Hey everyone! Our team (Delphi Digital) has been working in close collaboration with the core Rally team and we are happy to present our initial findings and proposals for Rally’s token bonding curves. Please note we’re always looking for feedback and hope this can serve as a catalyst for more dialogue around these topic areas!
The PDF link to the full formal proposal can be found here, as well as a drafted Google doc version for anyone who’d like to provide specific commentary or feedback; the Appendix also contains the links to the TBC curve simulations.
Our primary goals with this phase of the engagement were:
- Update the Rally community with our observations thus far, specifically as it relates to the demand and transaction activity of creator coins (CCs).
- Dissect the current token bonding curve model to better understand its advantages and challenges as a pricing mechanism for creator coins.
- Analyze the advantages and disadvantages of a sigmoidal curve for different-sized creator economies (i.e. small vs. large).
- Examine the impact of liquid secondary markets for creator coins following an initial bootstrapping phase.
- Propose an alternative TBC template to complement the current sigmoidal curve, targeted towards larger creators expected to attract significant engagement and demand for their creator coins (see Recommended Action Items below).
- Provide context on the potential amount of total RLY locked under various scenarios using both the current sigmoidal curve and linear TBC (see end of proposal).
We examined these dynamics in the attached proposal from several angles, including the shape of the curve, genesis CC supply, optional pre-sales, and the impact of liquid secondary markets.
In addition, we propose to introduce a linear token bonding curve to complement the current sigmoidal curve, targeted more specifically for larger creators we expect will attract significantly greater demand and engagement. Below is a quick summary of our recommended action items.
Quick note: While our initial focus was primarily on the structure of the bonding curves, we recognize the potential impact RLY’s price can (and likely will) have on both the perception and adoption of creator coins, which is one of the reasons we’re proposing to implement an optional bridge from the Rally sidechain so creator coins can trade more freely (with the bonding curve still serving as a liquidity backstop).
This will be a core consideration of our next phase, where we will be digging deeper into RLY’s economics, the design of network usage rewards, and additional ways RLY can be used or leveraged to the advantage of creators and their communities; all of this builds on the work we’ve been doing, which also goes beyond the scope of this proposal. We could not be more excited and look forward to any and all feedback as we progress!
Recommended Action Items
Create an alternative linear bonding curve to complement the current sigmoidal curve; our example assumptions include a 5MM genesis supply and 21MM max creator coin supply cap, though we plan to iterate on these as larger creator economies develop. This type of curve would be recommended to new creators with volume expectations indicating varied liquidity pools could aid with market-based price discovery (more detail can be found in the full proposal) .
Implement an optional “pre-sale” period that allows a cohort of early participants to acquire a batch of new creator coins at the same price before the bonding curve’s price dynamics begin. Our initial proposal is not to limit the amount of pre-sale tokens available as it offers an option by which potentially a significant amount of RLY can participate if each participant knows they are being offered at the same price; the final price for the pre-sale will determine a creator coin’s starting price on its bonding curve. This eliminates the incentive to immediately sell post-sale, mitigating the potential downside risk for early participants.
Implement an optional bridge allowing individual creator coins to move from the private sidechain to a public L1 (initially Ethereum Mainnet). This will encourage liquid secondary markets to form, aiding in a coin’s price discovery as market-based forces determine its value (after an initial bootstrapping phase). It will also open up the design space for CC integrations, driving more utility and value for creators and their communities.