2.2 Temple AMM & Tokenomics Update (1/2)
We’ve built a liquidity pool unlike any other, incentivising treasury growth and price stabilisation.
We split this article into two parts:
- Part 1: Refresher on Temple Economics
- Part 2: Temple AMM Design
Let’s begin with Part 1.
Refresher on Temple Economics
This article is an update to the July-August medium series including principles, part 1, 2, 3 and 4. It is financially oriented, focused on Temple’s defi mechanics. Upcoming articles will explore our related DAO and metaverse mechanics.
We are building the much needed sanctuary of long term wealth creation.
One that provides solace from pump and dumps, grows real value, and brings people into deeper contact with themselves and community.
Quotes are from our July principles article:
We believe the volatile experience of retail defi is a reflection of the shortage and shortcomings of available products and offerings rather than the intrinsic nature of defi.
TEMPLE exists to provide the best possible balance between:
- Stablecoins depreciating at 5–25% pa depending on how you measure inflation / money supply growth — which you try to counter with safe yield
- Naked tokens in defi, which vary from “crazy volatile” to “holy fk volatile” and mostly correlate and crash together in downturns
It achieves this with its unique design, crafted to best meet these principles:
Principle #1: Ecosystem growth benefits all TEMPLE holders.
We want everyone to win.
Many protocols give away 90% of their lifetime value to the first 100 people in Discord through an immediate price pump on launch. This short-sighted design limits protocol growth. We thoughtfully built something very different.
- Our rituals drive a self-selection process, creating a strong basis of committed members, which aligns our community = team = investors = users
- Our mechanics limit price growth, so entry to the Temple remains attractive for everyone (very first TEMPLE price to last Opening Ceremony price is less than 4x)
- Our design channels excess demand into treasury growth, funding yield, protocol health, and a range of economic & organisational advantages (see next articles)
Designed as the fairest protocol ever launched, if we can deliver the most stable, fair, and efficient way to share value with holders, we will attract the most users, the largest treasury, and reap the compounding advantages of an at-scale ecosystem.
With the right structure, we can turn that scale into the largest, best paid, most passionate, most community driven, fastest shipping, metaverse native, decentralised cult of any defi protocol ever.
That kind of DAO, with a giant treasury, can meaningfully win in related defi services (exchange, lending, risk management).
That kind of endgame compounds growth and value enormously, which is shared fairly with current and future holders.
This is how we win.
OK, big picture clear, back to mechanics.
Principle #2: Design for the highest return possible with maximum price stability and treasury growth.
Optimising price stability with return is the heart of TEMPLE mechanism design.
Multiple complementary design features to achieve this:
- Temple Growth prevents price moon and dump by slowing price growth and capturing excess demand into treasury growth (previously ‘Safe Premium’).
- Temple Devotion, aka Buy The Dip Game, provides the most efficient downside price support possible utilising Faith and Bonus APY rewards (concept previously leaked under the name ‘Temple Offence’).
- Temple Defend guarantees this Intrinsic Value by preventing price falling below it.
- Exit Queue ensures a fair yet orderly exit from the Temple, where ordering is preserved (first in first out) but the volume of Temple unstaked is limited per day (policy setting, currently ~1.5% of all staked TEMPLE).
The essence of all five of these features are unchanged from Temple v1 economics.
However, the Temple AMM substantially changes how many of these features are implemented (#2, #3, and #4). The control of our own AMM gives us a much broader design space than originally contemplated, meaning we can improve these features far beyond what we originally thought possible.
Part 2 of this article will outline exactly how these features work.
Principle #3: Allow Intrinsic Value to grow and never be diluted.
Safe Harvest & Intrinsic Value are at the core of TEMPLE mechanics, underpinning all price stability features above.
A quick refresher:
- Each TEMPLE token is backed by Intrinsic Value.
- Intrinsic Value is ‘Safe Treasury Value’ / ‘Fully Diluted Supply’, and represents the absolute minimum amount of value attributable to each token. By the end of the Opening Ceremony, each TEMPLE was backed by 0.65 FRAX and growing.
- As Treasury Grows, Safe Harvest is run and calculates exactly how many TEMPLE tokens can be minted to allow Intrinsic Value to steadily grow. For details, see a working example in this article under “Let’s Run An Example”.
This system is special because the floor grows and your claim on Intrinsic Value will never dilute. Unlike many protocols, there are no founder or investor options vesting in the background diluting your claim on value. In addition, all future staking rewards have already been minted, so supply can only grow when the Treasury grows.
Both of these features are distinct from Olympus style protocols where dilution can eliminate the benefits of Treasury growth.
Temple is designed with comfort in mind, your share of value can never be diluted.
Now that we are refreshed on Temple Tokenomics, let’s continue in Part 2: Temple AMM Design.