Thanks for the information Clay and I wasn't being derogative on the "buzzword" comment, it does have a ton of buzzwords that I'm not sure how they apply:
defi bonds - this doesn't fit with a traditional definition of bonds
liquidity mining, token incentives, etc are other such terms.
I feel all of these are shortcut words that conjure up an image that sounds good, but may not necessarily be understood by many. So my point is I find myself having to really dig in deep to figure it out.
and it sounds like from your answer that this is exactly us using our own funds to provide liquidity. So if we do $100k worth of SPS, that's $50k of our token and $50k of a paired token.
Is there any difference in us doing a $100k pool with our own tokens and us doing this?
Second question, there is no fee if we don't sell any bonds. Who do we sell the bonds to?
What yield do buyers of the bonds get if we aren't paying any "liquidity mining" fee? There's not enough volume of transactions to make it profitable to my knowledge without liquidity mining concessions, so I really don't know how these would have more than a 1% yield and who would buy that bond?
Third question, if we sell $100k worth of SPS, where does that money go? Are we issuing and buying our own bonds with that liquidity?
I'm not trying to be argumentative, but I don't think this is clear at all (not because you failed at explaining it, but because its complicated in general). In order to make a wise decision, I think we need to know these things. I know at least I do.
Defi bonds are just what they're calling this. To me it would be more accurate to describe it as the opposite of a bond? Fair enough on that being buzzword-y lol.
Liquidity mining is what we currently do. Pay token inflation for people to put funds in a pool and earn a percent of that inflation for "mining with their liquidity." The "mining" in question is basically being the counterparty for pool trades.
Token incentives are the inflation we're minting and paying to the liquidity miners.
I don't take any offense, I do my best to make these proposals as simple to understand as I can, but I'm not perfect obviously. Always feel free to ask questions, I don't want this stuff to feel like a smoke and mirrors thing at all. My goal is clear and concise info so the DAO can decide what it wants to do.
Is there any difference in us doing a $100k pool with our own tokens and us doing this?We actually very well could. I've got a draft on how to rework LPs and one of the things I really want us to do is set ourselves up for long term success so that we aren't on a deadline to lose our liquidity. It also seems prudent to me to deal with this soon as opposed to waiting for 3 more years until that inflation runs out. It's like we have a destination that we're going to get to and we can take a swift shortcut and save a lot of travel expenses or we can drag it out for 3 years and waste a ton of money to end up at the same place. All in all we really need to work on reforming our approach to LPs.
Second question, there is no fee if we don't sell any bonds. Who do we sell the bonds to? What yield do buyers of the bonds get if we aren't paying any "liquidity mining" fee? There's not enough volume of transactions to make it profitable to my knowledge without liquidity mining concessions, so I really don't know how these would have more than a 1% yield and who would buy that bond?We'd sell the bonds to whoever wants to participate, so this could be new people that have never heard of SPS that hear about this through SushiSwap marketing efforts or it could be some of our own community members. The only yield those buyers would get is the 5% discount. The DAO owns the LP tokens and would be the one earning on any trading fees the pool earns. The thing is that if the DAO owns the liquidity, it doesn't have to earn on it. Any earnings is a bonus, the real value is we stop just paying inflation to rent liquidity. Thus it turns what is currently an expense (net negative inflation) into potential revenue, even if it's not a lot.
Third question, if we sell $100k worth of SPS, where does that money go? Are we issuing and buying our own bonds with that liquidity?The funds are sold for liquidity tokens. The DAO would own the liquidity tokens and earn on them. The DAO could also exit it's LP position and take those funds elsewhere if chose to do so. The DAO would be the full owner of the proceeds here, sushi would take its 5%, and the people that bought the bonds get a slight discount on some SPS. It's essentially the DAO selling tokens. The reason it makes sense is we're currently just spending tokens to rent liquidity. Hundreds of millions of tokens are apportioned to LP incentives that have been being given out and are scheduled to continue to be given out for at least 3 more years. After those tokens are gone, we're left with nothing. I consider this a test case to see if there's any demand for these bonds, a bit of marketing, and if things go well, a good trial for the DAO potentially owning more of its own LPs.
I'd say the big TLDR here is this:
We don't have to do this. I look at this proposal as a marketing proposal first and foremost. Does the DAO want to take a (at most) $10,000 shot at some nice marketing with SushiSwap and try out something new? Long term, we need a lot of overhaul on our approach to LPs and it's next on my to do list after tournaments. Maybe to some extent it'll coincide with tournament work.
and if I understand this right, the buyers of the bonds get a 5% discount for 30 days and then they can get out. If so, then that means we are back to no liquidity unless we do another bond for another 30 days.
Is this correct?
For your understanding, I am drilling down on the sustainability of this model. I do love the idea that we stop paying liquidity fees to the LPs at some point, but I really don't understand how this will incentivize money to stay invested in the LPs.
My read on it is that we will get people to buy the bond for a guaranteed 5% for 30 days, then they will cash out (I would too). From there I think we got liquidity for 30 days, but then we lost the liquidity after the 30 days. So I see no sustainability at all.
Again I'm not upset or anything, I really can't see where this gives us a sustainable model at all. In fact it seems more expensive than what we have currently.
I think we addressed this on Discord, but to try to clear things up here...
The buyers get literally nothing but the discount on the tokens they buy. If they buy 100 dollars worth of SPS, $95 is proceeds which goes into the liquidity pool, Sushiswap would own 5% of those proceeds and the DAO owns the rest, let's call it 90 cents on the dollar after everything is said and done.
There is no ongoing commitment from the buyer. After 30 days they can do whatever they want with their SPS. The liquidity is owned buy the DAO, that's what they use to purchase the discount tokens. The DAO is free to do whatever it wants with the liquidity that it is essentially buying with SPS.
yes we did clear it up on Discord and I appreciate you clearing it up here too Clay. Thank you!