MANTRA DAO Core Proposal: Making OM the main L1 Token for MANTRA Chain (ANSWER)

Dear MANTRA Community,

The recent community Proposal (https://snapshot.org/#/mantra-dao.eth/proposal/0x81dc371465584cf5168da3cbdfee7f247c2bd871d694c82e3121cbdec285738c) passed with an incredibly large and positive participation. As a result, the team has deliberated on and prepared a plan to accommodate both the existing MANTRA DAO community and the new ecosystem partners (validators, RWA issuers, dapps, etc.) needed to secure and enliven the new L1 MANTRA Chain and ecosystem.

Reasons for Proposal:

As the stewards of this project, our goal has always been to build an expansive, sustainable ecosystem that benefits users and developers alike. Bringing the OM token into the center of MANTRA Chain requires that our token model undergo changes to fulfill this vision successfully.

This proposal puts forward changes regarding:

• Upgrading OM
• Staking
• Newly Issued OM
• Total Supply

Proposal Summary:

Upgrading OM & New Staking:

In order for OM to become the L1 token of MANTRA Chain, we must implement the necessary infrastructure for OM’s smooth transition onto the cosmos interchain. Therefore we propose establishing a PoS Bridge that will allow users to transfer their EVM-based OM onto the MANTRA Chain upon the mainnet's release - and vice-versa, creating an environment of expansion rather than replacement of EVM OM. To be clear, we are not deprecating the ERC20 OM token. But, this is not all!

MANTRA recognizes that we would not be here without you, the Sherpa community, that has supported us since inception. To give back, we will change our current staking process in order to allow current stakers of OM to benefit from this exciting transition and to start exploring the MANTRA Chain not only once mainnet is live, but also during our upcoming rounds of testnet.

We will replace the system of compounding rewards, with a new snapshot mechanism that tracks your stake in all eligible staking pools. Stakers can now earn up to a 1.35x multiple on their staked OM until mainnet launch. For this, the entire “OM Upgrade” bucket (see below) has been reserved. To minimize token inflation, the team will assess the amount of OM earned by the community from one week after this proposal passes (assuming it passes) until 2 weeks before mainnet launch, and only distribute the amount earned until then, locking in a maximum amount of 311M OM that can be reached if all 888M existing OM tokens were to reach the 1.35x multiple. The undistributed amount from this “OM Upgrade” bucket will be transferred into the “Community Pool” allocation on the new mainnet. This token pool will be governed by the Sherpas.

We provide this significant benefit as a symbol of your continued support to the MANTRA ecosystem and to take our community on this exciting next journey with us - a journey that should benefit us all.

For further information, please have a look at our article on staking changes. https://www.mantraomniverse.com/news/om-staking-faq

Newly Issued OM:

At the Chain’s inception, due to the difference in validator staking versus dApp staking, we envisioned a new token ($AUM) to act as a native coin to secure the chain. Given that the recent DAO proposal has instead committed us to upgrading the existing OM dapp token to be a Proof of Stake mainnet coin, we must be able to regularly issue additional OM on MANTRA Chain to allow for the new economics dynamic to work while ensuring network security.

The Cosmos SDK that we are using to build MANTRA Chain allows for a variable staking inflation between 7% and 12%, based on the percentage of tokens bonded to secure the network. The more OM bonded to secure the network, the lower the supply inflation. This rate can also be adjusted via governance after mainnet launch.

The most important reason for this, is to enable a validator ecosystem that will securely propagate blocks on MANTRA Chain. If we were to retain the fixed token supply in the current emissions model, it would be infeasible to efficiently operate and incentivize a robust validator set. Hence , an inflationary token model is necessary for the initial phase of MANTRA’s RWA ecosystem.

Another reason for this change is its ability to power continued innovation on MANTRA Chain through an elastic token supply. Developers will feel empowered to build ambitious, community-enriching applications when they know the underlying economic framework is equipped to sustain long-term growth.

Deflationary rate for token issuance:

Rest assured, we will include a deflationary factor within the model that will continuously decrease the amount of new OM tokens minted. The model we propose meets the needs of a young, rapidly growing ecosystem, while decreasing any token inflation steadily as this ecosystem matures. We plan to reduce OM inflation over time, eventually transitioning to real yield staking once our RWA ecosystem has been sufficiently developed.

Newly minted tokens on a per block basis will be directed to the following stakeholders:

New Total Supply:

After careful consideration, we have determined that the move from a dApp token to a native-chain coin will require new allocations of OM tokens to allow not just for a smooth transition, but also a thriving chain that will capture value in different areas. Therefore, we propose that new OM be minted and distributed. Our proposed allocation of these tokens is illustrated below, however, please note that we may be required to amend this allocation or other aspects of our tokenomics if requested to do so by the exchanges on which OM is listed, or in response to feedback from regulators.

*Maximum OM to be minted. Final number may be less.

To read up more on the new token supply, and issuance, we have published an article with further information: https://www.mantraomniverse.com/news/the-next-generation-of-om-tokenomics

Next Steps:

Upon the successful approval of this proposal, MANTRA’s Sherpa community will consolidate around a single OM token. In order to facilitate this paradigm shift operationally and make above changes a reality, some of those need to take effect immediately:

(1) Halt the ERC20 OM staking rewards on MANTRA Finance and app.mantradao.com for stakers. (Single Asset & LP pools).

(2) Accrue rewards via the new snapshotting mechanism to stakers one week after this proposal passed, with users able to claim up to 1.35x of their staked OM. These new OM tokens will be claimable upon mainnet launch and the reward multiplier is subject to the total time staked as well as number of tokens.

(3) Announce the mechanics snapshotting process across all eligible staking pools within Q1 in order to facilitate the allocation mentioned in (2).

(4) Remaining token allocations from previous tokenomics will be nullified to bundle resources in preparation of the launch of the MANTRA Chain testnet and mainnet, giving us greater flexibility to meet the demands of an L1.

Conclusions:

The steps outlined in this proposal present a distinct opportunity to foster growth and strengthen MANTRA’s ecosystem, along with the Sherpa community. Although the community's proposition to establish OM as the L1 token of the MANTRA Chain comes with its own set of challenges, we acknowledge the enthusiasm and support it has garnered, and we are fully dedicated to transforming this vision into a tangible reality.

As these are important times for all sherpas, our team will remain attentive to all social media channels to support an open discussion about the above.

Please also take a moment to read through the two supporting medium articles we published around this proposal:

OM Staking FAQ: https://www.mantraomniverse.com/news/om-staking-faq The next generation of OM tokens: https://www.mantraomniverse.com/news/the-next-generation-of-om-tokenomics

This proposal will run for 7 days (168 hours) commencing at 11AM UTC on February 21st, 2024 and ending at 11 AM UTC on February 28th, 2024.