplied LP in the AMM to be locked out of tx fees and have their LP stuck in a frozen AMM.
What about if we pay off LP suppliers a fair amount and pause the AMM?
Not a bad idea.
Lets monitor this first LBP and see. If leakage is too great to non-Temple bots, then we can consider this idea.
Does this mean that we won’t have to worry about IV and RFV anymore?
Good question. This comes back to the story at the top.
Original paradigm = IV = all temple supply.
Lobby paradigm = RFV = only current user circulating supply.
We’re going to end up with something that is neither. You could call it new-IV, because we will burn Temple and raise IV.. but that might be misleading because its also changing from a hard floor to a soft floor.
So at the moment, we’re talking about “soft floor level”, which will be “new-IV” or “new-BV”, and be defined as treasury assets divided by current and future circulating supply (ie, it’ll include the DAO tokens that are left over / not burned).