TL; DR
Temple Spice Bazaar will allow users to
- Borrow DAI against TEMPLE at fair market rates through Temple Loving Care (TLC)
- Earn Temple Gold (TGLD) passively for staking TEMPLE
- Go mega long what Temple is building by bidding DAI for TGLD through Auctions
- Redeem TGLD for volatile tokens from partner and in-house projects through Auctions
- Continue to enjoy high APY through the TPI updates and downside protection through RAMOS
Introduction
The Temple Spice Bazaar is a unique system that recirculates capital and drives the flow of value between the different aspects of the Temple Protocol. Far more than just a DeFi product, the Spice Bazaar is a new paradigm for how the Temple Protocol will create capital efficiency, extrinsic value, and utility for all stakeholders. Let’s dive right in!
What Is Temple Line of Credit?
Fig 1. The Current TLC Interest Rate Model (subject to change)
The first facet of the Spice Bazaar is Temple Loving Care, also known as Temple Line of Credit (TLC). TLC allows holders to supply the TEMPLE token as a pristine collateral to take out a DAI loan at up to 75% Loan-to-Value (LTV) with the liquidation LTV set to 80%. From 0% to 90% utilisation of the global borrow cap, the TLC interest rate will be 15%. From 90% to 100% utilisation, the interest rate will scale to the 20% ceiling. The total DAI borrow liquidity will be capped to 10mm DAI and fair market rates will be charged. The interest rate model may be updated by governance should market conditions change.
Because TLC is a Temple v2 compliant Treasury Strategy, the TLC is a whitelisted Strategy Borrower from the Treasury Reserves Vault (TRV). This implies that TLC should generate positive Equity growth exceeding the “risk-free” rate available from the Base Strategy. At the time of writing, the TRV Base Strategy stands at 13% which is synced with the Dai Savings Rate (DSR).
In contrast to OlympusDAO which offers below market interest rates to incentivize Cooler loan borrowers to diversify its Treasury, Temple has no such need since our Treasury Price Index has grown at approximately 13% APR for the past 16 months during a bear market. Given that TLC Strategy Debt Ceiling is almost 33% of the entire Treasury, should TLC lending rates be set below the “risk-free” rate, TPI growth would fall below what Templars have become accustomed. Thus the opportunity cost of TLC lending would become detrimental to Treasury growth overall.
TLC is fully-funded and LIVE. Previous runway debt as recorded on the Treasury report has already been migrated to the TLC which will be utilised moving forward for future expenses.
What Is Temple Gold?
The second facet of the Spice Bazaar is Temple Gold (TGLD). TGLD is a non-transferrable ERC-20 token that will allow holders to redeem certain volatile tokens from the Treasury. Through its investments and partnerships, Temple has earned airdrops and rewards such as Ethena Shards. When future Spice Bazaar auctions go live, users will be able to claim those rewards using the TGLD they may have accumulated.
For users who do not need to borrow DAI, staking TEMPLE to farm TGLD is an intriguing option, especially when TLC utilisation rate is high implying much of the user-controlled TEMPLE supply is currently supplied as collateral.
The maximum number of TGLD that can be in circulation is capped at 1,000,000,000 tokens. TGLD is emitted periodically to 3 contracts: 1) The Temple Gold Auction (70%); 2) TEMPLE Staking (20%), and 3) Team Runway (10%).
Almost all of the TGLD emissions will go toward Spice Bazaar auctions and TEMPLE stakers. The TGLD emitted to the Team Runway multisig will be used to incentivize and retain valuable contributors so that Temple can be competitive for their services vs other Protocols offering token upside beyond cash value.
What Are Spice Bazaar Auctions?
Fig 2. Diagram showing the flow of tokens between Spice Bazaar Auctions and the Treasury
The Temple Gold Auction is the first type of Spice Bazaar auction that will be introduced. Whether they hold TEMPLE or not, anyone can participate in the Temple Gold Auction by submitting a DAI bid for the lot of TGLD up for bidding. At the end of the auction, the TGLD will be claimable on a per rata basis.
Let’s say that 10mm TGLD are available in the auction and 100,000 DAI are submitted as bids. At the end of the auction, each bidder would be able to claim 100 TGLD per DAI submitted. We expect fair price discovery to occur through this auction process so there will be no “minimum price” for the auctioned TGLD and no bid withdrawals once the DAI deposit is made.
The DAI from the auction will be transferred to the TRV in order to: 1/ invest in future projects and partnerships that will result in more volatile rewards; 2/ drive TPI growth for TEMPLE token holders. TGLD holders will have claims on future Temple airdrops by redeeming through Temple Spice Auctions.
In contrast to the Temple Gold Auction, the Temple Spice Auction will utilise TGLD not DAI as the bidding token. Furthermore, the token that is up for bidding is another volatile token in the Treasury which has not yet been utilised to raise the TPI. This reward could be a token from a partner protocol for bootstrapping early liquidity, or points to claim a future airdrop from the partner at their token generation event (TGE). At the end of the Temple Spice Auction, the volatile reward will be distributed pro rata to Temple Spice Auction bidders and the submitted TGLD will be burned.
Temple Gold Auctions will occur regularly e.g. bi-weekly or monthly to distribute the newly minted TGLD to stakers. The Spice Auction will go live pending market conditions and the vesting schedule for partner rewards.
Given the high gas prices on mainnet, Temple Gold Auctions will be on Layer Zero and will be cross-chain compatible. However, the individual Temple Spice Auctions will likely take place on the chain where the reward resides.
How do I get Temple Gold through TEMPLE Staking?
TEMPLE holders will be able to stake their TEMPLE to claim a portion of TGLD emissions. The staking APY is dynamic and will vary based on a number of factors i.e. how much TGLD is already in circulation and how many TEMPLE tokens are staked. Staking APR for TGLD will rise whenever there is a large redemption of TGLD in the Spice Auction, or if most of the TEMPLE is staked in the TLC. In contrast, APR will fall when there’s already a lot of TGLD in circulation or when TLC utilisation is low.
Importantly, TEMPLE tokens that are currently supplied as collateral on TLC, or held naked in a wallet or LP token will not receive any TGLD. However all TEMPLE holders will continue to enjoy increases in the TPI.
In short, users will be able to choose from staking their TEMPLE to farm TGLD, or supplying TEMPLE as collateral to borrow DAI. However, the same TEMPLE token cannot be used to simultaneously farm TGLD and used as collateral on TLC.
What is the Vision of the Spice Bazaar?
Temple is transitioning away from its yield farming roots to an innovative and sustainable new capital structure that is tailored to incubate new projects and partner with the best builders in DeFi. We envision a future Temple where most of the Treasury funds are deployed in various forms of airdrop farming, or incubating new projects such as Origami Finance.
The Spice Bazaar provides a way for the Treasury to recapitalize itself to fund more projects. Users who are bullish on what we are building can go long on the extrinsic value of TEMPLE by directly bidding on Temple Gold without even buying any TEMPLE on the market. The Temple Spice Auctions enable current and future volatile Treasury holdings to be converted to cash to push the TPI higher and reward TGLD holders.
Through the introduction of Temple Gold and the Spice Bazaar auctions, the Protocol will be able to find an ever-shifting equilibrium between providing short-term liquidity, driving TPI returns, and investing in the future upside of collaborators and builders. Thus the Treasury scales can be tilted organically by the community to leave the Temple Protocol well-positioned in all market conditions.
In future articles, we will reveal more juicy details about the Spice Bazaar. It will only get even more spicy from here on out.
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