The Three Pillars of Sustainability — Early, Long-Term, and Active
The Astro Space protocol allocates the vast majority of token emission to the following three user groups: 1) early adopters, 2) long-term investors, and 3) active participants. Finding equilibrium is tricky but critical to the protocol’s long-term sustainability. For example, excessive token emission to the early adopters would drain the protocol’s treasury and result in a pump-and-dump situation. On the other hand, insufficient token emission to the early adopters would lead to the protocol’s failure to achieve mass adoption.
1. Early Adopters
The main reason for rewarding early adopters is obvious — they take the biggest risk by allocating capital to an untested protocol. For example, an angel investor for a brand-new startup invites the risk of losing all their capital but is also in a position to benefit the most (e.g., the often-reported 10,000× return) if the startup gains momentum and becomes the next Google.
Astro Space will allocate a large chunk of token emission to the protocol’s early adopters, but the tokens rewarded will be partially locked, depending on the protocol’s total value locked (TVL). This is in line with the above startup example: if the team and the investors are subject to a vesting schedule, the early adopters should also be subject to a time lock such that the risk-reward spectrum is fair to all participants. This model, also called the ve-model, was pioneered by Curve and is not new to crypto. We will discuss in detail the issuance schedule and the lock model in “DreamMatter — Token Issuance” and “DreamMatter — Time Locks.”
2. Long-term Investors
We want to reward long-term investors because their investment allows the Astro Space team to build the best decentralized exchange (DEX) for our governance token, DreamMatter (DMT). A similar incentive structure is seen in the US tax system, where short-term capital gains are taxed at a much higher rate than long-term capital gains.
Kyle Samani from Multicoin Capital defined the velocity of an asset as follows:
In the case of a standard governance LP token that nobody wants to hold, velocity grows linearly with total transaction volume. Based on the second equation above, if the total transaction volume (not to be confused with total value locked) grows 100×, the velocity will increase by the same amount. The result is that there is no value accrual to the protocol; thus, the often-seen pump-and-dump price chart. To reduce velocity and reward long-term investors, Astro Space will use different methods, such that token emission occurs in an equitable way.
First, a large portion of the LP token rewards is locked up in exchange for a higher annual percentage yield (APY) initially. For example, early adopters receive a higher APY, but a large portion of the rewards will be locked at first. The APY and the lock/unlock ratio will vary depending on the current total value locked. The equation for this will be shown later in “DreamMatter — Token Issuance.”
Second, our game NFTs will allow for extra yield boosting in Astro Space. The longer the NFTs are staked, the higher the user’s yield boost. We borrowed this concept from Curve, where locked CRV tokens, also called veCRV, get a boost of up to 2.5× depending on the lock-up period. The boost percentage and the time lock period will be detailed in “DreamMatter — Time Locks.”
We understand that this reward structure may discourage short-term speculators from participating in the Astro Space protocol. However, that is the tradeoff we are willing to make to build a strong community for our adventure.
3. Active Participants
The first two pillars of the Astro Space protocol are related to DeFi itself. Many successful DeFi protocols (e.g., Convex, Yearn, and DeFi Kingdoms) allocate a large share of token emission initially to help bootstrap liquidity, which is used to build a strong community. Early adopters and long-term investors who take the high price risk to give a vote of confidence to the Astro Space protocol should therefore be rewarded. In the long run, they are the best candidates for managing the DreamMatter DAO.
Should early adopters and long-term investors take all of the token emission reserved for protocol participants, though? The answer, in line with Web3 principles, is no. We want to reward users for actively engaging with the game content — via forming guilds and competing in upcoming PvP or PvE modes — by leveraging our NFTs, called Astrobots. (We will discuss the Astrobots’ included stats in “Astrobots — Levelable NFTs.”) The more the Astrobots are upgraded after completing in-game quests, the higher their yield will be. In PvP and PvE modes, access to the DreamMatter treasury is more likely if a user’s Astrobots are powerful and if their guild is the reigning champion in Astro Space.
It is our belief that the fundamental purposes of gaming are to have fun, compete, and form guilds and alliances. Games are played not to earn money, but to have fun with friends, beat other teams, and form connections via guilds and alliances. In Web3 gaming, “earning” is not a foundational component but a catalyst. In Astro Space, based on gaming results (non-competitive PvE) and rankings (competitive PvP), a guild may be lucky enough to receive windfall gains from the protocol’s treasury.
Dynamic gaming communities are not built from a Kumbaya mentality but out of the right mixture of competition and cooperation. Our goal is to emulate this in Astro Space.