[ABIP-03] Reduction in total Supply & APY

Summary Studying recent market changes especially around rebase models, the treasury and policy teams have decided to put forth a proposal that will:

1. Reduce total supply from 100 million to 10 million.
2. Reduce APY to a more sustainable value to ensure at least 1 yr of runway.

Drastically improve bonding incentives to grow the treasury. This will effectively ensure the total supply is reduced by 10x & the APY will also come down to match the reduction in supply. The teams want to do this to ensure that the issuance of ABI always stay at a sustainable level with respect to the treasury.

Because of the rate of APY decrease, any speculators that want a higher piece of the overall supply will need to bond and cannot just rely on their staking stack

Those who bond or buy early and stake will get the highest reward and marketcap of the overall Abachi that will ever exist

Abstract

The team is proposing a reduction in supply to 10m from the earlier 100m supply Abachi planned to issue. The reduction in supply does not affect the project since the supply does not exist, however ensures that the token and price faces much less dilution.

This will be added to the smart contracts as a hard cap. Moreover the treasury also wants to ensure that the total emission schedule is over a period of 9 years without bonding. The only way to increase dilution (up to a maximum of 10m) is to be able to bond.

With the above it is also proposed that the APY be brought down to a much more sustainable level. This will ensure long term holders will still benefit the most, but shorter term price swings will not have an adverse affect on the community.

1. Reduce total over mint possible from 100m to 10m.
2. Reduce the total APY based on new framework given below.

Motivation

First: Abachi used the rebasing mechanism for token emissions instead of the traditional ICO method. However with this there is an expectation that the treasury also constantly increase (even though the products are not out). This pressure is increased as the total emissions and APY are high.

Abachi was never meant to be a backing or reserve currency. When we reached out to Olympus DAO back in Nov, this was our pitch to them also. Albeit, we did ask for Olympus to buy the token (ABI) from us instead of us providing these tokens. New projects are now using this model, and we do think this will become a defacto way of fund raising, we can see projects now buying up seeds in other projects.

While we in the team still think this is the best way to raise, where the control is with the market and the project that owns the liquidity, we do think we need to keep market expectations in check also. Not everyone will be staked for 1-3 years and a high emission will drive the price down at least initially as the treasury will not increase at the same rate.

Secondly Abachi has a high conviction position in DeFi. This includes Olympus DAO. For us to be able to keep this conviction, it is important that the treasury be able to maximize in the assets it thinks will lead the future. To do this we will need to increase the treasury stable holdings. A lower APY and emission will allow more people to bond initially to capture market share and also become lucrative as APY drops.

Current Treasury Distribution

Token Treasury The Main Abachi treasury that provides the minimal viable price for ABI is on L1 Eth under the abachi.eth wallet. Additionally 100k is also in separate team wallets being used on CRV, Vesta Finance & Balancer.

Abachi owns 1m in this treasury without counting any LP positions. If the LP and the bond fees are included, the treasury currently sits at 1.5m.

Dev Treasury In addition to above, Abachi also owns around 700k in stables which is used to pay for development & research. This amount was raised from pabi sales.

DAO community treasury 10,000 sABI is locked under the DAO treasury to be used for future initiatives.

Token Distribution

The proposal does not change the token distribution in terms of percentage as the future tokens don't exist yet.

Pros

Reduces sell pressure significantly caused due to rebases Increases runaway to our target (356 days) Increases potential value of each ABI currently in circulation.

Cons APY reduction may cause speculative shorter term holders to exit.