Mechanics Part 2: Safe Premium
To catch up on the Temple story so far, you will want to catch our articles on:
- TempleDAO principles and the intrinsic value concept
- Mechanics Part 1: Safe Harvest & Intrinsic Value (👈 important context)
This article will build on the concepts developed in the prior articles. We are going to dive deeper into the value proposition of TempleDAO.
So you’ve heard us talk a lot about two common defi problems that slow adoption and drain stakeholder value. They are:
- Infinite mint inflation that leads to dumping of yield
- Automated market maker (AMM) pump and dump
We want to do our best to avoid this kind of volatility and destruction of value.
Our prior article talked about our Safe Harvest concept, which is designed to stop the infinite mint and dump problem.
In this article, we will explore our Safe Premium concept, which is designed to stop the AMM pump and dump problem.
How? We put a ceiling on the token price.
You heard that right. We limit how high the $TEMPLE price can rise.
Don’t worry. You get the same (or better) value at the end of the day, because the value comes to you through staking rewards instead of price appreciation.
This is much better aligned with a long term community.
Rather than all value building up in the price (which increasingly incentives selling on the AMM), value is provided in long-term stabilized incentives (staking rewards).
How it works
Buying is always available via the AMM.
Just like normal, the price rises as people buy from the AMM.
However, TempleDAO protocol sells $TEMPLE to users at a multiple (~3–6X) of the intrinsic value. This is the Safe Premium concept. We do not let the price rise too high above intrinsic value, as that would lead to instability in the protocol.
This price is fixed, and buying through the protocol is comparable to buying “over the counter” outside of an exchange. No need to worry about flash bots front-running your trade or MEV mischief. Transact directly with the protocol and enjoy zero slippage and zero fees.
Because TempleDAO is offering $TEMPLE at a fixed price (a fixed multiple of intrinsic value), the price on the AMM will not be able to rise above the protocol price (or at least, not for long). When the AMM price is higher than the protocol price:
- No one would buy from the AMM at the higher price when they can get the coin cheaper from the Protocol
- There is an arbitrage opportunity for fast hands to buy from TempleDAO and sell on the AMM until the prices are in equilibrium again. TempleDAO could also do this, but at least for now we will let our users profit.
And this is very good, because when users buy from TempleDAO, collateral enters the Temple rather than the AMM liquidity pool. We view the AMM pair as the exit liquidity for users who want to cash out. Although not trust less like an AMM, it is better for the user to enter the Temple through the front door, so to speak. By transacting directly with TempleDAO, the Treasury can begin compounding value right away. This is where the magic begins.
Natural questions to ask at this point
Q1. I’m still stuck on you telling me the $TEMPLE price is constrained. I’m not here for charity…
Tl;dr | Constraining price will make you rich.
Longer answer | This is the Temple of Financial Freedom. We can’t promote new defi technologies if we don’t make everyone rich in the process.
Because instead of new purchases pumping the AMM price, new purchases feed into reserves and compound in Safe Harvest of Staking Rewards.
- This means you receive compounding rewards.
- $TEMPLE token is protected from regular AMM pump and dump dynamics
- And as a more stable protocol, TempleDAO attracts more users and growth
More stability means more users. More users means more growth. More growth means more staking rewards. More staking rewards means more users which feeds and accelerates the positive feedback loop.
Q2. What are you going to do with these reserves?
Tl;dr | Compound.
Longer answer | Reserves allow us to compound value in three different ways:
These three aspects work together to create value for $TEMPLE holders.
TempleDAO has implemented a Safe Premium on $TEMPLE to stop the price rising above a sensible premium of intrinsic value. This means that volatility is reduced, stability increased, and value moves into the protocol instead of the AMM.
This allows the protocol to use this value to deliver staking rewards, invest its reserves, and grow the protocol further.
This is an unusual approach for a token that is not a stablecoin. But if you dig into other governance tokens, staking tokens, or value accrual tokens, their premium over intrinsic value can be very high. This means you are paying today for a promise of huge growth yet to come and bear the risk that it’s going to come crashing down.
We don’t want you to have to face that risk with $TEMPLE. We want you to feel confident buying and holding $TEMPLE at a Safe Premium, while you watch us build out our roadmap and grow TempleDAO sources of value.
If you’re looking for that sweet shitcoin pumpy high (and hey, it can be sweet), or if you’re looking for a giant flood of freshly minted governance tokens to farm — you might need to look elsewhere.
But if you want to create real wealth and not lose your way chasing illusory riches, come chill in the Temple.
We got you. We’re in it for the technology too.
Talk soon fam.
The information provided in this Medium Post pertaining to Temple DAO (“Temple DAO”), its crypto-assets, business assets, strategy, and operations, is for general informational purposes only and is not a formal offer to sell or a solicitation of an offer to buy any securities, options, futures, or other derivatives related to securities in any jurisdiction and its content is not prescribed by securities laws. Information contained in this Medium Post should not be relied upon as advice to buy or sell or hold such securities or as an offer to sell such securities. This Medium Post does not take into account nor does it provide any tax, legal or investment advice or opinion regarding the specific investment objectives or financial situation of any person. Temple DAO and its agents, advisors, directors, officers, employees and shareholders make no representation or warranties, expressed or implied, as to the accuracy of such information and Temple DAO expressly disclaims any and all liability that may be based on such information or errors or omissions thereof. Temple DAO reserves the right to amend or replace the information contained herein, in part or entirely, at any time, and undertakes no obligation to provide the recipient with access to the amended information or to notify the recipient thereof. The information contained in this Medium Post supersedes any prior Medium Post or conversation concerning the same, similar or related information. Any information, representations or statements not contained herein shall not be relied upon for any purpose. Neither Temple DAO nor any of its representatives shall have any liability whatsoever, under contract, tort, trust or otherwise, to you or any person resulting from the use of the information in this Medium Post by you or any of your representatives or for omissions from the information in this Medium Post. Additionally, the Company undertakes no obligation to comment on the expectations of, or statements made by, third parties in respect of the matters discussed in this Medium Post.