Overview:
Our Buyback-and-Make tokenomics is meant to resupply $TIME balance in the MasterChef contract. We’ve got endless buying pressure and there won’t be a need for layer (n) — thereby creating a sustainable and circular ecosystem.
In other words, farming never ends.
If you love geeking out, there’s a long read ahead, so get comfy! If not, below is a quick TL;DR.
Timeleap is a yield farm with a max supply yet no additional layers. Normally, a max supply would mean that token emissions and farming would end.
What we’ve done to make farming continue even after all tokens are minted is to create an automated way to refill/top up the Masterchef (MC) contract — by buying back TIME from the market and depositing it in MC. Farming emissions continue normally as if we never reached max supply to begin with!
What’s the rationale behind this?
Imagine this: You’re happily farming native tokens but within a couple of weeks, either one of these two things happen:
- The farm ran out of supply of its native farming token, starts layer 2, and repeats until layer (n)
- The farm never runs out of supply of its native farming token, burns are never enough, and hyperinflation takes over
In both cases, yield farmers lose money and losing money = devastation.
Sure, layer (n) farming adds additional ways to profit for early adopters, but when merged with a referral scheme, it just reeks of ponzi. Ponzis create crypto whales who will then dump your favorite project to the moon.
Then there are farms with legit burn mechanisms. These are usually AMMs and boy are they great to have.
The only problem is hyperinflation, too much minting (because there’s a need to raise APRs due to hyperinflation), and too little burning. Circulating supply goes to Mars and your favorite project goes to the moon.
Let’s get real. As yield farmers, we’re not:
- Crypto Traders — We don’t want to spend all 16–18 hours a day staring at charts, spotting patterns, exploring algorithmic trading bots only to get rekt
- Moonshot Apes — We don’t want to snipe new moonshots only to get burnt by frontrunner bots that buy in when liquidity is added
All we really want is to retire with a daily stipend of 2~5% APRD so that we can get out of this never-ending rat race of reality.
When we first started out, we had spreadsheets that tracked our average ape-in price and our daily earnings + how long more it would take for us to buy that dream home or get out of debt.
We just wanted to head over to our wallet tracker (0xTracker.app), and grin at it every single time when we’re in the green. Your heart skips a beat and you tell yourself you can afford a nice meal today.
Do we even need to elaborate further on the anxiety of moving funds from one farm to another just to chase insane APRs? No one likes to deal with the constant fear of a newsworthy rugpull — which could be the next farm you’d ape into.
Creative constraints
We thought really hard on how we could build a yield farm with several criteria in mind:
- A verifiable max supply with a low emission rate that curbs hyperinflation
- Circular tokenomics for sustainable yield farming
- A native capital asset that appreciates in value with fair distribution and future DAO in mind
Sounds too good to be true? Well, this does happen in the real world with capital assets.
Things are about to get real technical, so read on and geek out with us.
Let’s go back to Economics 101
We’d like to shout out to the original piece that inspired our model. The content below is adapted from Joel Monegro’s article titled “Stop Burning Tokens — Buyback And Make Instead” from Placeholder.vc
When dealing with public equities, buybacks are a popular way for large companies to boost their stock price — by buying their own shares in the market. Equity buybacks help to increase existing shareholders’ voice in terms of governance / voting rights within the organization.
Shares that are bought-back by the company do not get destroyed. Instead, they continue to be held by the company as treasury shares. Unlike circulating shares (which are publicly traded), treasury shares that are bought-back can’t vote or participate in the governance / economics of the organization.
By reducing the number of circulating shares (i.e. decreasing supply), buybacks help to improve certain valuation ratios (e.g. earnings per share) for all remaining existing stakeholders in the market. This then justifies paying a higher price per share.
What about burns?
Crypto investors seek out token burns to reduce the anxiety of a large scale token dump by the dev team (aka soft rug). So yes, burning would definitely guarantee that treasury shares are never re-issued and it helps to reduce the circulating supply permanently.
Besides, there’s a lot less paperwork involved when it comes to burning tokens as compared to burning treasury shares; simply send them to a dead address and we’re good.
If you’ve been in this space for a while, you might have noticed that most projects burn tokens as a quick fix to boost positive sentiment among holders, which then drives the price of the token up.
This act of burning tokens does not add any value to the protocol at all — the market capitalization of the token remains the same (no new funds are injected).
Then came the age of buyback and burn. You’ll find this in some popular yield farms (e.g. Polycat Finance), where additional capital is contributed prior to a token burn.
This is great and it creates “implied scarcity” while adding buying pressure at the same time. A win-win proposition, until… your favorite farm runs out of supply and starts layer (n).
You know what happens next, liquidity would usually go to ZERO because there’s a lack of utility for Layer (n — 1) once the airdrop for Layer (n) is completed.
Utility of capital shares / tokens
Simply put, issuance of capital shares dictates how resources are required to scale a protocol. This is the same for crypto protocols and DAOs.
Tokens can be issued as compensation for participants in a protocol who contribute different kinds of capital:
- Liquidity Providers who ensure that TIME remains tradable with minimal slippage
- Developers who ship product features that give confidence to Liquidity Providers and Investors
- Investors who contribute to price stability and the value of TIME
Issuance helps grow fundamental value by growing the capital of the system, which then turns into a greater token price.
Reducing the supply of shares or tokens over time through burns can discourage capitalization just like deflationary currencies discourage consumption.
And if the rate of burning ever exceeds the rate of fundamental growth, you risk decapitalizing the system by over-concentrating ownership at the expense of liquidity and long-term value.
There’s far more upside to smart issuance than there is in clutching to scarcity. Some examples include:
- Re-issuance of treasury assets to continuously incentivize productive capital for the 3 types of participants
- Resell treasury assets to raise financial capital for marketing / protocol improvements, or
- Use treasury assets as collateral for credit that will spur growth
TL;DR, we need to get over the idea that increasing scarcity automatically means more value. So instead of burning, let’s think about more creative ways to recycle that capital.
Introducing Buyback-and-Make for yield farms
Phew, what a long read before we could get to this. Thanks for sticking around!
Buyback-and-Make is, in a sense, similar to Buyback and Burn. The key difference is the treatment of tokens after the buyback.
So what exactly is “Make”? And how does it solve the problems of layered farming / hyperinflation?
We first need to discuss the roles that we play in a yield farm and how we can motivate each role to continue contributing in order to sustain / generate progress:
- Liquidity Provider
- Developer
- Investor
Liquidity Providers
That’s you, dear reader, well for the most part. You provide liquidity for the farm to function, and in return, you receive a share of TIME that’s paid to you.
Capital contributed = Liquidity
Compensation / Reward = TIME
Motivations:
- (Primary) Price stability and value that’s secured by the market capitalization of TIME, hence ensuring high APRs to be earned
- (Secondary) Having a reliable product with well-thought tokenomics, ensuring consistent TIME rewards to be paid out
Developers / Founding Team
That’s us. We contribute our knowledge and time to build a protocol that would serve the liquidity providers and investors.
Capital contributed = brains + time => Product
Compensation / Reward = TIME
Motivations:
- (Primary) Access to liquidity in order to raise capital to pay for work to be done (product development, audits, partnerships, marketing)
- (Secondary) Price stability and value that’s secured by the market capitalization of TIME, hence providing assurance that the project is a worthwhile commitment
Investors
That’s all of us who hold TIME. We invest financial capital and we believe in the value of TIME.
Capital contributed = Financial capital + Diamond hands
Compensation / Reward = Capital appreciation
Motivations:
- (Primary) Strong core team that will ship product features reliably and attract more investors / liquidity providers
- (Secondary) Sufficient liquidity in the market to help reduce losses due to slippage when swapping
As long as the interests of the 3 roles above are maintained, we can then achieve circular tokenomics that will mutually benefit everyone.
So what exactly is “Make”?
Before we start, let’s take a look at how MasterChef mints and distributes rewards to users.
- MasterChef mints 10% worth of TIME rewards harvested to devAddress
- MasterChef mints 100% worth of TIME rewards harvested to MasterChef address
- MasterChef checks for TIME balance on MasterChef contract and performs a transfer of TIME to the User’s address
This means that, so long as there is a balance of TIME within the MasterChef address, there will always be rewards that can be paid out to Liquidity Providers.
We have configured our MasterChef to stop minting more TIME once the maximum supply is reached. And to ensure that users still receive their TIME rewards, our MasterChef contract first checks for TIME balance within the MasterChef contract before a transfer is made to the user’s address.
TL;DR — MasterChef can always transfer rewards, so long as there is a valid TIME balance in the MasterChef contract.
Key Takeaway #1 — Resupplying MasterChef with TIME would ensure that farming never ends. This marks the beginning of circular tokenomics.
The Automated Buyback Machine
You can send TIME to MasterChef and that would top up its TIME balance. In order to do so, you’d have to swap TIME.
However, no investor has an endless supply of funds that would help raise TIME’s market capitalization forever.
Besides, this would result in diminishing marginal returns (motivation) for the investor to continuously inject capital to increase the value of TIME.
Funds will need to be introduced via external sources in order to motivate investors to hold TIME for the long-term, but instead of merely focusing on marketing efforts, we’re introducing auto-compounding vaults.
These auto-compounding vaults provide a service to users who wish to remove the hassle of manually compounding liquidity pools. In return for providing such a service, our protocol earns fees from auto-compounding.
Users benefit from time saved, and our protocol benefits from earning compounding taxes that are used to buyback TIME. This then creates a consistent buying pressure for TIME which will result in a positive effect on price.
There are no deposit fees to use the vaults, but there will be an upcoming small withdrawal fee (0.1%) that will serve as a deterrent to vaulting bots that steal harvests.
Key Takeaway #2: We can retain investors for the long-term by introducing a consistent and reliable inflow of external financial capital through our auto-compounding vaults.
The Resupply
TIME needs to go somewhere after our Automated Buyback Machine does its job, so we’ve allocated 50% of all TIME that’s bought back to be resupplied to our MasterChef contract.
As a result, farming will continue indefinitely even after we reach TIME’s max circulating supply, hence motivating liquidity providers to continue providing liquidity — since TIME rewards will still be paid out consistently.
Note: APR is a function of both TIME Price and % Liquidity provided.
TIME will perpetually be tradable without having investors worried about a lack of liquidity during a swap. Devs / Core team will always be able to gain access to a sustainable pool of funds (from auto-compounding vault withdrawal fees) for future development, audits, marketing and partnerships.
Key Takeaway #3: We can farm for an indefinite duration since our MasterChef contract will always hold a TIME balance for distribution of rewards.
The Treasury
What about hyperinflation? Indefinite farming can potentially result in TIME going to 0.
We’ve played out multiple simulations and we’ve concluded that the only way to avoid hyperinflation (via overfarming) would be to create additional utility for TIME.
50% of all TIME that is bought back will be deposited into our Treasury, which will be set aside for the future utility of our protocol.
Since TIME is a capital asset that is to be accumulated due to price appreciation, we do intend for TIME to be an asset that you might want to retain as a store of value.
Some applications for future utility of TIME include:
- Leveraged Yield Farming with TIME as collateral
- Algorithmic over-collateralization of TIME in exchange for stablecoins
- Privileged access to Governance and other tokens within the Timeleap ecosystem
Key Takeaway #4: Added future utility for TIME (aside from farming) will motivate investors to develop diamond hands.
The “Make”
In summary, this is where the “make” in buyback-and-make comes from. Instead of wasting tokens by burning, we now have something very interesting happening.
On one side, TIME is being bought back and resupplied to MasterChef to continue rewarding Liquidity Providers (i.e. TIME won’t dump to 0).
On the other side, income from auto-compounding taxes will be used by our Automated Buyback Machine to consistently supply TIME to both the MasterChef and the Treasury, hence refilling the reward pool while incentivizing holders to retain TIME for added utility.
Instead of burning TIME, TIME has become available for re-issuance following the same incentive model for Liquidity Providers.
Buyback-and-make is not destructive to the market cap the way burning can so easily be. It is a permanent incentive model that creates continuous issuance of TIME while still keeping to its promised maximum supply of 86,400.
By recycling bought-back TIME into constant rewards and liquidity, we ensure there is always an incentive to continuously capitalize the system.
This essentially allows our protocol to perpetually leverage the benefits of issuance, while keeping the economic benefits of buybacks and the certainty of a known max supply.
Wow, we’ve finally come to the end of this article. Good on you if you’ve read till the end — and thank you for reading our brain dump / thesis!
We’re trying to do something very different in the yield farming scene. And if nothing else sticks, just refer to our summarized diagram below and stay around because it’s going to be a fun ride! 😄
Find us here:
- Websites: https://timeleap.industries/ | https://timeleap.finance/
- Twitter: https://twitter.com/TimeleapGameFi
- Telegram: https://t.me/timeleapgamefi
- Medium: https://timeleap.medium.com/
