The Forge - Fee structure and establishing burn %, DAO %

Author: Dr Wagmi#6629 Gotchi ID: 16635 Discourse Thread: https://dao.aavegotchi.com/t/the-forge-aalloys-essence-and-smithing-a-massive-proposal/4432/48 Forge Litepaper: https://docs.google.com/document/d/1sKEmMJcwAfmIsysr1NP2D-EGvxKBtzZls7iDtM6gGXg/edit?usp=sharing

As part of the Forging process, more Aalloy will be required to Forge than will be returned to the Smith when the smelt their wearable. Our initial recommendation is for a 10% reduction in Aalloy returned to the user on Smelting. As an example, a common will cost 100 Aalloy to Forge but would only return 90 Aalloy to the user when smelted. This provides the ability for a deflationary mechanic or for Aalloy to be accrued by the DAO for utilization throughout the ecosystem. If all the Aalloy is burnt, this will provide a ~10% burn ratio of all Aalloy in the forging process and establish strong deflationary pressure. This leaves no Aalloy for the DAO, however. As Aalloy represents tokenization of the entire wearables market, it will provide powerful utility as a reward mechanism for players or a non-dilutionary revenue stream for the DAO in the future should the DAO seek to issue its own wearables using accrued Aalloy.

The Forge team recommends a balance between the two approaches with 5% of Aalloy being burnt and 5% of Aalloy being sent to the DAO wallet. This will ensure a deflationary impact of the mechanic while also providing the DAO flexibility moving forward. This number can be modified by future DAO vote to meet the needs of the ecosystem.

Special Note: A base 100 system that requires 100 Aalloy to Forge a common is necessary to allow flexibility with this fee in the smart contracts. The previous sig prop outlined a base 10 system which would not have afforded this flexibility. While the base has been increased to 100 from 10, the underlying ratios for consideration remain unchanged.

This is one of a series of signal proposals necessary in creating and deploying the Forge. These signal proposals will shape the direction and creation of Forge mechanics and be combined into a Core Proposal after the Forge is complete and ready to deploy if the DAO accepts. Some essential design decisions have received broad support from the community and Forge creators and will not be submitted for a DAO Signal Proposal. If anyone in the community would like to make a separate signal proposal shaping Forge design, they are welcome to do so. The following are the design assumptions which will be implemented in the Forge unless an external Signal Proposal decides otherwise:

• Essence will not be airdropped to those who have previously sacrificed gotchis
• Face, eye, and pet wearables will be codified as less abundant per the Framework. The Framework will be a separate DAO proposal outlining Frame distribution
• The Forge will not be a Gotchiverse installation
• No individual trait will or should be codified as less abundant
• The Forge will have an initial 10% Aalloy fee. This can be adjusted by future DAO proposal
• Aalloy, Essence, and Schematics will be ERC-1155 tokens
• All gotchis will provide an equal 1000 essence when sacrificed
• Essence will not be returned to the user after smelting a pet or Godlike wearable
• The schematic will be returned after smelting a wearable

Thanks again – The Forge Team