Should we move to a ve-token model?

Background

Magnet started as a rebase token, backed by a treasury. Users could buy MAG off the market and stake it on our protocol for a substantial rebase APY. As time has gone on, it has become clear that the rebase model has failed. An incredibly high APY for staking dilutes the value of un-staked tokens, and the power of any buybacks using the treasury. Backing means little for a token that continually grows at around 4% supply every 5 days. From community discussions it’s evident that in order for Magnet to succeed we must make a change to our model.

Overview

This proposal moves that we do three things as a protocol.

1. Reaffirm our values as a build guild
2. Stop rebases and move towards a ve-token model
3. Change how the treasury is utilized

Item #1 - Reaffirm our values as a build guild

From our earliest days as a DAO we’ve been a community of builders: we’ve created custom launch mechanisms to raise funds, Discord bots to verify whitelisting, a substantially customized rebase token protocol, and now with Vector Finance, an incredibly effective yield optimizer on top of Platypus Finance. This portion of the proposal simply reaffirms that as a community.

Item #2 Move to a veMAG model

The ve-token model has proven to be incredibly successful for protocols like Curve, Platypus, and more. In this model, the main token is “vote escrowed” through staking where it gives the holder governance power and additional rewards. As the token remains staked, it earns ve-power. The more ve-power a stake-er accrues, the more governance control and rewards it receives.

The core team would like to propose that we move MAG away from a rebase model where the staked (or wrapped) token receives more of the same token through rebases, and instead implement a ve-token model.

What would this look like for MAG holders?

• Stop rebases: Over the next 3 months, reduce the staking APY for MAG from where it is now to 0%.
• Implement a contract where users can stake their MAG and earn veMAG over time.
• Reward veMAG holders: veMAG holders would be rewarded from a bucket of tokens.

Instead of receiving an APR in more MAG, users would receive VTX, AVAX, JOE, etc. The APR of these rewards would be determined by the user’s veMAG balance. This bucket of tokens would consist of projects that the Magnet treasury invests in, incubates, or builds, and yield from the treasury’s farming rewards.

Item #3 - Change how the treasury is utilized

Moving from the rebase model means MAG will no longer be a “backed” token. The value of MAG will shift from a rebase of treasury value, and towards the tokens it accrues from investing, incubating, and building projects. We’d like to propose that the treasury be used in the following manner.

• Allocate 20% of the treasury towards innovation: investing in new or promising projects during their pre-sale rounds, incubating teams internally, or building projects on our own (including hiring more developers, business developers, marketers, etc.) This will essentially mean doubling our innovation fund. We’ll make sure the community has direct input on how these funds are utilized: any use of over 5% of the innovation fund would need to be discussed and approved by the community. The yield from these projects would then be returned to MAG holders as they hold MAG and accrue veMAG.

• Allocate 80% of the treasury towards managed farming on safe platforms using mostly stablecoins. Utilize these yields to reward MAG holders as they remain accruing veMAG and in proportion to their holding.

Implementation Plan

While our fundamental mission of investing, incubating, and building new projects to return value to token holders has not changed, the means of doing so must. There are several steps we need to take to get there. Should the community agree with the proposal we’d like to do the following:

1. Within the next 3 weeks of the proposal passing, we will implement our veMAG feature. MAG token holders will be able to stake their MAG in the contract and accrue veMAG along with the remaining rebase emissions.

2. Over the next 3 months, reduce the APY for Magnet staking down to 0%. Each month, starting in mid March and proceeding until May 27th, we will cut the ROI in half and then turn emissions completely off.

3. At the same time as MAG rebases end, MAG token holders that have accrued veMAG will be able to claim their $VTX tokens from the airdrop, along with other tokens received from our farming, pro-rated for the amount of veMAG they have.

4. Deploy 80% of the MAG treasury over a mix of high yield stablecoin farms on the Avalanche network and elsewhere. The return on this farming will be distributed proportionally to veMAG holders starting on May 27th and claimable at any time.

5. The team will work closely with the core Magnet community to formulate an investment thesis, incubation framework, and development strategy. We’ll hold discussions and votes on any substantial deployment of the innovation fund.

6. Based on this strategy, the core team and wider community will identify high value projects for investment, incubation, or development. The 20% of the Magnet treasury delegated to the innovation fund will be used to fund these projects and any tokens from these investments returned to veMAG holders.

The Vote

We’ve decided to use the standard “For, Against, or Abstain” model for this vote. A “For” vote means support of the proposal as stated. “Against” means the voter does not support the proposal. “Abstain” is a vote neither for or against the proposal and indicates that more discussion is needed.