LON (Tokenlon Network Token) is a utility token issued by Tokenlon, used to incentivize contributors within the Tokenlon network ecosystem. The LON staking, buyback, and trade mining was officially launched on April 1, 2021.
Current Issues with on-chain buyback
On-chain buybacks come with gas fee costs, requiring a certain threshold to initiate and occur at a relatively low frequency.
In cases where feeToken falls short of meeting the buyback criteria, the available funds for buybacks decrease as token prices drop.
On-chain buybacks carry the risk of being exploited by MEV arbitrage.
LON, currently listed on centralized exchanges, experiences short-term price volatility due to low trading volume during bear markets, impacting larger trades and causing extreme price fluctuations. This scenario is detrimental to LON's long-term development and may lead to potential delisting.
Within the ongoing context of declining DeFi token prices, the rewards distributed to liquidity providers, community treasury, relayers, and users in each Tokenlon trade mining round are in the form of LON tokens. A decrease in token value reduces the incentive for ecosystem participants.
Tokenlon has captured over $50 million in total protocol fees, and the accumulated feeToken & community treasury tokens require active management to address value preservation and appreciation concerns.
Objectives
Streamline buyback operations for enhanced utilization of LON buyback funds.
Operate the community treasury more efficiently to incentivize various participants within the Tokenlon ecosystem.
Proposal
Adjust the on-chain LON buyback mechanism to execute off-chain. Future protocol income will not be restricted to on-chain buybacks; off-chain exchanges, OTC platforms, and similar options will be explored for LON buybacks.
For rewards distribution in trade mining, explore possibilities beyond LON tokens, such as issuing feeToken, LPtoken, and other tokens, to enhance incentives for ecosystem participants.
For feeToken (e.g., USDT), rewards will not fluctuate with market prices during bear markets.
For LPToken (e.g., LON/USDT), this can boost liquidity depth.
FeeToken and treasury management will be dynamically handled by the Tokenlon team, with treasury records regularly disclosed to maintain transparency.
Drawing from the example of $DAI, MakerDAO community votes for adjusting DAI savings rates to 8%.
If the proposal is approved, trade mining will operate under the new mechanism, and the 22nd phase of trade mining will conclude on August 21, 2023.
Execution
Rewards distribution in trade mining will encompass forms beyond LON tokens to heighten ecosystem participants' incentives.
Future protocol fees will be managed through the protocol income wallet. The team will flexibly handle buybacks and positions, regularly initiating LON buybacks through centralized exchanges, OTC platforms, and similar means, with regular disclosures.
The 22nd phase of trade mining will conclude prematurely on August 21, 2023, and the 23rd phase will commence.
