This is a proposal to upgrade Botto's tokenomics and to grow and diversify Botto's treasury. In the proposed setup, ETH proceeds from auctions are sent to Botto's treasury, and an equivalent amount of $BOTTO is burned from the treasury.
In Botto's current buyback and burn, all ETH earned from auction sales is used to buy $BOTTO from Uniswap. The $BOTTO is then sent to a burn address.
This setup accrues no ETH to the treasury, and the amount of $BOTTO burned is diminished by slippage and frontrunning.
Botto's treasury is solely comprised of $BOTTO, a relatively illiquid asset that cannot be sold or distributed at scale without crushing its price. Diversifying into ETH will make Botto more sustainable in the long run. With a liquid treasury, Botto will be able to fund growth without creating sell pressure on its native token.
Side note: This setup would enable a faster shift to protocol-owned liquidity by 1) accumulating ETH which can be used for LP and 2) removing the need for agnostic liquidity due to the termination of a public buyback. The latter enables the use of Uniswap v3 which can achieve the same liquidity with significantly lower TVL. Put together, this would enable the removal of around 500k $BOTTO per month in emissions to LPs and all resulting sell pressure. For simplicity, this proposal only concerns Botto's burn and buyback. A future proposal may concern liquidity.
Summary of benefits:
- Treasury diversifies beyond $BOTTO and accrues ETH that can be used to fund growth
- Increases the amount of $BOTTO burned by removing slippage and frontrunning from the buyback
- Enables accelerated adoption of protocol-owned liquidity and a resulting reduction in subsidies and sell pressure
Each week, all ETH auction proceeds go to Botto's treasury.
An equivalent amount of $BOTTO is burned from the treasury. This can be calculated by taking the Uniswap price of $BOTTO at the time of the sale (auction end) and subtracting any price impact (slippage) and swap fees.
ETH accrued to the treasury is spent according to the will of BottoDAO. Possibilities include protocol-owned liquidity, marketing, and distribution to voters.
Note: Vyper proposed a modification to the above: burn 75% rather than 100% of the $BOTTO equivalent and keep the remainder in the treasury. Personally, I think burning 100% is optimal since the treasury has a surplus of $BOTTO, but this is open to discussion.
Criteria of Success
The benefits listed above are achieved, in particular, diversifying and accumulating ETH to Botto's treasury.
-Reduction in weekly buy pressure from public buybacks. This is likely to be offset by increased buy pressure from interested investors due to more robust tokenomics and by reduced long-term sell pressure.