BIOPSY-10 🧪 BIO Genesis Round 2

Summary

• As a part of Vending Machine’s partnership with the BIO Protocol, we have collaborated on parameterizing Auction 2, aiming to strengthen the Bio community, bioDAOs, and the launch of the Bio Protocol.
• The proposal introduces the 2nd and final BIO Genesis auction with the goal of acquiring bioDAO assets and ETH for the BIO treasury.
• It also proposes a retroactive increase in allocation for Auction 1 from 5% to 7.25%, rewarding early participants and decreasing the average closing FDV of Auction 1 to $85M.
• The aim is to ensure fair pricing, reward the early community, maintain demand across auction rounds, and accumulate ETH for BIO’s liquidity needs.
• BIO Genesis Auction 2 is proposed to finalise the accumulation of bioDAO assets, and also reach a targeted amount of ETH for essential BIO liquidity provision. Auction 2 allocates 7.75% across the bioDAO assets, and 5% for ETH. There is a cap of 100M FDV for BIO in this auction.
• Auction 2 functions with the same mechanism as Auction 1.
  • The minimum and maximum bioDAO token amounts are determined based on the valuations of $84,882,315.32 and a $100,000,000, respectively. Token prices for each asset to be contributed have been determined using the 30-day TWAP.
  • These final valuations will fluctuate as the price of bioDAO assets fluctuate.
  • The Genesis Auction 2 closes after 45 days or once all auctions are filled.

Summary of BIO Auctions

Auction	Allocation	Assets	Target FDV (Subject to change based on asset price fluctuations)
1	7.25%	bioDAOs	Average final FDV of $85M
2	12.75%	bioDAOs (7.75%) + ETH (5%)	Minimum = $85M , Max = $100M

Introduction

The genesis swap event is an important moment for BIO, marking the initial distribution of tokens across various bioDAOs and their communities of token holders. Ensuring fairness and efficiency in this process is critical to fostering long-term sustainability within the ecosystem. The initial BIO auction mechanism presents several challenges, particularly concerning its feasibility in changing market conditions. Therefore, BIOPSY-7 adjusted the initial Genesis design to several auctions.

This proposal introduces auction parameters for the final genesis auction, Auction 2, aimed at achieving three primary objectives:

1. Rewarding the Early BIO Community: The supporters of BIO from day 1 should be recognised and rewarded for their commitment to BIO.

2. Treasury Sustainability: Obtain an adequate amount of productive assets that can be used to benefit the entire bioDAO ecosystem and maintain BIO functionality in supporting each bioDAO.

   • BioDAO token raises: The auction mechanism should ensure that Bio.xyz raises a sufficient amount of existing bioDAO tokens to provide a value basis for the system.
   • ETH Treasury Accrual: The auction mechanism should accrue ETH. This will be used to provide liquidity in the BIO/ETH liquidity pool, giving the ecosystem access to deep liquidity.

3. Pricing auction fairness: The auction mechanism should target consistent final and the subsequent starting BIO valuations.

Problem Statement

The multi-auction mechanism poses two significant challenges:

1. Pricing Discrepancies Across Auction Rounds: There’s a risk that subsequent auctions might clear at prices that are either too low, providing an unfair discount, or too high, inflating the FDV to levels that reduce participation. This imbalance could lead to a combination of insufficient capital raised or an unfair discount, undermining the integrity of the auction process.

2. Ability to Raise Required Assets for the Functioning of BIO Protocol Objectives: In the initial auction mechanism, BIO only obtains bioDAO assets. While this is good for the DAO acting as a network of its associated bioDAOs and its value being aligned with the ecosystem, it does not provide the DAO with all required assets necessary for its functionality, including providing ETH/BIO liquidity for low-cost ETH<>bioDAO token conversions. The DAO requires assets such as ETH or stablecoins in order to facilitate deep liquidity with external parties and to provide continual support to the individual bioDAOs.

Proposed Solution

To address these issues and meet the objectives of fairness and capital efficiency, we propose a revised auction mechanism that introduces a controlled pricing strategy across the auction. The key components of this mechanism are as follows:

1. Auction 1 Adjustments:

• Auction 1, which closed on Monday the 19th of August raised 6.22M for 5% of the token supply which gave BIO an average valuation of $124.4M. This is a good final valuation but makes it difficult to have fairly priced future rounds of a ‘price discovery’ style auction. To address this, we propose allocating an extra 2.25% to the first auction, bringing the total BIO sold to 7.25%. This will give a 45% boost to all Auction 1 participants in terms of ownership and will reduce the final average valuation to roughly $85M valuation.

2. Auction 2:

• Existing Auction Mechanism: BIO Genesis auctions work like a pool with a limited amount of BIO. Participants add token A, unlocking BIO at a base price. Once a threshold of token A is met, all BIO is unlocked. The base price is the minimum token A/BIO exchange rate. After reaching the threshold, adding more token A raises the BIO price. BIO is distributed to participants based on their share of token A in the auction.

• Base pricing of BIO and threshold amount: Auction 2’s base price will be set at Auction 1's amended closing average valuation ($85M FDV). The threshold is based on this target price for each asset, meaning the bioDAO price only increases after surpassing the minimum bioDAO deposits (see “Asset Weighting” table for threshold tokens). This ensures stable and predictable pricing, giving participants confidence.

• Price Discovery for remainder of Auction: The final allocation of the auction will introduce a controlled price increase, with a proposed linear escalation in BIO price for bioDAO tokens and ETH up until an effective cap at the current valuation of $100M. This mechanism ensures that as demand increases and the auction nears completion, the price adjusts to reflect this heightened demand, preventing underpricing of the final allocations.

• Capping the final valuation of BIO at 100M FDV: This mechanism caps each asset deposited for BIO, allowing participants to easily assess their opportunity. The cap, based on current asset prices and targeting a $100M BIO valuation, ensures certainty for all participants. By bootstrapping the treasury, users support BIO and are rewarded accordingly.

• bioDAO Weightings: The specific bioDAO weightings have changed from Auction 1 to reflect the Bio Protocols treasury needs. To inform Auction 2 weightings, the Bio core team suggested the following ownership targets of the total supply across the bioDAOs after all BIO Genesis auctions.

  • Vita - ca. 20% ownership
  • ATH, CRYO, GROW - 10-15% ownership
  • HAIR, NEURON, PSY - 4-6% ownership

• Raising ETH: A 5% allocation within Auction 2 will be used to accrue ETH to ensure that the capital requirements for Bio Protocol’s liquidity and bioDAO servicing are met.

3. Additional Considerations

• ETH Accumulation for the BIO protocol: Given the necessity of accumulating ETH for the BIO protocol, this proposal’s pricing mechanism is designed to maximise the capital raised without deterring participation through unfair or inflated pricing. This approach aligns BIO's interests with those of its participants, fostering a more robust and sustainable treasury.
• Market Sentiment and Participation: By establishing a clear and fair pricing strategy, we aim to bolster market sentiment and encourage broader participation across all auction rounds. The transparent pricing mechanism aims to reduce uncertainty, making the auction more attractive to a wider range of investors.

Given these requirements, below are the asset weightings in Auction 2:

Asset Weightings

DAO	30-day twap (Ending 25.09.2024)	Total Token weights	Threshold token allocation until BIO price starts increasing linearly	Total token cap for Auction 2
VITA	~1.08	25.015%	2,516,187	2,964,325
NEURON	~0.00021	1.810%	915,405,498	1,078,440,774
ATH	~0.38	4.830%	1,377,410	1,622,730
PSY	~0.10	2.550%	2,759,736	3,251,250
RSC	~0.26	0.250%	104,661	123,301
GROW	~0.44	9.930%	2,441,649	2,876,511
HAIR	~32.95	15.729%	51,662	60,863
CRYO	~0.61	0.670%	118,374	139,456
ETH	~2,443.66	39.216%	1,737	2,046
Total		100%

Auction Mechanism Explainer: Using VITA as an example, the closing BIO FDV will remain 85M FDV if there is 3,363,012.85 or less VITA tokens deposited. If there are more VITA tokens deposited, the closing BIO FDV will scale up linearly to 100M FDV, until the full cap of 3,961,971.15 VITA tokens are deposited.

Conclusion

We believe that these changes will not only improve fairness and equitable access of all participants but also strengthen the financial foundation of BIO by maintaining demand and preventing overvaluation. This proposal aims to achieve a more balanced and fair launch mechanism for the Bio Protocol.