juicebox

Title: Revisit the JBX redemption rate
Author: mieos and zhape
Date: 05/19/2022

Thesis:

To revisit the redemption rate of JuiceboxDAO treasury, change it to 80%

Abstract:

We had a proposal (https://www.notion.so/juicebox/Increase-JBX-Bonding-Curve-to-95-039166a8ae844951a233c90ce0cda107) to increase the JBX redemption rate (aka bonding curve rate) to the current level of 95% in Feb. 2022. As the community keeps evolving and macro market condition changed drastically, we think it’s high time we come back and try to find a new balance to this mechanism.

Motivation:

The last proposal to increase the redemption rate to 95% has fully accomplished what we expected it to function properly in the past several months. But as the condition has changed and needs to have such a high percentage no longer seems as demanding, we think it should be put into discussion again if such a percentage still aligns with the overall interest of our community.

Risks:

• Lower redemption rate, esp. in the current market situation, might loosen the floor price of JBX in the AMM market, in turn induce the loss of faith by community members, and lower community involvement might follow, for an interval of time not known if the current market situation persists.

• During the time between proposal discussion and final voting, this proposal might create big pressure on redemption by holders, for fear that they might have less redemption value.

Specification:

Decrease the JBX redemption rate to 80% from the upcoming Funding cycle.

Rationale:

• From the #16FC till today, the total redemption of JBX amounts to around 324m, roughly 14.7% of the total supply, and about 750 ETH in terms of treasury assets. Although we have one big redemption by certain early contributor and another one by the assangeDAO, which add up to about 142m, we still have 182m gets burned from other holders. This should have played its part in the objectives of the last proposal, i.e. stakeholder alignment, increasing flexibility, strengthening the JBX ecosystem.

• We noticed that there have been several suspicious bots active in arbitraging the difference between our redemption rate and AMM market price. Although it helps to solidify the floor price of AMM market, it doesn’t align with our long-term interest. It looks as if we are intervening with the secondary market price through these arbitraging bots. If the community is interested in managing the market price of JBX, we always have better options to do it.

• In the current market situation, the overall price level fluctuates very drastically on a daily basis. Although JBX stays pretty resilient, it still tends to be influenced by other major cryptocurrency esp. ETH, and also sometimes falls prey to a gloomy mood in the bear market and gets dumped. A wide fluctuation in price will mean more arbitrage opportunities. Arbitrageurs tend to buy JBX on the secondary market and redeem them for ETH in our treasury. This create unnecessary loss of treasury asset.

• We have a bottom line that we want to adapt to difficult market conditions - being successful in a bear market relying mostly on the ability to survive and buidl.

Timeline:

effective in the upcoming Funding cylce.

Copyright Disclaimer:

Copyright and related rights waived via CC0.

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