Paegan DeFi TempleDAO
Before explaining what is the TampleDao, I want to talk about token behavior in the market.
Option №1 Pump and Pump.
A great project gets released, you buy at a low price, then it goes to the Moon and a little above. What do you do next? Of course, you sell, you sell well if you are a broke ass clown with some pocket change, but if you’re a big boy with 3 million? Everyone suffers by your single decision.
Option №2 Trash farm.
A great project gets released, the emission is live, you start farming, and a thousand of twads like you. Y’all try to outrace each other, selling and ripping the token to shreds.
TempleDAO says that rewards should not water down the token value. Unlike most protocols, TampleDAO token mining is limited by created value. Token supply will be held back by the asset coverage ratio, controlled by the protocol, from the treasury.
Long story short, the protocol will not water down the price by minting tokens out of thin air and won’t let any celebrity drop the new reward tokens directly to the book and dump the price. Just HODL, boyz. Now is time to speak mechanics.
#1: Safe Harvest of Rewards & Intrinsic Value - dynamic rewards
#2: Safe Premium - arbitrage Dapp>AMM
#3: Bonus Rewards - temp boost of APY
#4: Unstake Queue - delay of unstake
#5: Temple Defend - arbitrage AMM<Dapp
#1: Safe Harvest of Rewards & Intrinsic Value
АММ bypass. There are two ways to buy Tample:
#1 Market
#2 Dapp TampleDao
Option #1 is a good ol’ one and we use it daily and it seems ok. There are a couple of things like fees, slippage, and tokens staying liquid. TempleDao is a more elegant solution. Just go to their website and exchange your assets to $TAMPLE without fees, registering, text or slippage. So what, R.I.P. Dexs? Don’t rush to write off the old man! We’ll use them for arbitrage later.
And that’s not it since we all tank up our assets into a protocol in exchange for the Temple token, increasing the public purse. And as you remember, the more is the total protocol collateral, the more rewards we get.
Here’s an example. Focus, it’s gonna get down!
Each epoch the protocol calculates the increase in the intrinsic value of the reserves.
If on one hand you have $100 and 50 $TAMPLE on the other, that equals $2 for $TAMPLE ($100 / 50 = $2,00 for a token). But if the collateral is increased from $100 to $130, we get $130 / 50 = $2,60 for a token.
If you just mint new tokens, you reduce the intrinsic value from $2,60 to $-2,60 as one of the options! But it’s not the choice of the TampleDAO.
If you burnish your brain and add up 2+2, you can precisely determine how many tokens you need to issue to get the intrinsic value back to $2,00.
In this example the number is 15 tokens ($130 / (50 + 15 = 65) = $2,00 for a token).
In other words, the goal of the TampleDAO is to balance the number of rewards to the amount of collateral going into the protocol. That keeps the price stable.
Ergo, the example with 15 tokens is a top limit for farming $TEMPLE rewards. Ipso facto we get more safe returns, backed by the real growth of the intrinsic value.
Actually, the TampleDao will not give out all the rewards! Because the goal is not only to keep but also increase the price. If TampleDao would have given away the max amount of Rewards, the intrinsic value would have stayed the same.
In the previous example, if only 10 (not 15) new tokens would have been rewarded, the intrinsic value would rise by $ 0.17, and the number of tokens left would be enough to give it to farmers. Which in general gives reduced token volatility.
#2: Safe Premium
TampleDao has set a cap on token price so the arbitrage window would open, thus supporting the price on exchanges.
The price rises on the exchange as people buy. It is not tied to the collateral in the protocol. It is only tied to demand.
As we remember, we can buy $TAMPLE not only on an exchange but also in the very Dapp, where the price is locked to collateral for good, not to demand. So, the arbitrage window could open, when the price of the token tied to the collateral of the protocol in Dapp TampleDao will be lower than the price that is tied to the demand on the exchange. And now who damps the first get all the paper.
#3: Bonus Rewards
Sometimes excesses of collateral accumulate in TempleDAO's vault. This means that APY will increase for some time to stabilize the price.
#4: Unstake Queue
What to damp the price? Get in the line bro!
The nub of the line. When you unstake the $TEMPLE, you go to an orderly exit line. Every block the certain amount of $TEMPLE is processed for withdrawal. When you get into the line you are informed about the block, by which your $TEMPLE will be fully processed and available for withdrawal.
Simple example:
Let’s say each block processes 10 $TEMPLE.
You get in line to unstake 3 $TEMPLE.
Example 1:
5 $TEMPLE is already in the line
You want to unstake 3 $TEMPLE
5 + 3 = 8 collective $TEMPLE is less, than the block limit in this example.
That is why all the $TEMPLE is processed instantly and will be available for withdrawal.
Example 2:
8 $TEMPLE is already in the line
You need to unstake 3 $TEMPLE
8 + 3 = 11 $TEMPLE is more, than the block limit in this example.
That is why 2 $TEMPLE is processed in this block and 1 $TEMPLE in the next one.
The line is needed to help reduce volatility
#5: Temple Defend
Temple Defend - is the fifth stability mechanism. If a sell pushes the AMM price too low, Temple Defend takes the action.
Temple Defend gives the $TEMPLE owner a right to sell at the Defend price. That means that users can buy cheap $TEMPLE at AMM and sell in TempleDAO pricier. Users get profit from the deal and pump the AMM price.
In other words, is a reverse arbitrage AMM < Dapp
