One of the most common questions that we have been asked since releasing RBN was what the token could be used for. Up till today, RBN has been a pure “governance token” — it has been used to vote on governance proposals including changing of fee models, how to utilize the treasury funds, creating liquidity mining programs, and so on.
Today, we are unveiling a longer term plan for RBN utility and how it becomes a key part of the Ribbon ecosystem.
Staked Ribbon (sRBN)
The first key piece of Ribbonomics is a brand new staking architecture. RBN holders can opt-in to stake their RBN and receive sRBN in exchange. sRBN gives users voting powers and other superpowers, which we will explain more in this post.
The sRBN token uses fully on-chain governance, specifically the Governor Bravo system, which allows governance proposals to get executed autonomously instead of through loose consensus via a Snapshot vote and multisig execution.
Vote Locking and Reward Boosting
For many DeFi projects, governance is not particularly valuable. Token holders are able to vote on parameters such as fee tiers or how the treasury spends its funds. These governance powers rarely give back direct value to token holders, leading to voter apathy and an overall lack of interest in the governance token altogether.
One standout counterexample of this is the Curve governance system. Curve allows users to lock their CRV to earn more veCRV, netting them more voting power, trading fees, and the ability to boost rewards.
We are designing sRBN with the same model in mind as veCRV. The longer users stake their RBN tokens, they will get in return:
- More voting power (e.g the ability to control which vaults rewards accrue to, a la the infamous Curve gauge weight vote)
- Boosting of future RBN rewards
- Outsized proportion of protocol revenue
This will become an extremely integral piece of the Ribbon ecosystem when we rollout 2 new programs in the next few months:
- Vault Deposit Incentives
We will soon propose a new revamped RBN emissions program, but which vault these rewards go to will be controlled by sRBN holders — this aligns users of the platform with long-term RBN stakers. For example, large depositors in the ETH Covered Call vault may choose to acquire and stake RBN to acquire as much voting power as possible to redirect emissions into that vault.
- Permissionless Vaults
The Ribbon protocol will also support permissionless vaults in the future — anyone will be able to create their own Ribbon Vault that supports any asset or any strategy. In this universe, people can also acquire and stake RBN to bootstrap their vault and redirect more people to use it.
This vote locking model helps to align incentives by giving all the powers and rewards to the longest-term RBN stakeholders. Fleeting speculators will lose out on governance powers, rewards, and protocol revenue.
Users who decide to stake their RBN also play a role in backstopping the protocol against black swan events. These black swan events come in two forms:
1. Smart contract exploits
If the protocol suffers an exploit where there are unexpected losses of funds, RBN stakers will be on the hook. This will be modelled after the Aave Safety Module.
2. Huge vault losses
Because Ribbon vaults earn yield through selling risk, they are exposed to black swan events such as huge market downturns. For example, the ETH Put Selling vault lost -12% of its value during the May correction this year.
We introduce a new backstop feature where RBN stakers insure losses beyond a certain threshold (for example for losses more than 10%), which should make the vaults much more attractive to depositors. This threshold is configurable on a per-vault basis, and is controlled by governance.
Through providing these services, RBN stakers will be compensated in additional RBN rewards as well.
Timelines and Launch
The Ribbonomics plan will be rolled out in two phases. The first phase will include the new sRBN token, along with vote locking and reward boosting capabilities. The target for this is to be launched in Q4 2021.
The second phase will include the protocol backstop functionality. This will be rolled out in Q1 of next year.
Execution of sRBN functionality will be performed through governance vote.
The Ribbonomics plan combines some of the best ideas from other DeFi projects to deliver more sustainable and long-term utility for RBN holders. Vote locking creates an incentive for RBN holders to lock up their tokens for extended periods of time to have more sway in the Ribbon ecosystem and receive lion’s share of protocol revenue. Protocol backstopping creates a way for RBN holders to earn additional rewards for having skin-in-the-game, while delivering a better product for vault depositors.
Combined, we believe that these and other future efforts could create a positive flywheel for Ribbon and RBN, where more depositors -> more revenue -> more stakers, and the emissions of RBN get locked up for longer and longer as people try to gather as much sRBN as possible.
Connect With Us
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Special thanks to DCF God for reviewing an early version of this post.