BIP-09: New Incentives for Bidding on Botto 1/1s

Ben

Summary

This proposal introduces two new incentives for bidding on Botto 1/1s:

Winning bidders (collectors) receive the $BOTTO equivalent of 15% of the auction sale price
The runner-up (2nd highest bidder) receives the $BOTTO equivalent of 10% of the final sale proceeds

Rationale

Botto's 1/1 sales remain the project's primary revenue source. However, the NFT art market is in a lull, and sales have slowed down.

These new incentives may help catalyze bidding activity. They also introduce a new way to distribute ownership in Botto the artist via $BOTTO to those who show conviction in the project by bidding on its works.

Advantages

Catalyze bidding activity on Botto 1/1s
Distribute ownership in Botto the artist via $BOTTO to those with demonstrated conviction in the project
Motivate earlier bids on Botto's 1/1 auctions, resulting in more exposure on SuperRare

Proposal Specification

Botto 1/1 collectors receive 15% of what they spend back in $BOTTO
Note: this only applies to Botto's 1/1 auctions subsequent to the passing of this proposal, not to prior auctions
For example, if a collector spends 10 ETH on a Botto 1/1, they would receive 1.5 ETH worth of $BOTTO.
If there are two or more bids on a Botto 1/1, the second-highest bidder receives 10% of the final sale proceeds in $BOTTO
For example, if Bidder X meets the 10 ETH reserve but is subsequently outbid and the final sale price is 12 ETH, Bidder X receives 1.02 ETH (12 * .85% * .1) worth of $BOTTO. Note: 85% is the artist's cut on primary sales on SuperRare.

Both clauses 1) and 2) are based on the price of $BOTTO in ETH terms at the close of the SuperRare auction in question.

These incentives will be implemented for a pilot period of three months (12 auctions). By default, they will expire after this time, unless Botto DAO decides to renew them.

Budget

$BOTTO spend depends on auction activity and the ongoing price of $BOTTO in ETH terms. Any $BOTTO spent would be sourced from the Botto treasury.

Criteria of Success

More bidding activity on Botto's 1/1s
$BOTTO ownership is further distributed to project participants with demonstrated conviction in Botto

Disadvantages

May create sell pressure. This risk is mitigated by filtering for collectors with demonstrated long-term conviction in Botto.

Lowlander

Thanks for bringing up the initiative!
My concern is what if the outbid is used in bad faith to get the amount in $BOTTO.

adr94

My concern is for the little $BOTTO holders. 15% and 10% is a lot of $BOTTO (for a 10-15 ETH sell), it means a lot of voting power for the wealthiests, for free.
What if 10% and 8% of those 15% and 10% where redistributed to the liquidity providers (UNI LP) ?

Ben

adr94
I wouldn't say it's for free, they're spending at least 10eth on Botto and demonstrating LT conviction in Botto. LPs on the other hand are not necessarily as convicted. I actually think that LP subsidies should be terminated and we should move toward full-on Botto-owned liquidity, but I guess that's another topic.

Lowlander

Ben but they still receive the 10% if they are outbid, so perhaps it is profitable?

Ben

Lowlander It's not since they have to spend at least 10% more in ETH on SuperRare while only receiving 8.5% back in $BOTTO

Example:
Bidder places 10 ETH offer
 To outbid themselves (with another wallet) they must bid at least 11 ETH
 If their 11 ETH bid wins the auction, they receive (11 * .85 * .10) .935 ETH worth of $BOTTO
They spent 1 ETH more while only receiving a .935 ETH reward, so it is unprofitable

Lowlander

Ben understood, but if they are both (first and winner bidders) then they are getting Botto twice, the 15% and the 10%. Or I understood it wrongly? Sorry if so!

neffnet

I would suggest rewarding the winning bidder and runner up bidder, rather than the original bidder + winner. If Botto pieces rarely sell above 10 eth then there isn't much difference, but if there is known demand above 10eth then we will be paying a bot just to bid first. Alternatively, consider taking the 15% portion of BOTTO and distributing it to all bidders weighted by highest bid.

I do worry about dilution of existing stakeholders given the low price of BOTTO today relative to when many others joined. The incentive might be higher than it needs to be, but I think it's a good idea and I like it.

hudsonsims

A few suggestions:

Would you consider a nominal cap to this? It seems like we are trying to stimulate two things: bidding interest and collector stake in the project. Does the % influence much higher bidding or are we just paying more for bids that would have come once the interest is drawn in with the initial, nominal reward? Also, this would help address the concern of diluting smaller holders, whereas a certain threshold of $BOTTO is enough to give collectors a sense of stake and say in the project. Could either do a nominal amount at the outset: e.g. 1 ETH for first bid/runner up and 1.5 ETH for top Bidder OR a hybrid e.g. 10% up to 2 ETH and 15% up to 5 ETH (just sample numbers)
I like @neffnet's suggestion of rewarding the runner up. In combination with the nominal cap, this would help maintain interest in successive bids and mitigates botting/front running risk.
I would like to have a limited run so that it doesn't stay on by default and we need to actively renew. Also, if #2 isn't implemented, let's add a trigger clause that this can be suspended if Cyborg receives additional funding.

Ben

I think @neffnet's runner-up modification makes sense, so I'm changing the proposal to reflect that.

I’m not opposed to the idea of setting a nominal amount or max amount if others prefer that, but my preference would be to keep things as simple as possible. Personally, I don’t see an issue with just doing plain % and I think it can potentially motivate higher bids if a prospective bidder is on the fence.

If someone wants to bid 100eth, I don’t see an issue with distributing them 15eth worth of $BOTTO. They could have bought that same amount of $BOTTO on the open market for just 15eth, but this way they’re spending 100eth which is going to the dao.

@Lowlander that is correct, in that case they'd get 15% of sale price and 10% of the sale proceeds. It would still be irrational for a bidder to outbid themself as they'd get the 15% regardless and the 10% of sale proceeds would be less than the 10% higher they paid to outbid.

chrisrauh

1) I want to second @hudsonsims suggestion of a sunset clause and active renewal. This way we can test the incentive and renew if it is effective, but otherwise automatically remove the added complexity if not working and/or if we've forgotten about it.

Related, what is the success metric for this change? % increase in bids and a % increase in sale price?

2) There are some concerns about the proposal further concentrating $BOTTO and suggestions to lower the incentive. I think the concerns are not valid because these collectors are able to buy this amount of $BOTTO if they wanted. What this is doing is really just giving a discount for more people to consider collecting - and in the process potentially keeping them involved longer term by keeping the token. In this sense, I think that the discount is actually not large enough to make a difference. How many collectors are 10% off a winning bid (or closer since there is friction with the discount on the token)? In a way, for this to be effective I think we would need to be more aggressive on the discount. But what is currently proposed is a good start to test.

3) This proposal addresses the issue of the price being too high for some collectors as it provides a discount in $BOTTO but it doesn't really address the issue of bringing in new collectors. I suggest using this as a trigger to some sort of communication campaign to reach new collectors that could be lured into bidding by this mechanism. @Ben had good traction on twitter when proposing something similar, maybe some folks might bid just out of curiosity of how it works.

Ben

chrisrauh

Agree with all this. I think broader outreach is more important than these incentives. I see the incentives more as low-hanging fruit with minimal downside to complement broader efforts.

Success metrics I see as:

More bidding activity on Botto's 1/1s
$BOTTO ownership is further distributed to project participants with demonstrated conviction in Botto

1) can be due to any number of factors so it's hard to attribute to this.

Will add a clause that this will expire after 3 months (12 auctions) unless it is actively renewed.