Liquidity Wizard has stepped out of the lab to field questions from the community about growing our treasury of protocol owned assets, the new ACC mechanic, Membrane, revenue distribution, governance, and more.
- "Old DeFi" focused on TVL numbers, but the evolved thinking is that TVL more closely resembles debt, and it is preferable to focus on growing protocol owned assets sustainably in order to grow the balance sheet.
- Tokemak currently has ~$36 million in protocol owned assets and is at no risk of burning through the runway.
- Liquidity deployment is proceeding as expected, with perhaps a more conservative approach due to current market conditions.
- A portion of generated revenue can be distributed to TOKE holders via repurchases and can further incentivize ACC purchases.
- L2 ambitions remain the same, but given the current state of the market, are not a priority. The first cross-chain/L2 support is expected in late 2022.
- Membrane is being actively tested in production by trading desks.
- The BRANE token will be launched when market conditions are more favorable.
- Tokemak will be able to deploy liquidity to Membrane, but this integration isn't expected until next year.
- BRANE will have multiple utilities as a credit and price-backing token.
- Distributing revenue in the form of TOKE repurchases increases market buy pressure, simplifies revenue distribution, and reduces emissions.
- Inbound revenues are likely to be primarily through ACC, with LP fee-based revenue being used to incentivize ACC purchases in the form of a mint bonus rather than net-new emissions.
- Permissionless Reactors would be ignited via accTOKE-based governance.
- Snapshot governance is expected to begin in the next few weeks.
- A refreshed landing page is being developed by Tokemak's newly hired designer and is coming soon.
Alternatively, the recording is available on SoundCloud
[00:00:00.490] - end0xiii
The people want to hear The Wizard.
[00:00:03.140] - end0xiii
All right. I think we could probably get started -- tratium, if you want to just jump straight into some of the questions that we've gathered.
[00:00:11.450] - tratium
Yeah, absolutely. We're very interested to hear how Tokemak's timeline has changed during the past six months. Some things that were kind of expected to be delivered earlier on seem to have been reworked with better tokenomics, more thought put to how we do things within the protocol. So would you be able to describe what has taken longer than expected and what adjustments have been made along the way to get to the point we are now?
[00:00:36.230] - Carson
Yeah, absolutely. So I would say in general, it's worth sort of talking about how DeFi has evolved and what we've been monitoring and then therefore how that impacted what we build and continue to build. So I think old DeFi, and though we sort of often put in our overviews that, hey, this is the state, and we're trying to move ourselves beyond this...Tokemak was not immune to this -- old DeFi was very focused on... [inaudible 00:01:01]
[00:01:10.150] - Carson
All right, I might have to switch to my phone. Let me know if it cuts out again.
[00:01:13.770] - Carson
This might be my great internet connection that I've had this week. How about now? Can you hear me?
[00:01:18.590] - end0xiii
Yeah, sounds good.
[00:01:19.970] - Carson
Okay, just jump in if I cut out.
[00:01:22.510] - Carson
Okay. So I'm not sure how much you missed, but I was just saying old DeFi was very much focused on TVL and emitting tokens in order to attract that TVL and then hopefully do something useful with that TVL. Right? In the case of Tokemak, provide liquidity. Liquidity as bandwidth out to DeFi... [inaudible 00:01:42]
[00:01:43.990] - tratium
Yeah. You dropped off again, Carson. Might have to switch to your phone.
[00:01:48.250] - Carson
Why don't you guys discuss while I switch? Okay, sure.
[00:01:54.970] - tratium
Even on my own with the last ACC article, it kind of -- the idea that TVL -- third party capital -- is largely a liability compared to actual protocol controlled assets is kind of an important distinction to make. And I am very interested to hear the full answer to this because DeFi has mostly been focused on TVL numbers, and it's not really the full picture at all for what you can accomplish. And despite some of the issues that Olympus has had -- being overly hyped and then kind of crashing down -- they really do show the power of having protocol owned assets and liquidity and stuff. And I think incorporating that is going to be huge. So it's a good pivot to make.
[00:02:44.050] - Carson
Okay, can you guys hear me clear now?
[00:02:45.990] - tratium
[00:02:48.010] - Carson
Okay, cool. Hopefully my cellular reception will be better than my internet, which has been giving me trouble for whatever reason over the last few days. Okay, so sorry, everyone, for dropping there. So what I was just getting into was: DeFi now, I think, is going over to hopefully much more solid fundamentals, which are what for a while we've been calling PCA or PCV, protocol controlled assets or protocol controlled value. And then, of course, revenue and profitability. So basically a balance sheet. And then whether you're actually profitable.
And I think someone – and you can probably refresh me on who in the community – someone recently suggested the term protocol owned assets within the Tokemak community. And I actually love that. So I think just recently we were recording some new podcasts that will be out soon, and I'm...adopting that. I want to make sure that we give props, though, to who mentioned that. Do you remember who it was off top of your head?
[00:03:46.810] - tratium
I think that was adjudicator.
[00:03:49.810] - end0xiii
[00:03:50.640] - tratium
The recently crowned specialist.
[00:03:53.290] - Carson
Okay, nice. And the only reason I'm sort of singling this out is I think "protocol controlled" – if you just sort of think of the two words, right – protocol controlled assets. You can argue that a DAO is definitely controlling the assets that are in its TVL, but protocol owned assets are much clearer. So I thought that was a great point. And I'm going to try to make it a point to sort of incept that into the DeFi consciousness now of using protocol owned assets versus TVL.
And again, I'll get back into sort of the actual question of what has gone on track, what things slower and why. But if you sort of look at everything DeFi, being focused on TVL is basically how much venture debt you can raise in some sense, right? It's like how much in liabilities can you take out? Which I think was the right thing to look at for a point in time. But it's very clear that that should not be sort of the future of this. And so all of that has caused us to, I think, focus much more on core sustainable tokenomics starting with ACC.
[00:04:58.720] - Carson
And we've been sort of under the hood for a long time looking at that. But the core approach with ACC is really a shift, kind of flipping it on its head, how both the core team and I think the community generally looks at this thing. So now instead of just like, hey, how can we get as much TVL and to provide liquidity, how can we instead grow our POA or protocol owned assets or formerly PCA in a sustainable fashion, taking into account TOKE emissions -- we'll get to more of that later here as well.
And in a way that the balance sheet can grow, we can be conscious of revenue and ultimately profitability and really move into the next stage, which is making sure that this is sustainable. And I should also note then before I go to actual what things have gone sort of faster, slower, et cetera: we have about $36 million in protocol owned assets right now. So the good news is, despite a bear market, which always sucks for everyone right now, we're right around 7 million or a little under annual burn, which gives you just on a straight extrapolation about five years of burn rate.
[00:06:05.260] - Carson
That doesn't, of course, take into account any sort of DAO to DAO swaps. Also doesn't take into account any revenue we're generating, which we are. We're actually generating about a run rate of $20 million in revenue. So actually profitable, especially if you don't take into account TOKE emissions prior to sort of the market falling off. Where then all of the reward tokens that we were pulling in obviously went down in value.
But so that kind of gives you an idea of where we want these things to go. We really want people to be focused on treasuries protocol owned assets, revenue, and profitability. And so I think then linking back to what's gone on track, what things maybe then got pushed to the side in order to focus on these things and sort of establishing more...fundamentals. I think L2...and I think this might be the next question so I won't dwell on it too much, but...I think L2 has taken longer because we've been much more focused on these core fundamentals. Also, I think just scaling up takes a little bit more time because we need to make sure we have enough protocol owned assets, especially in the pair asset side of things.
[00:07:08.010] - Carson
So the stables and ETH, in order to actually get the network effects, you want to bring in more of these volatile or what we call "Token Reactors", the project-based tokens that you pair with those assets to deploy. So I would say that's sort of the general approach on which things took a little while longer and then why where we were focusing instead.
[00:07:28.430] - tratium
Great. Thank you. The next two questions are related to those things you touched on. So as far as, like, liquidity deployment and scaling up that has gone, how is that proceeding with...what you guys had in mind? Maybe at the beginning of the year or earlier last year, the process of lowering the guard rails...did you think it was going to happen faster or slower, or how has that process been?
[00:07:54.870] - 70k3m3ch
I think we might have lost him, so I think I can hop in on that one a little bit. Craig might also have some input on the governor's side since he's been closely monitoring this. I think generally speaking, from that end, it went generally the way we expected it. We've been maybe a little bit more conservative and careful about lowering the guardrails, right, especially with the market conditions currently. Craig might have more precise numbers for that.
[00:08:30.330] - Craig
Yeah, I can add a little color here. I think as we transitioned into this PCA or...sorry, given Carson's new terminology.
[00:08:43.510] - Carson
PCA is fine for now. By the way, guys, where I am, there's like a massive storm going over. So if I drop again, worst case, if I can't be on much of this, we can always reschedule one even sooner than we wanted. But hopefully I can keep going. Go ahead, Craig. And then I'll jump in.
[00:08:59.130] - Craig
Yeah, that sounds great. So I think we always have talked about crawling before we're walking, before running and stepping into these things very deliberately. I feel pretty good about us deploying our POA first, getting comfortable that the infrastructure is operating the way that we expect and the incentives are working the way that we expect, and then introducing the liquidity multiplier to start...then sort of levering on top of the reserves.
As we started to do that, you've seen some pretty extreme market conditions. And so that kind of continued ramp up has gone a little bit slower than maybe we would have envisioned a couple of months ago as we started to increase that factor. I think that's the right move; this is just my personal opinion. And as we implement the new reserve system, I think that gets us to a point where we can start to scale a lot of these things more quickly because we have a lot of incentives that enable us to kind of scale, refill PCA as needed, or lever up effectively...use more tAssets depending on individual assets, the markets they're deployed to, and...our intent to scale along with the liquidity directors vote for each of these reactors.
[00:10:22.770] - Carson
Yeah. I was having connection challenges when I heard when the root question was coming, but just building for now on what Craig was saying: there's going to be a very interesting feedback mechanism in the next phase. I don't think this is apparent for sort of what we put in the very first ACC token article. But effectively we will be able to generate revenue from our TVL, which is sort of our leverage...take a portion of that revenue, use it to purchase TOKE and ultimately a portion of that revenue, which can serve as sort of a leverage effect to attract more ACC or POA.
And I almost did my issue, too -- POA deployment -- so in other words, more people to mint ACC and hand more tokens over into the POA. So you're going to get this really nice leverage effect where the TVL can be used as leverage not only for liquidity providing, but also as incentive leverage without being net-new emissions. So the goal now is to move away from inflationary... kind of the inflationary phase of this and have all TOKE emissions be paid out sort of as a portion of revenues generated, which we think we have a really sustainable and I think beneficial path to all TOKE holders that this next phase of tokenomics is going to open up.
[00:11:50.350] - tratium
Yeah, that's great to hear. And I think especially important during a bear market where the market maybe can't absorb as much emissions as it would otherwise. And so the next question -- similarly, what was the multichain ambitions and how are they going to progress... maybe we're being more cautious on that end as well. And at what point do you think we'll be deploying to L2s?
[00:12:13.810] - Carson
Yeah, absolutely. So I think kind of this links into, I think the first question where we were saying...where this probably took a little bit of a backseat as we focus on...fundamentals here. We still definitely have multichain ambitions and are planning to go in that direction.
I would say right now the thing that we're sort of both observing and learning is that I think TVL isn't always your friend in a bear market. So the game is not just to have TVL for TVL's sake. It's to be very strategic in where and how you deploy TVL – or really what I now call like debt capital – effectively to your benefit. So one of the reasons beyond just kind of refocusing on tokenomics and where I would say probably the biggest endeavor from the core team has been...where we've been heads down: focusing on how to grow profitable revenue and protocol owned assets. And by the way, there's a ton of work that's been happening on this and everyone...we've got the article out, but you're about to actually see the effects over the coming weeks as these things start to be rolled out.
[00:13:14.950] - Carson
And by the way, we'll start pushing towards some of these revenue things I think within the next week or two here. So there's going to be a lot of movement you're going to start seeing happening, but along kind of the lines of what I mean, where all TVL is not necessarily your friend.
If we immediately – like tomorrow – turned on current Tokemak on, say, three other chains or L2s, right...you would have some TVL there. You would now have some segmented liquidity until you really kind of finalize your bridging approach. And importantly, it can be helpful as long as you have the ACC – the new tokenomics – set up, because then there's this nice feedback mechanism between your leverage and your growth of treasury or growth of POA. But until you have that, it doesn't necessarily get you a whole lot. It's great to plant the flag. And again, in a bull market, I would say it's more important to plant the flag. I think here it's more important to do it in a very strategic and systematic approach. So for any of you that are big believers in any of the other ecosystems outside of kind of Ethereum L2 – myself included, by the way – we're still going to be there.
[00:14:21.120] - Carson
We're just going to do it when the time is right, which means get these new tokenomics out and then come. So I would say still probably by in 2022 you're going to see L2 or cross chain of some sort from Tokemak. But we're going to do it when the time is right and we want to make sure that we can do it in a manner that's beneficial to token holders instead of just doing it to do it.
[00:14:43.450] - tratium
Got you. Thanks. Yeah, it makes a lot of sense. All right. Maybe the most popular question, Membrane. Any sneak peek on Tokemak <> Membrane integration? Wenbrane? Anything you can give us?
[00:14:56.410] - Carson
Absolutely. So the platform progress is actually out the door now with friendly...and a number of desks...feedback has been very positive. So, though so far on the token front, it hasn't been out. By the way, the token could sort of go at any point, but we're obviously being cognizant of market conditions.
So the plan is to launch BRANE still in 2022, but do it at a moment when we can launch into the right market, as opposed to a moment where right now just people aren't paying attention very much to tokens.
So the platform, though, currently has OTC trading lending. We're getting all kinds of requests from the initial users of it to add the clearing abilities for derivatives and OTC options, which is really interesting. So that's sort of a brand new product that can be built on top of the Membrane clearing, netting, and settlement. And I think I would say three ways that...or actually four ways that Membrane and Tokemak will have tangible integrations -- and I think there will be a lot of other ways that are maybe a little bit more abstract. But one is that, of course, once the BRANE token comes, as we've been long saying, there's going to be a benefit to the Tokemak community.
[00:16:07.920] - Carson
So we'll let you continue to parse out what that means. But that means once it comes in 2022, those that are participating with Tokemak will be happy. Second is liquidity from Tokemak will eventually be able to be routed to Membrane as one of the recipient venues. That probably won't happen...probably not even in 2022. That will probably be 2023, only because there's some nuances with Membrane being sort of a hybrid venue that's not purely DeFi and also isn't CeFi, but that's definitely one of the conduits.
The other direction is once the BRANE token is live, the BRANE basically serves as a credit gauge token of sorts for the different desks and individuals that are on Membrane. But the BRANE can also be used as credit to back market makers as they come on board onto Tokemak as pricers. And we haven't launched pricers. That's probably when I could have mentioned earlier, too, on where did I think things would happen and when this one was much more a state of the market kind of thing where so much...let me take a step back. For those of you on the call that don't know what I mean by "pricers"...
[00:17:19.060] - Carson
In the early days of Tokemak, we talked about liquidity directors, liquidity providers, and pricers. And if liquidity is deployed somewhere that needs someone to set bids and offers or respond to our queues that requires pricers, basically a decentralized network of desks or market makers that can respond to those things and set prices. The idea is BRANE could be used not only as credit backing BRANE, but also backing the price. That's another interesting flow through.
And then we're starting to kick around ideas in Membrane to let it be sort of a conduit for institutional capital to flow into DeFi. So Tokemak could be one of recipients where in a very streamlined...like stupidly simple process, you could have a tab that sort of routes capital into DeFi. And therefore Tokemak could be the beneficial recipient of some of that TVL again, that we want because it is strategic and helps us with sort of growing the PCV -- or sorry, I did it there -- POA, protocol owned assets, and profitable revenue generation...and of course, liquidity deployments from Tokemak.
[00:18:33.250] - tratium
Great. Thank you. Yeah, not a lot of analogies for Membrane...I don't think there's another platform that's quite similar, but the onboarding outside capital into DeFi sounds familiar to the Goldfinch AMA, where they're one of the few protocols that are really bringing in outside capital.
Let's see, jumping back a little bit to the revenue share part: is there a reason why the revenue share is in TOKE tokens rather than the native reward tokens that we accrue? Is it simpler from a distribution perspective? What's the reasoning behind that?
[00:19:06.130] - Carson
Good question. So it is in some sense simply from a distribution perspective. But the actual benefits are this gives...one of the main reasons is once you generate revenue – which Tokemak obviously does – if you take whatever slice of that pie and you want to distribute it to various token holders or various participants within your ecosystem, the best move is: if you don't have it in your native token, purchase your native token with it.
So the goal of this is to move away from TOKE emissions in the fairly near future, meaning maybe midterm completely, meaning we could switch over to just...if you're generating native revenue, buy the token and distribute it rather than do net-new emissions. So the goal of this is to slow down emissions and also give nice sort of pricing pressures, I guess you would say, or market impact from the actual revenue that you're generating.
[00:20:01.630] - tratium
Yeah, it makes sense. Let's see...how effective do you think the growth of PCA or POA through liquidity provision will be? Do you see most of inbound revenues and permanent owned assets coming through like ACC, or do you see LP fees still being a significant part that will bring us towards the Singularity?
[00:20:29.640] - Carson
So it's really interesting, and I don't anticipate this will set in very well for anyone on the call because we're deep right now in these discussions. You actually can determine which like one or the other or both, that you actually want to have your sort of net revenue generator.
What I mean by that is...the short answer is yes, I think that the rewards, the LP fees, the spread, conceptually will continue to be a nice revenue generator. But you may use that revenue generator as the leverage some or all as the leverage factor that I mentioned earlier in the call about how you attract more POA into the platform. So you can use basically that generated in order to juice or give sort of an increased APR and mint bonus to those that mint ACC token, which means just hands tokens over into our treasury.
And the way you can kind of think about that is anytime you have an asset, say a stablecoin where you can deploy leverage greater than one with the TVL that we deploy in relation to our protocol owned assets or POA, that means you can actually flow back through from the revenue that's generated on that leverage.
[00:21:48.660] - Carson
You can flow through juiced APR -- in a non inflationary manner -- to those that hand us assets into our treasury. And again, I probably lost everyone, but these are just two different approaches to how you do it, both of which end up bringing in revenue. It's just the question: do you push all of what's generated out in the secondary markets into attracting more assets via the ACC mechanic and you mark your net revenue there, or do you take some portion out of what you get in the space and sort of slow down the ACC mechanic? And there are various reasons you want it to come from one way or the other. In the early days, it's probably very much, hey, push the ACC, push the assets through the door into our protocol owned assets by ACC, using a lot of the revenue from the liquidity deployments to incentivize over there so you don't have to use any net-new TOKE inflation.
[00:22:40.250] - tratium
Yeah, that concept really clicked with me during the latest ACC article, and that article does mention the bonus factor and stuff. So anyone who wants to read more about that can reference that previous Medium post. Could you provide any information on how -- with a permissionless reactor system -- how would that be bootstrapped using the new ACC or accTOKE system?
[00:23:02.570] - Carson
Yeah, absolutely. So we're still refining exactly, but you can think of it as: we're planning to have juiced governance abilities for those that participate at the highest levels of the ACC mechanics. So if you hold ACC to or this locked sort of vote locked TOKE, that should give you more juiced governance power for liquidity direction, likely. And then...we are fine tuning this right now, but either unique access or at least preferred access into voting for these reactors to come online. And so a lot more we will outline exactly how those work. We're sort of fine-tuning all the mechanics right now, but we believe that that is a good example of sort of higher levels of governance for those that are acting most in the most helpful manner towards Tokemak.
[00:23:56.630] - tratium
Got you. Thank you. And last question with a minute to spare -- "with great power comes great responsibility" -- any updates around Tokemak governance?
[00:24:06.710] - Carson
Yeah, absolutely. So we have been working right now on staging and setting up a forum and snapshot. So from the beginning, we had, in a way, a lot of governance within Tokemak, but much more on the operational end. It's now time to move into sort of the strategic end of things as well. So the community can expect over the next two-ish weeks, two, three weeks, to see...at first probably kind of streamlined governance coming to them. And then we'll be opening up more and more and more. And so you can expect to see a lot more activity on the governance side of things. We'll get the community more engaged there as well.
[00:24:45.770] - tratium
Great. Thank you so much. Yeah. That is all the questions I have listed here, and it's the top of the hour. So if you've got to hop off, I appreciate your time. And will anyone else in the team be around for any other questions or are we going to wrap up here?
[00:25:02.090] - end0xiii
We'll wrap up. I just want to say one more thing first. I want to thank everyone for joining. I've got 80 people in the audience. That's pretty cool. We're going to definitely try to have these more often because I think they're the most effective way to sort of disseminate solid information coming straight from Carson's mouth, because he's the most eloquent and efficient person to articulate a lot of these things.
But one other thing I wanted to say is that I know we had mentioned and teased an improved splash page for the Tokemak website. And now that we have this full time designer, we're going to be making good progress on it. We just got a really nice revised mock-up that looks nothing like the previous version that we teased, and hopefully we'll be able to get that out in the next few weeks. So we appreciate everyone's patience on that.
[00:26:00.450] - Carson
I'll chime in one more thing, too. I appreciate everyone being here. I think having 80 people in an audience in a bear market here is great. Like I was saying, we're all building a ton of stuff. We are going to continue to deliver product. We could get through a market like this that lasts for three years. None of us are going anywhere. And if anything, a builder's market has a lot of benefits as well. So we're getting hyper focused on sustainable tokenomics within Tokemak, and I think you all will see the benefit of that coming very soon.
[00:26:35.190] - end0xiii
Awesome...and tratium, thanks so much, man. Your smooth voice is a perfect candidate for asking questions. We really appreciate it, and I'm sure that it will be.
[00:26:47.380] - Carson
Thank you tratium, the only thing I wonder now is how you were able to also keep track of everything, because I know usually it's immediately sent out as soon as these things finish.
[00:26:56.410] - tratium
Yeah, I'll have to go back and re-listen to it and summarize.
[00:27:00.270] - Carson
I was also going to say...I think there's even more questions so we'll do another one fairly soon where we can hit more of the questions. Keep the questions coming in Discord, and we'll make sure that the captains are all aggregating those things and we'll try to keep doing calls with regular cadence where we can keep going through stuff. Awesome.
[00:27:17.230] - end0xiii
Thanks, Carson. Thanks for coming in. Thanks for the team. tratium, thanks so much. And thank you to the community and we'll host another one of these pretty soon. Great.
[00:27:30.060] - Carson
Thanks, everyone. Bye. Take care. Bye.