vDODO Tokenomics Design Update Proposal

DODO is revamping the tokenomics for vDODO, DODO’s proof of membership tokens. To understand this vDODO Tokenomics proposal, it’s important to understand the basic facts about DODO and vDODO tokens, and about the Membership Points (MP) reward model.

Quick Facts about DODO, vDODO, and Membership Points

DODO:

  • Is a reward token that is neither yield-generating nor does it have governance power;
  • Has the best liquidity to become a DeFi building block, e.g. collateral;
  • Is a way of exchanging value.

vDODO:

  • Is minted by staking DODO;
  • Is an interest-bearing token for 5% fixed-rate APY;
  • Gives the holder the power to vote on any DODO Improvement Proposals, including DODO incentives, use of treasury funds, and fee distribution;
  • Is transferrable and their voting power can be delegated to others;
  • Can be swapped for DODO tokens with 0 fees and restrictions.

Membership Points (MP for short):

  • Are generated over time when you hold vDODO tokens;
  • Are generated faster the longer you’ve held vDODO;
  • Are not generated with vDODO tokens that are delegated;
  • Are not tokens and are neither transferable nor tradable
  • Will drop to 0 when you convert vDODO to DODO tokens.
  • Will be used in a to-be-introduced utility market, and all consumable utilities will require users to consume the necessary amount of MPs.

What Can MPs be Used For?

MPs can be redeemed for certain uses - all of which can make your life and business activities much easier.

MPs can be redeemed for…

  • Subsidies for transaction fees;
  • Slippage protection;
  • Partial reimbursement for gas fees
  • Portions of the minimum IDO and crowdpooling starting capital;
  • Impermanent loss protection;
  • Funding for project airdrops.

Vote Delegation

DODO is also introducing vote delegation, where business-side users (i.e. project) protocols will incentivize vDODO holders with extra token rewards in return for the vDODO holders delegating their voting power to the protocol owners. Protocols will compete for governance uses of Membership Points (see above), including DODO emission incentives, use of DODO Treasury funds and fees distribution.

How will this work? Read on:

a. How will voting and governance work?

For voting, use Snapshot - no on-chain actions required!

b. How do I delegate my votes?

A special ‘vote delegation’ account must be set up. This account has voting power on its own but can collect vDODO tokens to gain voting power via delegation. Vote delegation requires some on-chain actions: the delegating user can delegate (transfer) their vDODO to the ‘vote delegation’ account, and the owner of this account can then start voting for any proposals with these tokens. vDODO tokens from this account cannot be delegated to another account. This delegation account can then be traded as an NFT.

c. How do I recall my delegation?

It depends! A standard recall clause includes an ‘earliest recall time’ and a ‘pending period’. For example, if the earliest time to recall your delegation is January 1, 2025 and the pending period is 1 week, then, after January 1, 2025, anyone can initiate a recall request and the delegation recall will be executed after 1 week from the time of initiation.

d. How can I get delegated votes?

Any way will do as long as you can convince vDODO holders. The most basic way is to offer token rewards in exchange for vote delegation. DODO will also offer multiple tools for ‘governance mining’, which will include:

a. Multi-token rewards;

b. Token vesting;

c. The maximum amount of vDODO raised.

‘Governance mining’ is the act of providing token rewards in exchange for delegated voting power.

e. How do I initiate a proposal?

To initiate a DODO Improvement Proposal (DIP), you need to pre-lock a certain amount of vDODO tokens for at least 1 month. The content of the proposal will be uploaded to AR/IPFS.

f. How long does a proposal last?

From the moment the proposal is proposed, a timestamp is generated, and the blockchain snapshot will be taken on the block right before the timestamp. A proposal should also have at least a 7-day publicity period and a 3-day voting period.

Examples

a. Alice’s protocol wants to win liquidity support from the DODO Treasury and needs at least 10,000 vDODO votes to pass. Alice offers an incentive of 1,000 ALICE tokens to vDODO holders in exchange for their voting powers via governance mining (with 1 month vesting). Alice then raises 12,000 vDODO to vote for her project to win support from the treasury, and vDODO holders get extra token rewards simply by delegation.

Note: If the protocol wanted to lock your vDODO for 4 years, the 4-year-locked delegated votes will have 5 times the voting power of unlocked ones. Meanwhile, these 4-year-locked vDODO votes will become an NFT that can be transferred and tradable in the market.

b. DODO starts a governance mining campaign with a 1-4 year vesting period, which can be considered as a fixed-term deposit with a very high return.

Benefits of Vote Delegation

Vote delegation…

a. Lowers the threshold for 3rd-party protocols to compete for voting power. The competition for votes will be much more intense than it is now, which will bring more benefits for vDODO holders with the same DODO emission.

b. Makes governance efficient. Ideally, 3rd-party protocols or DODO control the most governance voting power;

c. Will, in the case of business-side incentives, drive more user exposure and encourage long-term support for vDODO holders.

A Multichain Solution

  • vDODO will be available on every supported chain, with a 5% fixed-rate APY and instant reward unlocking.
  • vDODO holders on different chains can vote on the same DIP.
  • MPs will be calculated and generated off-chain: no matter which chain vDODO is minted on, MPs can be generated. This means that you won’t need to pay gas fees when MPs are minted or burned.

Trading Fee Revenue and Token Utilities

Aggregator Service Handling Fees

DODO’s aggregator service charges handling fees that can be deducted by holding vDODO.

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Positive Slippage Route Call

When the final execution price is better than the intended execution price, that is called positive slippage.

For example, if a user sells 1 ETH, and the front-end quotes 1 ETH = $3000 USD, and then the execution price is $3050 USD, then this $50 USD is an “unexpected gain”, which is called positive slippage. Conversely, if the execution price is $2950 USD, the missing $50 USD is an “accidental loss”, which is called negative slippage.

Whether it is a front-end call or another DAPP call, as long as it passes through the DODO routing contract, the positive slippage will be charged by the protocol.

Positive slippage will be credited to the protocol revenue.

Partial Reimbursement for Gas Fees

Gas fees will be reimbursed via DODO at the end of each month according to the amount of vDODO held.

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Profit Sharing

Those who want more advanced control can call the API and add extra parameters when building transaction data for users to realize profit sharing.

We want to implement this design at both the contract layer and the backend API layer.

Revenue Sources

DODO’s revenue is currently generated from two sources:

  1. Trading fees.
  2. Token creation.

The current fees distribution is as follows: 80% of fees directly go to LPs, 15% goes toward DODO buyback, and 5% goes to the DODO Treasury.

In future, we plan to add two sources of revenue:

  1. Positive slippage.
  2. Proactive market making and fees for using liquidity management tools fees.

Fee distribution will be described in detail in future DIPs.

1 Like

This Membership Points system is very similar to how the 1inch token works and does very little to incentivize users to hold DODO tokens over a long period of time. Additionally, a 5% interest rate on vDODO tokens is far too low of an incentive to encourage users to stake their DODO tokens.

It is a much better idea to simply just leave tokenomics as they currently are. Selling pressure will eventually reduce over time. Trying to emulate a curve/1inch token model will only contribute to hurting the token price over the long term just as it has done for those specific protocols already.

Glad to hear your feedback : D
Do you have any suggestions for improvement? Or just leave it no change?

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Proponents of the Curve model argue that the four year lock-in is not the key. But how to introduce competitive voting among the projects is the key. Not sure what you think of this point, can you share more about it?

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I suggest we leave it as it is. Currently, DODO is one of the only if not very few DEXs that actually has value accrual to it’s governance token holders. Therefore, it is one of the very few protocols which is actually generating cash for it’s token holders. This is an extremely important value proposition for investors and so I don’t see any reason as to why this should change.

DODO should aim only to simply just expand its presence across other L1 and L2 chains (as it is currently doing) and once the bull market resumes, the increased trading volume will not only attract new users but also new investors as well. We just need to get as many new users on board as possible and attract more LPs. But we can be patient as I believe that they will come sooner or later.

If there is anything I would suggest in order to reduce selling pressure on the DODO token. We should perhaps consider converting some of our treasury assets or a set number of DODO tokens into ETH or DAI and subsequently pay out fees and rewards in ETH/DAI tokens instead. I think this would be far more attractive to new investors since most users like to accumulate assets which generally have a stable price and this will also help to reduce the selling pressure of DODO tokens by new retail users.

We could also consider rewarding long term vDODO holders who perhaps hold there vDODO tokens for at least 3-6 months or longer with higher APY rewards. And these rewards can increase the longer the vDODO tokens are held. i.e. extra 5% APY for holding for 3 months, 7.5% for 6 months, extra 10% for a year etc. These holders are less likely to dump DODO because they believe in the project so rewarding them with extra DODO rewards is less likely to increase selling pressure on the token.

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First of all, I want to thank you for this vDodoTokenomics Design Update. For me, it is pretty complex to understand the outcome of all those proposed changes. So maybe you can answer some of my questions to help me with that.

Is there still a token burn mechanism?
What about the current monthly membership rewards?
Is it possible to create a diagram that illustrates the multiple mechanisms we can benefit from by stacking vDodos compared to the current model? So to be more precise is there a chance to get the same rate as we get it now by staking Dodos. So what I miss are examples that show the benefits or the positive impact on future Dodo price trends.

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Competitive voting hasn’t yielded any positive long term results to be honest. Initially this may have helped protocols such as Convex Finance for example but honestly I don’t see any real value proposition to the CVX token other than staking it, which is just circular and doesn’t provide any real value proposition for the token.

I think the idea behind it was that having the most votes allows you to determine how to distribute CRV rewards to various liquidity pools. So if I want 70% CRV rewards for a stablecoins pool, and I have most of the tokens (governance rights) then I can vote for this proposal and have it pass as well as bribe every other token holder to do the same or simply just bribe them to hand over their governance rights to me. But bribes won’t be very financially attractive during a bear market as token prices go down and token prices have decreased rapidly for these protocols because their rewards are paid out in CRV and CVX. And so even voting for massive incentives (which are paid out in either CVX or CRV) still creates massive circular selling pressure. Hence the reason why their tokens haven’t performed very well recently.

I would even argue the opposite, that the lockup actually creates a supply shock which drives value to the token, so lockups in my view are a far better incentive to help reduce token dilution and subsequent selling pressure. The penalty we have implemented for converting vDODO to DODO is genius in my opinion and perhaps this penalty could be modified/increased depending on the length of time you have had your vDODO i.e. vDODO held for less than a month has 50% penalty, 3 months 25% penalty, 12 months 15% etc. I think this would be far more effective than trying to create some kind of circular distribution of DODO rewards based on governance voting rights which will only eventually result in large selling pressure of the token over the long term.

However, paying fees in stablecoins and/or ETH as well as incentivizing long term lockups will prove to be far more effective.

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Hey thanks for your reply.
I must say that you have to leave all your questions to governance decisions. This delegation voting system is a high level design that will encompass the variety of ideas.

For example, you asked if there will be a monthly buyback, and if someone proposes to cancel the monthly buyback and there is a majority support, then the monthly buyback will be cancelled. Otherwise, everything will remain the same.

So this tokenomics design proposal is just a start.

Thanks a lot for your detailed reply!

About the delegation voting system, or CRV model, it seems that there are two concerns. (we heard these complains from several sources)

- Does the 4-year lockup model make sense in long term

- Whether it can attract quality project parties

Frankly, I’m not sure about either of these issues.

But I think this proxy voting system is a fairly high-level framework design that does not only include CRV mode but can encompass different ideas.

For example, our first proposal could be: using the treasury funding to create a one-year vDODO bribe pool at a 50% APY Or, using the treasury fund to create a 60% annualized vDODO bribe pool with a 5% exit fee, decay over time
Whichever one passes governance, we will use.

Although the basic yield of vDODO is only 5%, the return from the secondary lock-in is determined by governance and those third-party bribe pool involved. So the true rate of return will be much higher.

We can leave everything as it is and just upgrade the governance framework to proxy votingWe can leave everything as it is and just upgrade the governance framework to delegation voting.

And then leave all questions to governance.

2 Likes

I like the idea of starting to build out the governance framework on proxy voting. As I said earlier, I think many people will be overwhelmed if we put forward all of the proposals I mentioned at once. In my experience, it makes more sense to involve more people in the voting process in the first place. For most of them, this is new in some way. And to be honest, there seems to be little interest in the Dodo community so far to get involved or participate in this issue. Unfortunately, I only count two people here so far.

I’m in agreement with this.

Whilst this may be a good idea, I would still suggest that at least a small portion of the bribe pool be paid in either ETH or a stablecoin in order to make the proposal more attractive to retail. Or perhaps maybe this could be put to a separate vote…

‘using the treasury fund to create a 60% annualized vDODO bribe pool with a 5% exit fee, decay over time’ - This seems like a reasonable option.

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FYI Trader Joe has started paying staking rewards in USDC.

Sure, that’s a good point
Instead of 60% DODO apy and people sell them on the market, it would be cheaper if we just provide 20% apy in USDC.

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