The Game Theory of MiniPanther
Greetings! Today we will discuss the Game Theory of MiniPanther.Money and DAOS in general based on the above flow chart! If you enjoy it, check out MiniPanther, our short-term gamified DAO on the Fantom Network!
Minting/Bonding: The minting/bonding mechanic allows DAO participants to mint tokens at a discounted rate. The contributed funds go to the DAO treasury, and the minter receives tokens linearly over a specified Vesting period, usually 5 days (but 3 days in MiniPanther’s case). The game theoretic mechanism of minting/bonding is a short-term confidence game: the minter is betting that the discount received justifies the Vesting period.
Although the mint pricing is referred to as a “discount,” the discount can go negative, as the minting/bonding price goes up when tokens are minted/bonded. In addition, the discount is reduced if the spot token price drops. Conversely, the discount becomes greater and bond purchases more appealing if fewer people are purchasing bonds or if the token price goes up. An equilibrium is reached based on minters’ confidence in the token price and the BCV (Bond Control Variable, which controls the rate at which bond prices change).
Staking/Rebase: Whereas minting/bonding can be understood as a short-term strategy, or at least one that requires short-term management, staking can be done on a long-term basis without active management. Single MP staking provides stakers 1:1 with sMP tokens, whose balance increases according to the Rebase formula. The total supply of MP is increased by a settable reward percentage each epoch (usually every 8 hours). The Rebase distributes additional sMP to all stakers, which determines the APY. Wrapped MP (wsMP) holders/stakers receive the extra sMP when they unwrap.
The MP single staking APY is dependent only on the reward rate. Therefore, DAOs can consistently maintain high APY numbers if they choose to do so, but minting an excessive number of new tokens can drain the token’s AMM LP pairs and reduce the token price. This is why MiniPanther restricts all supply expansion to 14 days. Hopefully, this will allow users to experience extremely high APY during the supply expansion period without inflationary collapse.
Transaction tax redistribution: MiniPanther also uses the transaction tax redistribution method from Minotaur Money. This tax applies only to selling MP to LP pairs. The taxed MP is then redistributed to holders during each Rebase. This provides a holding incentive, as tokens directly funnel from sellers to stakers. This effect is magnified during times of high-volume trading.
Treasury-owned liquidity: Native LP tokens such as MP-DAI LP are among the bonds. When minters form LP tokens to use for bonding, this raises the token price via spot purchasing and increases the discount level of all bonds. This forms a positive feedback loop between minting/bonding and spot buying. It also results in the majority of the MP LP tokens being owned by the protocol, as they are contributed to the treasury via bonding. Therefore, the protocol avoids having to pay costly rent fees for liquidity incentivization, as DeFi 1.0 protocols do.
Treasury Management: MiniPanther’s treasury contract does not contain a standard admin withdrawal function. Instead, it has custom functions that perform a series of randomly timed and sized buybacks totaling 80% of all treasury bonds besides LP tokens on Day 15. There is no price protection until the buybacks are carried out. After Day 15, MP becomes the meme token of the Fantom ecosystem.
The structuring of MiniPanther’s buybacks create a unique financial game. It is unknown what the best strategy is, but we can identify several factors determining when people may sell tokens. There is a high single staking APY that puts more tokens in people’s hands as the 2-week supply expansion period proceeds. This could naturally motivate people to sell. However, the promise of buybacks on Day 15 may lead people to hold tokens until buybacks occur. The presence of outside staking options and the potential viability of the token when it becomes a meme token also may incentivize holding.
We don’t really know what the optimal strategy is for participating in MiniPanther, but if people want to help the protocol, both staking and bonding are important! We have inserted a “Buyback price” readout that simulates what the MP price would be if we did all scheduled buybacks now. This could serve as an independent motivator for people to bond!
Interestingly enough, the buyback price gets higher when there are more single tokens in treasury, but it is lower when we have more MP-DAI liquidity. Therefore, the relatively low liquidity amount of MiniPanther may be a feature rather than a bug. We look forward to seeing how the unique MiniPanther system plays out!