The Game Theory of Minotaur Money
Greetings! Today we will discuss the Game Theory of Minotaur.Money and DAOS in general based on the above flow chart! If you enjoy it, check out Minotaur Money, our upcoming DAO on the Cronos Network!
Minting/Bonding: The minting/bonding mechanic allows DAO participants to mint tokens at a discounted rate. The contributed funds go to the DAO treasury, and the minter receives linearly released tokens over a specified Vesting period, usually 5 days. The game theoretic mechanism of minting/bonding is a short-term confidence game: the minter is betting that the discount received justifies the 5-day Vesting period.
Although some minting discount is generally present because of the inflationary nature of Rebase staking, the minting/bonding price goes up as more tokens are minted/bonded. Therefore, the discount can actually go negative if enough bonds are purchased. Conversely, the discount becomes greater and bond purchases more appealing if fewer people are purchasing bonds or if the token price goes up. An equilibrium is reached based on minters’ confidence in the token price and the BCV (Bond Control Variable, which controls the rate at which bond prices change).
Staking/Rebase: Whereas minting/bonding can be understood as a short-term strategy, or at least one that requires short-term management, staking can be done on a long-term basis without active management. Single MINO staking provides stakers 1:1 with sMINO tokens, whose balance increases according to the Rebase formula. The total supply of sMINO is increased by a settable reward percentage each epoch (usually every 8 hours). The Rebase distributes additional sMINO to all stakers, which determines the APY. Therefore, the APY is dependent only on the reward rate. Therefore, DAOs can consistently maintain high APY numbers if they choose to do so, but minting an excessive number of new tokens can drain the token’s AMM LP pairs and reduce the token price.
Transaction tax redistribution: Ultimately, the exponential growth of the Rebase formula may result in the need to further incentivize holding. The most unique part of Minotaur Money is the transaction tax redistribution method. This tax applies only to selling MINO to LP pairs. The taxed MINO is then redistributed to holders during each Rebase. This provides a holding incentive, as tokens directly funnel from sellers to stakers. This effect is magnified during times of high-volume trading.
Treasury-owned liquidity: Native LP tokens such as MINO-CRO LP are among those accepted as bonding currencies. When minters form LP tokens to use for bonding, this raises the token price via spot purchasing and increases the discount level of all bonds. This forms a positive feedback loop between minting/bonding and spot buying. It also results in the majority of the MINO LP tokens being owned by the protocol, as they are contributed to the treasury via bonding. Therefore, the protocol avoids having to pay costly rent fees for liquidity incentivization, as DeFi 1.0 protocols do.
Treasury Management: The treasury’s official purpose according to the code is to back the currency. This means that the treasury can be deployed to buy back tokens for the protocol, or not, based on the DCV (Deflation Control Variable). The official level at which minting stops and deflation begins is $1 worth of backing per token, but the code actually assumes that each single token that is bonded is worth $1, so the code’s assumed treasury value may differ from the true value. Minotaur.Money has developed Fractionality code to address this issue.
Minotaur’s Fractionality code also allows us to deploy a large fraction of the treasury towards profit-making activities. The treasury can be deployed in any way that makes a profit, including crypto investing, liquidity farming, decentralized VC activities, or incentivization of token bribes to the DAO (i.e., “the Curve wars”)! This increases the size of the treasury and the strength of the currency’s implied backing.
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Sincerely,
Uranus, Father of Cronos
