Temple Ascend: Progressing Temple Mechanics
By now, if you’ve listened to Call To Prayer 23 or been around recent discussions in the Temple Discord, you’re aware that a new mechanic named Temple Ascend has been in development and will be rolling out soon. With the basic concept having been teased, the time has come to provide some more details on Temple’s newest mechanism.
What is Temple Ascend?
In the most basic sense, Temple Ascend is a mechanism by which TempleDAO will acquire $TEMPLE tokens from the market when price is sufficiently low. Ascend’s initial use case is for market buying $TEMPLE with farming revenue, which in turn will be distributed to Core Vault stakers.
We first revealed the intent to obtain $TEMPLE from the market for yield distribution in our previous Temple Core article, and the Team had considered several options for how to accomplish this since that time. It was ultimately decided that Ascend was the most attractive option to mitigate front-running and return the best value to Core users.
How is this accomplished? To put it as simply as possible, Ascend introduces a novel implementation of Balancer’s Liquidity Bootstrapping Pool (LBP) mechanic.
What is an LBP?
To understand how Ascend works, we must first understand the basics of LBP’s. Balancer first introduced its LBP auction mechanic in 2020, and it has since been used with great success for several initial token fund-raise events. While an in-depth explanation of exactly how LBP’s work is beyond the scope of this article, we’ll provide a brief TL;DR on the general concept here.
Traditional liquidity pools are of course composed of a 50/50 weighting of the assets in the trading pair and they exist to be traded in perpetuity or until the time comes that the liquidity is removed. LBP’s, on the other hand, are more akin to a Dutch auction with a pre-determined start and end time. They utilize uneven asset weightings which are configurable by the LBP owner– and the weightings shift gradually over the course of the LBP lifespan. This creates a price curve (commonly referred to as a decay curve) that is effective in catalyzing a price discovery phase for a newly offered asset.
As a basic example, consider an LBP composed of Token A (let’s consider this a new protocol token) and Token B (this would be the paired token that the protocol wants to raise such as $ETH, $USDT, etc.). The LBP owner may decide to start the auction with an 80/20 weighting where 80% of the pool is token A and the weighting shifts to 20/80 (ending with Token A at 20%) over the duration of the auction. The starting price of Token A is high, and the LBP itself puts sell pressure on it, gradually reducing the price of Token A as the weighting shifts over time. If there were no outside buy or sell pressure during the auction, the decay curve of Token A would look like this:
This auction mechanism allows the market to determine a fair price for Token A, and in turn allows the protocol to accumulate Token B when buyers step in. For a deeper explanation on the standard LBP model, check out this Temple Codex article.
Temple Ascend: Inverting The Traditional LBP Concept
For Temple Ascend, the traditional LBP concept is flipped on its head. Since the goal of Ascend is to obtain $TEMPLE, it would not make sense to configure it to inherently put sell pressure on the $TEMPLE token. Instead, we invert the LBP weighting. In the case of the aforementioned example, and hypothetically using $FRAX and $TEMPLE, this would mean starting the LBP with a $TEMPLE weighting of 20% and a $FRAX weighting of 80%. Over the course of the LBP auction (known here as an Ascendance Ritual), the weights would shift like normal, putting buy pressure on the $TEMPLE token and gradually increasing its price over time.
Taking all of the above into consideration, and assuming no outside buy or sell pressure, the $TEMPLE token price would exhibit a curve opposite of the traditional LBP decay curve over the course of any given Ascendance Ritual:
This of course means that during an Ascendance Ritual, arbitrage opportunities are created between the external $TEMPLE LP’s and the LBP as $TEMPLE price on the LBP rises above market. With the participation of the outside market, this facilitates the efficient acquisition of $TEMPLE tokens.
Temple Ascend: Implementation
For the purposes of acquiring $TEMPLE for yield distribution, the total yield liquidated to $FRAX would be the starting point for establishing the pool parameters for an Ascendance Ritual. From there, the appropriate amount of $TEMPLE would be determined and paired to achieve the desired starting weight– and the ritual would then commence. At the end of the ritual, the acquired $TEMPLE would be distributed to Core Vault stakers.
Ascendance Rituals will take place within the Temple dApp. For any given ritual, the UI will display pertinent information such as price, chart, pool size, pool weightings, etc.; as well as a simple trading interface. Users may freely trade the LBP as they wish.
TempleDAO will configure each Ascendance Ritual to achieve its desired goal. This includes chosen assets, pool size, weightings, and duration. Additionally, TempleDAO may end a given ritual prior to the predetermined end date if its desired goal has been met.
Utilizing the tested and proven Balancer LBP mechanic in this way gives Temple an efficient tool for obtaining $TEMPLE tokens from the market to pay yield in vaults.
Launch of Temple Ascend is right around the corner. Keep your eyes on Twitter and the Temple Discord for further announcements.