Discussion of parameters for AIP21

Governance Discussion
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Discussion for AIP 21

Good day, I am sure that everyone has taken notice of the overwhelming support from the community in favor of AIP20 which called for the removal of ARTHX and the opening of the debt pool for deposits from investors who are current holders of ARTHX after liquidity has been removed, trading has been stopped and the token has been deactivated. The intention of this draft proposal is to establish the way the debt pool shall be governed as well as defining the method and timing(s) of repayment whether in part or full.
This proposal is aiming to set out the main points of discussion in relation to our way forward as a community, ensuring that we can come to the most favorable arrangement between all concerned parties, with the key points of discussion being the following:
• The debt pool will begin with minimum of 30% of platform fees until such time as it is rebalanced, with such period being no less than 1 month? (this is one of the things we need to discuss before we can progress to proper drafting as well.
• The currency of repayment- usdc and 5k maha per month (will this maha be distributed proportionately to ones share in the debt pool or will it be sold and added as usdc to the pool)?
• How often will an individual be able to claim their accrued repayments? (will fees be available to claim every time they accrue or will it be once daily)?
• How often can the adjustments on the balance of platform fee allocations to be distributed be proposed? (How often can we change the structure of the fee poolshare between mahax, debt pool and eco-fund). Should this be rebalanced monthly, quarterly or bi-annually.
These seems to be the only matters directly related to debt pool itself if we are to exclude the other matters that deal with the remainder of the protocol generated fees, until such time as we have the full picture, we need in order to make further proposals to govern them properly.

1 Like
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Awesome!

With regards to the fee distribution break down, it seems 30%/60%/10% (debt pool/mahax/ecofund) is the preferential option. This we ran a poll on in the governance channel > https://t.me/c/1254404216/5023

There is interest for 40% also, so if we balance these two options out perhaps 35%/55%/10% is more ideal.
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For the repayment asset - USDC was the base agreement offered when the debt pool was first opened, so it is important to keep consistent with this as any changes also effects that prior understanding/agreement. In saying that, the Maha supplement I think is better to distribute as is, due to converting it to USDC becomes undesired sell pressure (as minor as it is). For the same reason, it makes sense to not do a “buy back” into Maha with the fees as this makes up the greater portion of the repayment, which is then exposed to volatility and change of value. Because the pool honors a $0.012/arthx, and $1.00/arth, paying this out in USDC meets that agreement regardless of time - where as volatile assets have downside risk that can result in realizing a lesser repayment.

How often can people claim? - I think this is already inbuilt into the debt pool, they can claim anytime as the rewards accumulate in real time.

How often can the distribution change? - So as with aip20, it can not change to a lesser amount than 30%, and given this is a matter of changing code and contracts, it’s important not to make changes too
frequent. I think a period of 3-months is suitable, and provides enough time to gauge if a change is needed based on quarterly returns.

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I believe even 30% is too much for the debt pool, I believe in this project and I lock my maha for the beauty of 4 years and honestly I don’t understand this urgency to pay back the debt so fast
This debt can be paid only with the fees, for this reason I believe we should focus our resources on the ecosistem first…like a long term investment
If the maha price will rise will be a lot more easy after to pay back the debt
Two suggestions

  1. Pay back only in maha (maha from ecosistem + buy maha with usdc from fees)
  2. Because at the beginning the fees will be low maybe is a good idea to start the payment after the protocol starts working well (i hope early 2022)
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AIP 20 has locked this minimum rate in.

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The Ecosystem receives 57,000 Maha each month, this is distributed among Patrons network, LP rewards, and 5,000 used for debt pool subsidy. Of the remaining this is for various marketing/listings/sponsorship/grants ect.

Steven had initially made the suggestion of 10% for ecofund, quote “10% is plenty for ecofund”.

We are looking at roughly a $18m debt in the debtpool, even if we allocated the max inflation of 57k each month, at current price ($6) this totals to $342,000. It would take several years to service this while neglecting all other efforts, and creating a great deal of downward risk to market price, which further dilutes the supply. It is simply not viable to do this.

The reason why it makes sense to pay the bulk of the debt in USDC, is stated above;

So price variability of Maha here impacts the value of the repayment - Say the price of Maha spiked up, and then a payment to the debtpool was made in Maha - some withdraw it and sell, thus creating a lower valuation for those that did not claim. Because of this, it opens the risk of “gaming” it - by creating an incentive to drop Maha price before a snapshot and buyback (to be repaid with more maha at equivalent value of $0.012/Arthx). It runs a similar risk/issue that we saw with Arth v1 bonds.

For this reason, it is best to isolate the risk by servicing the debt pool predominately in USDC, with a small fraction being in Maha.

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U are right, i didn’t think about that
Imho 30% is enough at the beginning, after that if the protocol starts to generate a lot of fees we can always make another vote to increase the % and pay the debt faster
I think our goal is to stimulate people to lock maha, and for that we need to give them any reason possibile

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I think repayment should start as soon as the system is set up and the UI is in place. In the dept pools, there is money from a lot of people that has been blocked for months. Most of them wanted to buy Maha with it months ago. The longer the repayment takes, the less likely it is that they will invest the repayment in Maha (if the price rises in the meantime).

Moreover, debts should be reliably paid off. This chapter is part of Maha and all investors who have money in the dept pools have helped to move MahaDAO forward. All the people who are coming in now are building on that. It would not be fair to consider the investors money that went into the project in one of the earlier phases as less valuable or a burden, or to delay its repayment. Without those development steps and support, Maha would still be at Arth v1.

My suggestion for repaying the debt would be as follows:

5000 Maha per month for the dept pools (Paid out in Maha).

Fees paid in USDC go to:
50% to MahaX (they also receive Maha, Arth and SCLP etc. in addition to USDC).
35% + 5% to dept pools*
10% to ecosystem

*35% of this is used for debt repayment, 5% as a kind of rewards for the debt.

Through these 5% rewards, investors are compensated because they cannot use their money during this time (e.g. in MahaX-Staking) and the rise in the maha price. This also makes it less important whether it takes 4 months to pay back or 24 months, because all people with money in these pools also earn something anyway. Nevertheless, it should not take too long to close this chapter and distribute the money elsewhere.

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Much of your assertion here is based on the following assumptions;

  1. That those holding ArthX now are ‘new investors’ that were not present to contribute to MahaDao prior to the V1 fork of Arth.
  1. That those who deposited into the debt pool initially carried the intention to reinvest into Maha with the repayments, and that therefor we should cater to this speculative intent.

I would argue that most of the people holding ArthX now, are in fact the same community members that were present during the Arth v1 fork - the trading volume and community growth does not suggest that it garnished much traction at all with new investors. I think a more accurate assessment is that ArthX holders currently are also longstanding community members, who simply speculated that ArthX would appreciated in value more - that if the debt pool got paid off, then they too would realize an earnings through holding ArthX via fees generated.

In essence, their decision to hold ArthX as opposed to depositing into the debt pool comes from a kind of faith in the stated goals of ArthX - that expectation was shaped through their faith in the success of ArthX, and at the time they opted to pass on the high price offered by the debt pool - on faith, and belief in a longer term success of ArthX. That is what I think is the more accurate difference - how people speculated, but not a difference in new or old investors.

To the point about compensating further due to the missed opportunity to utilize accumulated fees for buying Maha, that is already factored in to the $0.012/arthx debt. This price is a calculation from the value of Arth just prior to the rebase that occurred, and if the intent was to acquire more Maha, then this does not align with the decision to firstly own Arth with that capital, and then transfer it to ArthX. The lineage of the capital investment demonstrates an absence for investing more in Maha, rather than an interest to invest more into Maha.

It is only after the fact, that there was a significantly large price difference between ArthX and the Debtpool offering, that intentions to reinvest rewards back into Maha were observed - because at this stage, ArthX was the capital used to take advantage of this price gap, and Arth is not a speculative asset that carries the potential of large returns.

So my conclusion is this;
The $0.012/ArthX price in the Debtpool was initially a compensation to those avoiding the rebase; to those who invested that capital into Arth V1 (Not Maha). And the reopening of this same offering is the same compensation, only that it caters more to those that believed in ArthX (Whilst Maha was an investment alternative present).

These are mostly the same community members that were present before the Arth rebase, and if they wanted to deploy that capital into Maha, then what was it doing in Arth and then ArthX in the first place? The answer is, that capital had no intention to be deployed into Maha, so why should the debt pool all of a sudden assume to compensate an intention that was not demonstrated in the first place?

Does it sound reasonable, to discount the earnings potential of MahaX (those who have demonstrated a capital deployment into Maha, and locking it for long term), to compensate the investments that were not deployed into Maha, with a justification that they had every intention to invest in Maha? The compensation is for the poor performance of ArthX, and the Rebase of Arth v1 - both of which should have nothing to do with speculated intentions about buying more Maha.

I know this is about 5%, but it’s not - it’s about the narrative and expectations being accurate. Maha could 100x and this should have nothing to do with the failing of ArthX or Debt pool - because the debt pool and ArthX had nothing to do with an investment in Maha to start with.

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Much of your assertion here is based on the following assumptions; 1. That those holding ArthX now are ‘new investors’ that were not present to contribute to MahaDao prior to the V1 fork of Arth.

No, you are wrong in this assumption. There are both new and old investors who have bought Arthx.

The dept pools we are discussing here, however, consist of more than just the new Arthx that will be added with AIP20. We are talking about repayment for money that has already flowed into development phases of MahaDAO (Arth v1, Arthx Genesis, Arthx for Fees) almost since the beginning of 2021.

Especially regarding Arthx: Let’s not forget that Arthx, for example, should originally receive all the fees, not MahaX.

  1. That those who deposited into the debt pool initially carried the intention to reinvest into Maha with the repayments, and that therefor we should cater to this speculative intent.

Again, I don’t completely agree with your assumption.

There are probably only a handful of people who bought Arthx to buy Maha via some X from the dept pool money.

99% of the people who now have money in the dept pools bought Arth (v1) and Arthx because they had a purpose at that time. And the purpose was not the dept pool. Arth v1 was supposed to be $1, Arthx (bought at Genesis or on the market) was supposed to get lifetime fees. None of these people originally expected their investment to end up in a dept pool for years. With Arth just like Arthx, the capital would have been freely available. This is all capital Maha has accumulated over months through their product development.

The reduction or focus on Arthx, which is now being added, hides the whole story before. Which goes back almost 1 year. We are therefore exploring repayment and compensation for all funds from all people who, for whatever reason, ended up in these deposit pools at any time.

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Adding a % bonus on top of the pool, is the equivalent to increasing the debt and time it takes to pay it off. Because the % bonus could otherwise be used to decrease the debt. And while it is not, it takes longer and therefor earning a bonus for longer. So mathematically what you are suggesting is an allocation that is greater than 35% + 5%.

According to community preference, even 40% was not favorable over 30%. The main reasons for this was to make MahaX more attractive and have a roll-over effect of actually generating more fees than if it was undercut too heavily.

I just don’t think this suggestion is that considerate of the greater success of MahaDao and growth - and instead it places more priority on bailing out what is essentially the assumed risk of prior investors, by using funds of new investors. In the spirit of our vision and goals, requesting what is essentially an ‘interest payment’ on top of debt, does not align with the fact we offer loans that are interest free.

We’re talking about a few % here, and the discussion so far is too broad and speculative to really present a justifiable case as to why should an interest rate be added to the debtpool. A discussion about ethics and morality is simply not technical enough to support this suggestion - and if we really want to have that discussion then the point of fairness lies with the complete absence of a debtpool to start with. Investing in developing crypto projects does come with risks, and not all can be managed with a stop-loss target on a chart. There was specific disclaimers about the high risk of ArthX before it launched.

It sounds counter-intuitive, but a lower % to the DP may result in a faster clearing of it. Because it means MahaX staking becomes even more rewarding and valuable. Maha is the beacon that attracts growth into the community to then explore all the products on offer.

The reality is, by the time the debtpool starts generating significant amount of fees to pay off 18mil, that means the products have already got traction, and Maha is not going to be anywhere near it’s current price. So people should stop concerning themselves about trying to get a low entry on Maha with Debtpool fees before it happens to take off. If you wanted Maha with the capital that is tied up in the debtpool or arthx (key phrase there is “with the capital”), then it would of already been in Maha instead of the Debtpool or ArthX.

If you want, we can run another poll on this - but I think the outcome would be the same. It is not really about what any one of us want individually, rather what the community wants collectively.

I think we just need to establish a baseline first and then re-evaluate it after some time, and any further discussion on this should first keep in mind what exactly is the greater goals. Increasing growth and adoption is a clear goal, and a clear direction by increasing the value for new members and investors. This debtpool conflicts with that goal, by taking the funds of new investors to subsidize the realized risk of old investors. Yet, there is a balance to achieve here with supporting our current community, and the challenge with trying to quantify that into a variation of a few %.

In the interest of moving forward, and considering that this is a blind shot in the dark as to where the right balancing point is, we simply need to come to a consensus - the polling result I shared above is to date our best representation of a consensus for this particular matter. If it changes, then we implement the new consensus.

I do appreciate your feedback on this, I guess it may help to know that the debt pool is due to release this week, and it is ideal to wrap this up sooner than later.

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I agree, we have disscussed enough about dept pools in the last months. We have been doing this for so long now that many people don’t even know (anymore) how many steps and time it took to get here. We should simply not forget history. Just like the speech of a German politician: “Those who do not know the past cannot understand the present and cannot shape the future.” But this is not the point I want to disscuss.

My main point in the original post was actually the idea of a rewards or interest share for the money in the dept pools. So a percentage share from the allocation of the dept pool fee % share.

Whether this is within a formula of 50% / 40% (35%+5%) / 10% or 55% / 35 (30%+5%) / 10% or 55% / 35 (32%+3%) / 10% does not matter.

This is because it has been going on for almost a year now and it may take a few more years to pay it off. I hope not so long. Personally, I have patience, but the longer it goes on, the more frustration and negative comments we have to expect.

This rewards or interest part might appease the frustration of many people in the Telegram groups and elsewhere that we will certainly have to continue to deal with. Especially if people see the interest or rewards separately on their dept pool page. Even if this is not very big, I think this already has a huge effect phsychologically and saves many negative comments in Telegram, Discord, Twitter & Co. Maybe they will even change to positive.

In order to come to a conclusion quickly, it would of course be helpful if people would comment on this. Then we could either include this or not.

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From the jest of it , it seems the your recommendation to intensify debt pool holders is commendable. Especially given that in Crypto people despise having idle funds, due to opportunity cost. This is what they will consider their funds locked in debt pool. Further is also plausible to assume the the the debt pool repayment may last for much over a year. ( The increase in maha price could help pay off the debt faster though). Giving a giving a small passive income will help with pacifying the community.

I suggest that the team informs that , if the debt is not cleared by say September 2022, will provide an additional incentive on the balance debt ( this could imply that the debt pool the team is committed to settle the debt faster)

On a another note . Platform fees will be collected in Arth as well ( mahax to receive arth) . Does this mean the payout will be in Arth and USDC or just USDC as previously informed.