Summary

Phase out Botto’s liquidity mining program with an option for existing Liquidity providers to redeem liquidity (ETH-BOTTO) for discounted treasury $BOTTO.

Rationale

Botto’s liquidity mining program creates ownership dilution for project stakeholders and sell pressure for its token.

This program is costly to $BOTTO stakeholders and is no longer constructive. Botto is spending token to rent something it does not need (external liquidity) when it could use it instead to acquire something that it does need: liquid treasury assets.

This proposal aims to:

  • Reduce ownership dilution for Botto stakeholders
  • Diminish ongoing sell pressure
  • Accrue liquid assets to Botto’s treasury

Context

Botto’s Uniswap pool contains approximately $2.15M in liquidity, of which approximately 500k USD or 23.2% is owned by Botto treasury.

Botto spends 500k $BOTTO per month on liquidity mining, the equivalent of $70k or 42 ETH at present prices.

In total, the liquidity mining contract holds approximately 8 million $BOTTO set for distribution through October, 2024. This is around 20% of all $BOTTO that Botto owns.

In the past 30 days, liquidity providers sold 102.9K $BOTTO and bought 24.4k $BOTTO. This amounts to a net sale of 78.5k $BOTTO.

Projected out, this equates to over 1M $BOTTO in added sell pressure through the present LM expiration date (likely significantly higher in practice, since the past month doesn't account for the largest LP who has a history of selling LM rewards) and a 13% increase in the circulating supply of $BOTTO (defined as total supply of Botto minus that held in treasury and burn address).

At the time Botto’s LM program was introduced, Botto’s treasury lacked assets it could use for liquidity provision, Botto had a weekly open market buyback, and it had no foreseeable path to OTC deals (to facilitate token acquisition for large buyers).

All three of these factors have changed, removing the need for liquidity subsidies. Botto is now well-positioned to own its liquidity.

Botto has greater market liquidity and deeper treasury reserves compared to the majority of crypto projects around similar valuations. This further suggests that Botto is overpaying for liquidity.

To briefly address the potential disadvantages/criticisms listed below:

  1. Inconsistent with past stated plan
    As stated above, Botto's circumstances have significantly changed since the LM program was introduced. This proposal considers what makes the most sense today, given our present circumstances, to best serve Botto and its stakeholders. The treasury redemption offer attempts to phase out LM in a way that is amicable toward LPs who wish to invest long-term in Botto.

  2. Likely lower market liquidity for the foreseeable future
    Botto has significantly higher liquidity than most crypto projects of similar valuations. Furthermore, recent BIP-35 will enable select parties to acquire large amounts of token via OTC. Given its organic revenue and deepening treasury reserves, Botto should be able to provide more liquidity on an ongoing basis. So this liquidity reduction is a medium-term issue that would also present itself upon the currently scheduled termination of LM in 2024. This BIP begins to address this issue sooner rather than later.

  3. Possible added short-term sell-pressure
    That LPs currently sell some but not most of their $BOTTO from LM rewards suggests that they want increased $BOTTO exposure, on net. So sell pressure may not be significant. That said, the termination of LM may decrease $BOTTO demand on the part of mercenary LPs. This would be an issue regardless of when LM ended and arguably a larger issue if it ended October, 2024 as currently scheduled, since LPs would have more token to sell at that point. So this proposal is an attempt to address the issue sooner rather than later in order to minimize dilution and long-term, overall sell pressure.
    After the implementation of this proposal, Botto would likely be in a far better position to perform buybacks (and burns) of its token since 1) it would own most of its liquidity, so swapping ETH into the pool for BOTTO would be less wasteful (Botto would effectively receive back most of the ETH) and 2) it would have more ETH via LP treasury redemptions to spend on buybacks. So if short-term sell pressure was a significant issue, a subsequent BIP could implement buybacks to remedy this.

Proposal Specification

  1. End Botto’s liquidity mining distribution within 7 days of the approval of this proposal, with all $BOTTO returned from the LM contract to Botto treasury.
  2. Within 30 days of the proposal’s approval, any existing LP that was an LP prior to August 1st, 2023 may trade in any portion of their liquidity for $BOTTO from the treasury at a 5% discount to the one-week TWAP taken at the time that this proposal enters voting.
  3. Botto rebalances its liquidity provision on at least a quarterly basis such that it provides at least 30% of total ETH treasury holdings, including LP. For example, if at the time of rebalancing, the treasury owns 400eth (300eth in treasury wallet and 100eth in LP), it would rebalance to supply 20 more eth (+ the equivalent value in $BOTTO) of liquidity, such that it provided 120eth in total (120/400 = 30%).

The cutoff date and one-week TWAP specified in 2) are intended to prevent manipulation. Note that the 5% discount is on top of the savings in price impact and slippage versus buying on the open market.

The aim of 3) is to establish a baseline level of liquidity that is roughly equivalent to what Botto currently supplies while growing it over time in tandem with the project’s treasury reserves.

Keeping a stable percentage of the treasury’s ETH in the pool also means that there is no increase in impermanent loss (percentage-wise).

Criteria of Success

  • $BOTTO becomes more valuable than it otherwise would have with continual LM, due to diminished sell pressure and ownership dilution
  • Botto treasury accrues liquid assets via LP token purchases and additional swap fees from protocol-owned liquidity

Disadvantages

  • Inconsistent with past stated plan
  • Likely lower market liquidity for the foreseeable future
  • Possible added short-term sell-pressure
  • Implementation time

A priori the 5% discount seems negligible and that could be removed; a softener that adds complexity and doesn´t compensate anything.

Ben, you seem to be sure that a pool of one fourth the size of the current one would suffice to sustain the token and this should be the center of the conversation. More takes from other knowledgeable people on this would be welcome (I know the benchmarks, and that argument is insightful but by no means conclusive, given the differences between the projects and how evenly distributed the token is). It worries me what a simple 300k $botto sale (a trade of $42k) could easily make the price drop by 15-20% (4-5% today). We have a few holders with more than 1M $botto. This BIP by itself will probably add big short term sell pressure if a few large LMiners suddenly left. I´m surprised that increased price volatility is not included as a disadvantage, and perhaps a few back-of-the-envelope stress tests like the one above, have not been accounted for. More volatility could also mean more speculators.

Won´t extend myself much more for the time being. I will only further add that I think this timeline is deeply unfair for legit supporters that joined the program and assumed risks and trade-offs. I understand the argument of dilution for non-lm stakeholders, but you can´t air this out with an "inconsistent with past stated plan". You could have said ¨harmful to legit LPs and harmful to the DAO´s credibility and predictability". Sounds harsher, but it´s less inaccurate.

People trusted this would last until 2024. People will (depending on when they entered the pool) incur losses. Some might not be very active and in less than a month realize that the whole thing suddenly changed. This is not like removing retroactive rewards, this is major change in tokenomics and it´s not that urgent. Having to liquidate your position with a few weeks notice, given the expected increased volatility spikes and short-term sell-pressure, will likely prove very harmful to those who can´t follow the project on a day to day basis and will probably prove profitable to rapid movers and speculators. There is positive value in keeping one´s word (there is a calendar in the docs), and negative value in changing key things overnight.

I already proposed a few times winding the program down progressively (linearly), starting asap. The list of pros vs. this is large.

    I understand why it is a good thing for BOTTO to own his liquidity but why the rush ? The liquidity program will end in a year as stated in the docs.
    Many of us Bottonians entered the LP to earn VP because we wanted to stay with the project for as long as possible (and APY can compensate the gas fee for little LPers in the long run) .
    Maybe it is possible to offer incentives for big players to step out of the LP game and/or limit the size of the LP stacked with decreasing APY for big amounts. End this gradually and lend at the date stated in the docs.
    I feel little BOTTO enthusiasts did not create this situation and would not benefit from the result of this proposal (at least in the short/mid term).

      dencryptus I think this timeline is deeply unfair for legit supporters that joined the program and assumed risks and trade-offs. I understand the argument of dilution for non-lm stakeholders, but you can´t air this out with an "inconsistent with past stated plan". You could have said ¨harmful to legit LPs and harmful to the DAO´s credibility and predictability". Sounds harsher, but it´s less inaccurate.

      The DAO never committed to the LM program, as far as I’m aware. The team, not the DAO, made the commitment, as this was before BottoDAO was in place. I think that it was a mistake to make this commitment, and there should have been a clause that the program may be adjusted in the future at the discretion of the DAO. I don’t want to point a finger at the team, as it was hard to foresee this issue, and I may have made the same mistake.

      The point here is that BottoDAO did not commit to this, but it is effectively paying the costs for it in the form of ongoing sell pressure and dilution for anyone who is not an LP.

      BottoDAO has the freedom to decide whether it wants to continue paying these costs based on today’s circumstances which are quite different from when the team implemented this.

      dencryptus A priori the 5% discount seems negligible and that could be removed; a softener that adds complexity and doesn´t compensate anything.

      5% in addition to OTC, so savings on price impact/slippage/fees vs. open market buys. And this makes it likelier that LPs that want more Botto exposure would buy from the treasury, which would bring more liquid assets to the DAO.

      dencryptus Ben, you seem to be sure that a pool of one fourth the size of the current one would suffice to sustain the token and this should be the center of the conversation.

      Given that Botto has distantly more liquidity than most other protocols of its size, I think the burden of proof is on justifying the costs for this liquidity.

      I do think that more liquidity is good, all else equal, and Botto can and should work toward that in a sustainable fashion. A key point is that the existing alternative to this proposal is not long-term liquidity for Botto. The alternative is rented liquidity for another 13 months, and then the same LP departure, just with more overall sell pressure and dilution in the interim.

              adr94 I understand why it is a good thing for BOTTO to own his liquidity but why the rush ? The liquidity program will end in a year as stated in the docs.

              Even 13 more months of LM creates an additional 8M BOTTO or 23% of BOTTO owned by the project entering circulation with no assets accrued to the treasury in return, just short-term rented liquidity. I consider this a great cost that is very hard to justify. I think the best time to address this was yesterday, but now is better than tomorrow.

              You bring up an important point that LP APY can help accommodate smaller holders with gas expenses etc. I think we need to find a solution for this. Maybe access passes help here? I don't think the LM program is a viable solution here, given its significant costs.

                Ben The DAO never committed to the LM program, as far as I’m aware. The team, not the DAO, made the commitment

                Wasn´t willing to dig deep into this, but now that you bring it, it might be appropriate. Everyone who joined the DAO adhered to this, just like everyone who joined the DAO adhered to the effectiveness of the airdrops (whether they were good or bad), the team´s vesting, or the fact that Quasimondo is the Guardian of Botto above all things (something that is important, and should be better articulated). This is why I said that published docs are, in a way and to some extent, legally (morally if you wish) binding. Changing things in a rush, not seeking middle ground solutions (which I already proposed and which seemed to arise bring some acceptance/agreement from other LPs) will prove to be a mistake because: 1) this is a big change against the plan (good or bad) for which many people joined, 2) it is not that peremptory (as Mazzi pointed in Discord), 3) is being proposed in the context of many other relevant things (fundraising coming, which might bring more volatility, which will be intertwined with pool sizing matters), 4) it only benefits a portion of the base of holders of $botto, and 5) very importantly, LM is and always was permission-less; so anyone can join today or tomorrow and avoid the so feared dilution. In fact, if selling pressure is such a big concern, I wonder why you are not doing LPing, that would be your best strategy to avoid dilution (apart from trying to wind it down). *Apart from the above, I get your arguments that a smaller pool might suffice, but I don´t get the determination in not winding it down progressively.

                Ben he point here is that BottoDAO did not commit to this, but it is effectively paying the costs for it in the form of ongoing sell pressure

                Ben BottoDAO has the freedom to decide whether it wants to continue paying these costs

                What BottoDAO has the freedom to do or not, or what it should do or not, is something that truly requires more clarity.

                They are not a cost for the DAO, just like fundraising is not a cost for the DAO, just like simply issuing new shares is not a cost for a Fortune500 company. It´s a cost for non-LPs. You may argue that what the pool size brings to non-LPs does not compensate your/their dilution. I may argue that I/we took risks and made our own plan, that we (and humans) highly value trust, consistency and predictability, and that even if I see the logic of your argument, I wonder why you never took the road of becoming a LP yourself, which would be your 1st best possible strategy.

                Ben 5% in addition to OTC, so savings on price impact/slippage/fees vs. open market buys

                If the argument is that some big LPs are here for the yield, once the yield is gone they will sell out and the price will plunge (add a smaller pool size to that equation). Why would I (or any rational homo economicus) take that 5% discount? A few people will profit from this and from the ripple volatility. I don´t like it, we shouldn´t give room to that unless it´s strictly necessary. Progressively winding down the program eliminates (or at least considerably mitigates) this issue.

                Ben Given that Botto has distantly more liquidity than most other protocols of its size

                I don´t buy this argument. It´s nice to have info, but what matters is our holders base and how they are going to behave. The lower the size of the pool, the more large holders will be able to play with the price at their will. It´s not a boat I would like to be on, and if we have to take it because we have to, let´s at least test it progressively.

                • Ben replied to this.

                            dencryptus it [this proposal] only benefits a portion of the base of holders of $botto

                            It benefits the >90% of $BOTTO holders who are not LPs. The vast majority of BOTTO holders are paying for this program with no direct benefit.

                            Spending 20% of the project’s BOTTO reserves for 13 months of rented liquidity is incredibly hard for me to justify.

                            I see no issue with the DAO deciding that a team’s decision from nearly two years ago (when circumstances were very different) no longer serves its collective interest.

                            dencryptus if selling pressure is such a big concern, I wonder why you are not doing LPing

                            Never said that I wasn’t. This proposal is an attempt to identify what is in the best interest of BOTTO stakeholders collectively and myself speaking as a long-term $BOTTO holder.

                            dencryptus very importantly, LM is and always was permission-less; so anyone can join today or tomorrow and avoid the so feared dilution.

                            I don’t follow what you're saying here. Over 90% of $BOTTO holders as well as anyone who buys $BOTTO in the next year and isn’t an LP is paying for the LM program in the form of dilution/sell pressure. Btw, it isn’t viable for everyone to be an LP. They may not have liquid ETH, understand defi enough to access it, or have enough holdings to justify gas costs.

                            While I feel strongly that this proposal is the best path forward that I’m aware of for Botto, I’m open to compromise if needed.

                            But for now, I'd like to hear from more BOTTO stakeholders as well as the team.

                                    One more thing I’d like to point out for now. I think it’s interesting that using 8M $BOTTO to raise liquid assets and bring on aligned partners sparks a decent bit of controversy, while using 8M $BOTTO to rent short-term liquidity, some portion of it from mercenary LPs, is shrugged aside as no big deal.

                                    90% of DAO members are not LPs but they are funding this program. I see no reason that the DAO should be bound to a decision made by the team almost two years ago when circumstances were very different, if it determines that said program is no longer in its collective best interest.

                                    I think if we look beyond the status quo and work from first principles, it becomes clear that this program at this point in time is a poor use of funds. Does having distantly more liquidity than most other projects of our size for another 13 months deliver value to BOTTO? Maybe. Does it cost the great majority of $BOTTO stakeholders in the form of dilution and added sell pressure? Absolutely.

                                      Ben I think it’s interesting that using 8M $BOTTO to raise liquid assets and bring on aligned partners sparks a decent bit of controversy, while using 8M $BOTTO to rent short-term liquidity, some portion of it from mercenary LPs, is shrugged aside as no big deal

                                      Helping reconcile this (firstly highlighting that I´m no mercenary, although some -we are not sure how many- might be). Both fundraising and winding-down the LM program are major changes to the status quo; both were suddenly brought and hit the position and rightful expectations of a coincident layer of stakeholders (for instance, it doesn´t seem to hit you, but both might hit some others), both are introduced in a fairly short amount of time, and the latter (shutting down the LMining program), although useful for some, will bring volatility and a few outcomes that cannot be predicted.

                                      Will also add that using $8M $botto sparked controversy mostly due to the way it was presented and the lack of guardrails in the first place, not because of its substance:. the need for Fundraising was becoming pretty obvious given that we barely were able to break-even. The fact that the team raised the issue so suddenly without barely socializing in the previous months was surprising, but I think we all learnt from that.

                                      Shutting down the LM program would have to be done, sooner or latter. We are proposing a path that minimizes the cons of doing it sharply (I think many months ago I already mentioned in discord the possibility of doing this progressively, can´t find it though), while at the same time being considerate with the rightful expectations and risks assumed by of a bunch of stakeholders. I think it´s the way to go, and the one that will "look better" for anyone that looks at our community: it will show that we can be trusted, but also that we can pivot and reach agreements that balance the trade-offs for every party.

                                      Reducing the pool by 75% will also give large holders much more power to influence the price (positively, but also negatively). More power to large holders is a recurring theme lately, and I don´t love it; ideally, we should have a way larger pool already if we wanted to move to PoL. Besides, for some time there might be a self-reinforcing loop that will reasonably push the price down: if there are yield farmers mainly, they will flee (if not, well...) -> the price will plunge (more IL for the least careful) -> the smartest thing would be to sell everything before that happens and then buy back (?) -> some with power and tools will benefit from this. Reducing the pool by 75%, and doing it so sharply, will also bring mercenaries. By basic game theory each individual player will likely try to maximize his individual position, so, unless I´m missing something relevant, one of the best things I could do (albeit risky) is selling just when this BIP is likely to go to be voted. Not beautiful stuff.

                                      First principles for managing human organizations arise from human nature, and it´s not an accident that the principles of legal certainty, or of equity in making deals are deeply rooted in most legal systems. Yes, the DAO is sovereign, but it can also be arbitrary.

                                      Ben I don’t follow what you're saying here

                                      If your main concern is your own dilution, you can fix it by joining the program. Anyone can do so. If everyone were doing liquidity mining this issue would not exist. There is also a nice mechanism to balance APR and reach a point of equilibrium.

                                      Ben Btw, it isn’t viable for everyone to be an LP. They may not have liquid ETH

                                      It wasn´t viable for everyone to have purchased as much $botto as other larger holders. I (and many) played with and by the rules that were given. I firstly joined the program actually as OnlyHuman, to mitigate dilution. Ican agree to bend the rules often and adapt, but I find it hard to accept maximalist positions (here shutting it down 100% and now is one) when they are not that obvious and might bring negative outcomes.

                                            Sharing my thoughts on this BIP’s first version, trying to add my two cents from an operational perspective and summarizing the conversations here and on Discord.

                                            This BIP seems like a great approach looking to tackle the unnecessarily high cost of renting liquidity and the reduction of $BOTTO’s circulating supply. It's also greatly articulated. However, it does seem a bit rushed and not well-timed with other ongoing proposals, like the OTC sale, and ongoing roadmap tasks. It appears to be missing a more thorough risk assessment and planning. It should now also consider the alternatives offered by the community.

                                            Here’s a summary of the discussion and my pov (hope I got the facts right!):

                                            • Optics of Making Changes to the Original Roadmap or Docs: Despite concerns about the optics of changing the original LM program, I agree with Ben that this initiative was initially designed to address liquidity issues in the project's early stages, which are no longer present. As such, pursuing solutions that involve amendments to the whitepaper or roadmap should be acceptable, provided they are made in good faith for the project's long-term success. This approach actually pictures our DAO as being thoughtful and flexible.

                                            • LP Buyout with Discounted $BOTTO: The process of redeeming LP positions in exchange for discounted treasury $BOTTO lacks clarity in its analysis. IMO, this should be treated as a distinct concept from the LM phase out in the proposal. Its goal is to bolster PoL would imply injecting around 12.5M $BOTTO into circulation, as calculated by Ben, contradicting one of the primary reasons for discontinuing LM rewards: avoiding further stakeholder dilution by decreasing circulating supply. While I lack the knowledge to comment on the rationale for enhancing PoL by buying out LPers and on the 5% discount percentage suggested, mazzi gave some interesting feedback. I recommend consulting Carbono on this, and clearly defining it apart from the LM phaseout in a subsequent version of this proposal. On this topic, Ben's later suggestion to introduce vesting in exchange for the discount seems like a great solution to the issue I just pointed out, as it could weaken speculative behavior and align interests of LP sellers and stakeholders by counteracting the mentioned 13% surge in the circulating supply due to the discounted $BOTTO sales.

                                            • LM Phaseout Implementation Alternatives: The 8 million $BOTTO cost is significant, especially when put together against the maximum amount the DAO is willing to offer investors via OTC. Reducing this expense would be beneficial for both stakeholders and LP stakers by reducing the circulating token supply. Suggestions from encryptus, onlyhuman, and sync emphasize a gradual or partial phaseout approach, allowing for better management of unintended consequences and smoother testing of assumptions. They also hint at granting LP stakers more perks from the discounted $BOTTO redemption, such as converting LM emissions to extra VP generation compared to single-side staking, as proposed by sync, which I find interesting and worth considering, as it could incentivize participation by compensating for the LM emission discontinuation with a higher Active Rewards portion upon participation. This last point might not be necessary if LP stakers are content with sticking to a gradual or partial phaseout.

                                            To sum up, I’d suggest the following next steps:

                                            1. Rewrite this proposal to reflect collective consensus after ongoing discussions on Discord and the forum, and separate and delineate more clearly the LP buyout approach considered to offset a potential pool size decrease within this proposal. Ask more PoL and tokenomics experts.
                                            2. Consider the core team’s current operational bloat in the outlined phaseout plan and update the proposal accordingly.
                                            3. Consider a partial phaseout, by decreasing linearly the LM emissions until Oct 24, or by cutting them by 60% at once, and save 4-5 million $BOTTO instead of the million initially suggested. @agus might be able to comment on the operational implications of both approaches from a dev’s standpoint.
                                            4. Add a vesting or lockup period to the $BOTTO sold at a discount to LPers, in order to offset the potential short-term increase in the token’s circulating supply and price volatility.
                                            • Ben replied to this.

                                              Appreciate this verox. Lemme respond to a few points.

                                              verox Its goal is to bolster PoL would imply injecting around 12.5M $BOTTO into circulation, as calculated by Ben, contradicting one of the primary reasons for discontinuing LM rewards: avoiding further stakeholder dilution by decreasing circulating supply.

                                              First, this figure is inaccurate. The max possible amount (in reality I’d expect much lower) would be 6.65M $BOTTO, given current liquidity. This figure accounts for the fact that half of the existing liquidity is $BOTTO and that a portion of it is already PoL.

                                              The more important point in my view is that the treasury would receive liquid assets in exchange for its $BOTTO, rather than short-term rented liquidity. Since the treasury is project-owned and these funds can be put to constructive use, I would not consider this dilution in the same sense.

                                              Also, I should point out that the received liquidity would not necessarily be limited to use for PoL. The liquidity/ETH could be put to whatever use the DAO/team deems best. The protocol specifies a minimum of 30% of treasury ETH for PoL. Beyond that, it is up to the DAO/team to determine its use.

                                              verox IMO, this [the redemption program] should be treated as a distinct concept from the LM phase out in the proposal.

                                              The idea of grouping them together is to figure out a win-win situation for the DAO and long-term-oriented LPs and to accrue liquid assets to the treasury. Upon an LM termination, some LPs would sell their $BOTTO while others would use a portion of the freed up ETH liquidity to buy more $BOTTO. It's ideal if they're buying from the treasury in my view.

                                              verox Rewrite this proposal to reflect collective consensus after ongoing discussions on Discord and the forum

                                              I’m open to considering other proposals, but so far we’ve only heard from a few people, and I would love to see more discussion here first. I know from private discussions that there is more support than has been conveyed here. I encourage more DAO members to share their perspective.

                                              While I do think the sooner the better to address this issue, I don't see any need to rush the discussion. Especially given that I don't think there would be sufficient support to pass this proposal prior to upcoming OTC investments. So that gives us some more time to discuss and deliberate. Now, if it will be a considerable time before the OTC investments go through, I could see the benefit in getting through a partial solution in the meantime.

                                              Finally, I would add that if LM is to be continued in any way, it seems like a no-brainer to me that Botto should stake its own liquidity in the LM contract so that the DAO (including >90% of token holders who are not LPs) receive back a portion of rewards and at least slightly decrease dilution. Actually, I’m not there's any reason to wait for any proposal to go through to implement this, as I don’t think it was ever specified that Botto would not stake its own liquidity (please correct me if wrong).

                                                      Chiming in with my 2cents.

                                                      • support removing LM asap with caveat of wanting to wrap OTCs first before voting for something
                                                      • i see the opportunity cost of using the 8M $BOTTO for grants and other things of value as more important than renting liquidity
                                                      • i agree there’s downward price volatility risk from LMers dumping, but as Ben said its either now with some mitigation or in 13 months with a hard stop. ripping the bandaid off once we have solid footing of OTC enables us to weather the storm, if any
                                                      • may help to have a target of what liquidity we do want to get to, but in general welcome taking action and building up POL over time
                                                      • we should also look to get more input from LMers here as that will add clarity on implications

                                                      personally am open to different approaches that help mitigate volatility and show good faith, but am ultimately more concerned with opportunity cost from other uses of the saved $BOTTO than short-term volatility, especially if we have a grounded strategy on POL.

                                                      5 days later

                                                      Chiming in on my thoughts on this proposal – which I’m supportive 100%.

                                                      Here are my rationales – and hopefully this goes in line with all the questions/concerns that have been brought up.

                                                      The main idea behind this BIP is to wind down the LM program now vs Oct 2024 – and can be summarized into 2 buckets of debate.

                                                      1) Changing the status quo:
                                                      A few people have mentioned that eliminating the program is ‘unfair’ and that people ‘trusted’ this program to last until 2024 so that’s why they invested in Botto. These comments are subjective and should not be used as an argument. (Please note this point is strictly about the messaging that has been conveyed, and not about the urgency and liquidity questions – that will be addressed in a later point).

                                                      This argument of ‘unfairness’ is akin to saying that if any government/country decided to propose a legislature to change the legal drinking age from 18 to 16 – and people are complaining that it’s not fair because those that are 18 followed the rules and missed out on 2 years of drinking legally. But in reality – things change fluidly and the DAO needs to be able to react fast and adjust to changing conditions. Just because it was memorialized 2 years ago does not mean it should remain. The US Constitution has amendments – because circumstances change.

                                                      2) Why now?
                                                      The other thing people have mentioned is why does the DAO want to do this now and what is the urgency?

                                                      It comes down to supply and demand economics. The DAO is currently giving away tokens to the LMs (adding supply to the market), and as a result, the LMs are selling a portion of the rewards (causing a downward sell pressure) whenever the tokens are claimed. This LM programwas a decision made in the past to incentive and create liquidity for the Botto tokens – but now that the tokens are fairly liquid relative to 2 years ago, and with 8M tokens remaining in the LM program – it makes sense to stop immediately, preserve the 8M token from being released into the market, and use it for strategic purposes. Reducing supply is a benefit to the token (similar economics to BB&B).

                                                      At the end of the day it comes down to the best interest of the DAO – and not one specific group, or person or whale. What Ben has proposed is, in my opinion, the best interest for the DAO. Let’s take a look from a realistic POV. Say we don’t touch the LM program – and come Oct 2024, when it ends, what do people think the liquidity providers will do now that they’ve received all the possible tokens. Sell? Hold?

                                                      Alternatively, say we eliminate the program now, so effectively pushed up the time line and ask the same question – what do you think the LPs will do? Sell? Or Hold? Both questions don’t have a definitive answer – it becomes whether we want to find out now or delay the inevitable question. IMO - the decision of the holders will be the same regardless whether it's now or 13 months later.

                                                      In all honestly – no one knows what the big LPs will do with their existing share – but one thing is for sure. If the LP takes out all or majority of their liquidity/selling BOTTO (whether now or when it matures) – it means that they were only in it for themselves. So if we’re worried about these individuals – why are we waiting until 2024 to find out who they are, or what they might do? It’s going to happen one way or another – so pull the band-aid now and have these individual reveal themselves instead of punting it till Oct 2024.

                                                      However if these big LPs really care about the DAO and the longevity – they would rather have the DAO reinvest in itself (sort of like reinvesting the free cash flow into the business instead of giving them out like dividends). If the DAO wins – so is everyone that is a $BOTTO holder, regardless of size.

                                                      Lastly – on the 5% discount – this part I don’t agree with in the proposal. I think it’s unnecessary and creates additional operational headache for the Botto Core team. Unless the team can create the LM redemption process like the way that Rare Staking has built in the smart contract (where anyone can swap their $RARE for ETH at a 10% discount to fund the staking pool) – then I would be supportive because it’s easy to implement – and creates an incentive/optionality for the LMers.

                                                      • Ben likes this.

                                                      Update: based on community feedback and further reflection, I’ve decided to remove the treasury redemption aspect of the proposal.

                                                      This was conceived as a way to accrue liquid assets to the treasury while facilitating $BOTTO acquisition for interested LPs.

                                                      However, it adds operational complexity and I didn’t see a favorable response from LPs. It also reduces buy pressure (and increases circulating supply), as interested LPs would more likely acquire $BOTTO from the treasury than the open market.

                                                      Meanwhile, I’m optimistic that the treasury can acquire needed liquidity via ongoing revenue and OTC token sales (BIP-35).

                                                      So all considered, I think the proposal is more straightforward and effective without this aspect.

                                                      The question should be what´s better for Botto, and this, to some extent remains unanswered ("treasoning" past commitments, the rush on the timeline, unequal treatment, upcoming volatility, increased possibilities of pummping & dumping, artificial pricing as I mentioned earlier...just to name a few costs of this implementation). Some of these are not mentioned as potential consequences in the "disadvantages section". For intellectual honesty, I would at least add them explicitly. Also the second criteria of success (as it is still now) doesn´t apply anymore. You didn´t pick up on my thoughts in discord about other mechanisms to manage liquidity btw.

                                                      There is a big difference between shareholder´s best interests and the company´s best interest, which often diverge. All calls made, as Mazzi pointed out, are made to favour a majority at the expense of a minority, and with unclear consequences, which is not surprising. Just as it won´t be surprising that it gets fully phased out as you wish. I however still think that you underestimate the relevance of all the matters discussed. This BIP is not actually only about discountinuing the LM Program; it´s actually more about reducing the pool by 75%.

                                                      Who will take moral responsibility if things don´t work out as you predict (to the extent that it damages the project´s credibility, despite it´s hard to tie the causality chain)? In this regard, and looking forward, it would be imptnt to have real criteria of success: what there is in the Bip now ($Botto´s price) is not anything that can shed light on whether this worked or not (no explanation required I think). Reduced sell pressure could be one (one that I don´t love as a metric, but it´s probably the only one to track the pros of the measure so let´s take it); would also add volatility increased within some reasonable parameters, or the perception that the new pool suffices. Success is not only harvesting the pros/profits, it´s also avoiding the risks/losses

                                                      For the last time I will leave here that phasing this out 100% and immediately poses some risks (hoping you´re right there), and it means running over a group of people that made a rational decision based on the rules of a game that are (eventually) going to be suddenly changed (this is certainly wrong, and tells, again, that our governance is flawed). So broadly, this is, imo, a bad precedent, and tells that there is nothing immutable here; the perceived risk will (imo) grow for a number of reasons. I´m all in into experimenting with middle ground solutions, but asking for a vote on those 3 alternatives is a loaded initiative, we all know what´s going to happen.

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