[Tokenomics] The elephant in the room - Serum's FDV

I think you guys are making a big deal out of something quite innocuous. Also I see most posts are just simply flaming the token price, which leads me to think that most of you here are for the pumps.

Isn’t one of the ideals of defi is the anonymity of ownership? From these posts I see you guys simply are asking for a Form 4 filing. Might as well report serum to SEC while you are at it.

@groot made a pretty interesting and concrete reply on tokenomics. But it is clear most of you are not interested in actually learning more about the newer models. “Burn all the supply” or “TELL ME IF SAM IS PUMPING THIS” reminds me of teenagers in junior high.

Do you think in your head that @JumpCrypto is here because they like to volunteer for serum charity position? And team members don’t have massive money interest? Companies have responsibility to respond to shareholders and increase price. Teams have responsibilities to respond to community and increase price. If you don’t care about token price, then don’t make token?? Make simple open source project.

Look at all the questions I have posted in above reply. You think these questions have no matter?? So much information being hidden from team, while they claim this is “DAO”? It is not DAO if insiders hold all tokens. How are you blind to everybody concerns. People have lost much money on this token

Really it doesn’t matter what serum team and shillers think. Community will decide where they will go, and team can have fun discussing how they don’t care about token price in forum

Well, investors want to see their investment increase in value overtime or is that too much to ask? Nobody is asking or demanding overnight pumps. Heck, I wouldn’t want an outrageous pump myself as it is not healthy. We all want to see healthy growth but that isn’t happening is it? Tell me if the burn rate has been increasing consistently or not? What about the volume? The answer is no, it hasn’t.
Crypto is a world with fast changing dynamics and if you don’t act quickly, you are at the risk of getting left behind.
Lastly, please tell me why the team hasn’t responded to this question as yet? Regardless of whether it makes sense or not we would love to see a response.

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I agree that its becoming a bit toxic. Please guys lets not call SRM ‘shitcoin’ and flame people.

Isn’t one of the ideals of defi is the anonymity of ownership?

Yes, if the team behind it doesn’t own 99% of the supply. Dont you see how deranged that statement is? Imagine Satoshi owning 99% of the supply of Bitcoin. It’s literally impossible to become a DAO.

@groot made a pretty interesting and concrete reply on tokenomics.

This isn’t a ‘newer model’. This is a fundamental flaw in the design. If one party holds 99% of the tokens (worth 70 billion) and launches a DAO where they control 99% of the (future) voting power thats super problematic. Especially if there is 0 response from their side to actually address these issues. Remember, the Serum foundation consists mostly of developers and traders. We have to ‘trust’ them that they are actually using the tokens wisely when they unlocked 400m-500m worth of tokens (not even 1% extra of the total supply?). Why would you ever need to unlock 100s of millions worth of tokens and then write in your blog that ‘it will barely affect the circulating supply’ when the market cap actually doubled. Do you see the patterns of problems here? And I’m not sure I can see any light at the end of the tunnel.

Just look at this. Forget all the other categories. The team owns 20% of a 70 billion dollar supply token. That means they own 14 billion USD worth of tokens. Do you think that is fair? Forget if the vesting is 1 year 5 years or 20 years. Do you think after a bit more than 1 year working on it they should be receiving 14 billion dollars worth of tokens?

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I really disagree with this. I’ve been trying to remain neutral since I discovered this forum and this thread, but looking at all the facts makes it very hard to not take a position on this, especially when the team. doesn’t have any response. This is what I’m concerned about:

  • Lack of transparency with past use of tokens. Not asking for exact team vesting amounts here, just how much SRM has been spend and how much is available for the DAO.
  • Lack of transparency with proposals when they start, like with Raydium. It’s clear this was passed due to insiders and no community involvement.
  • Lack of clarification of what the DAO has control over. The DAO never decided to announce a $100M liquidity mining program. Very concerning if this continues in the future.
  • Tokenomics that are at their core incompatible with anything most people would agree to call a fair and equitable DAO. Compare Mango, or any other DAO, with Serum.
  • Tokenomics that actually affect the product negatively, like myself and others mentioned in the fee reduction thread (Serum Fee Reduction Proposal).
  • The larger DeFi community’s negative view of Serum’s tokenomics. What people think of Serum matters.

This all comes down to token price, unfortunately. Most parties that are here care about that.

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Hey Serum DAO,

There’s been a great deal of discussion and questions regarding SRM. The core Serum contributors and I have noticed concerns regarding how the SRM tokens are distributed across the Serum user base. We want to clarify these questions regarding the ownership distribution, as part of our continued effort towards being fully transparent with the DAO.

There have been concerns that the overwhelming majority of the locked supply is held by VCs and similar parties. This is false. In reality, around 20% is held by investors. The vast majority of the supply (over 60%) is reserved for community and ecosystem rewards. The release of these tokens are subject to heterogeneous lockup schedules on the blockchain and will be implemented on-chain in due course.

It is also important to note that, currently, only 1.5% of the total SRM is in circulation; as that percentage increases, the percentage of SRM that is allocated to members of the DAO will only increase.

Another concern has been that, despite the distribution described above, some firms that were early contributors to Serum possess a larger number of tokens than the contributors and members that joined later. We acknowledge that this distribution is imbalanced. We intend to advocate for programs that disburse additional tokens to newer contributors and users over the next few years, including through grants, incentives schemes, liquidity mining programs, and more.

We also apologize for the lack of communication around past proposals related to the liquidity mining incentives arrangement. The Rules and Guidelines on discussions, proposals, and voting should have been made available to the community much earlier. We regret the bad communication between the different parties (the involved teams and the wider Serum community) across the creation and cancellations of multiple proposals that failed the general expectations of the DAO.

We recognize that the wider Solana community looks to Serum to set a leading example; under high expectations. Going forward, we want to set the right example and follow the correct path, as a DAO and community.

Other items we want to note:

  • Discussions about extending the voting period from 3 days to 7 days had been put up for voting and is now waiting for instruction initiation. (Governance | Solana)

  • Community members are advocating for MSRM to be used for voting in the future.

  • Proposals are underway to roll out a new version of the governance program with mechanisms for giving locked tokens more voting power, and giving participants the ability to lock their tokens to amplify voting power.

  • Proposals to allow users to vote via SRM tokens on centralized exchanges are also underway.

  • On October 5, 2021, it was announced that 100% of Serum fees would be directly sent to buy and burn until the DAO votes on other use cases of these funds. This discussion can be initiated in the forum anytime.


Thank you everyone again for your constructive feedback, commitment to Serum’s growth and direction, and continued support. Serum’s journey is a long one, and we’re honoured to have supporters who are here for the long-term, through thick and thin.

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Thank you for the reply! I just want to discuss this because it may seem like a small thing but its the most important issue that we are discussing here.

There have been concerns that the overwhelming majority of the locked supply is held by VCs and similar parties. This is false. In reality, around 20% is held by investors

20% of the total supply to the team with a valuation (currently) of 60 billion FDV is 12 billion. This means that the Serum team owns more than 10 times as much currently than the community as a whole. Don’t you think this is a huge red flag? 12 billion USD worth of tokens they own!!! In the history of VCs & crypto projects , has there ever been a bigger imbalance?

EDIT:

Will also like to add this:

It is also important to note that, currently, only 1.5% of the total SRM is in circulation; as that percentage increases, the percentage of SRM that is allocated to members of the DAO will only increase.

What does this mean? How will the percentage increase? Will everybody get free staking rewards? If not, then its just inflation and everybody here will lose money relatively to the current supply. We don’t want unnecessary inflation. Especially where 1.5% extra is 700 million USD extra that could potentially dump on the community.

There have been concerns that the overwhelming majority of the locked supply is held by VCs and similar parties. This is false. In reality, around 20% is held by investors. The vast majority of the supply (over 60%) is reserved for community and ecosystem rewards. The release of these tokens are subject to heterogeneous lockup schedules on the blockchain and will be implemented on-chain in due course.

So team owns 20% and investors own 20%? Piechart says private sale was 4%, so why do you now say 60% is available for DAO. Were there other investors that buy tokens after the first sale of SRM token?

It is also important to note that, currently, only 1.5% of the total SRM is in circulation; as that percentage increases, the percentage of SRM that is allocated to members of the DAO will only increase.

So 1.5% of total suply of SRM is unlocked, and most of that is insider own because those are whose tokens unlocked. But maybe insiders dumped so community own what, 0.25%? Then insiders own 40%, maybe 24% minimum according to pie chart.

Here is a simple question for Ed, do you think SRM distribution is fair for DAO compared to Mango or other DAO when insider have 26X or 13X more than community? You said you will look at Mango, so just answer yes or no please. Please stop drinking Serum smoothie Ed and answer with honest heart.

Amount of tokens insiders have is so much more than community, and insider will not vote to give community more power. There is reason everyone on twitter makes joke of serum, even on Serum’s own tweets replies.

Please also answer these questions one by one: [Tokenomics] The elephant in the room - Serum's FDV - #33 by Defi_Degen. Answering this is to be expected by people who own billions of dollars of this token, you cannot run away and say “DAO, DAO, it is for DAO to discusss!! Team has no opinion :))(even in case we own billions dollars of SRM)”

Most community members here would love to get complete answers for the questions @Defi_Degen asked weeks ago. But frankly, I don’t think that we will get all the information we want, and I think we actually don’t need that information anymore.

It’s obvious that Serum’s tokenomics are far from fair enough for anyone to call whatever is going on here a * Decentralized * Autonomous Organization (DAO) in any way, shape, or form. Token distribution and control is in the hands of whales by a huge margin (as evidenced by the recent proposals) and that can’t be fixed realistically without making many people unhappy. Serum would have to do huge liquidity mining (or some other “fair” token distribution) to get the community’s share remotely close to insiders’ shares as their tokens unlock, effectively doubling inflation and crashing price, or would have to do token burns which include insiders, and insiders would of course never agree. Serum’s FDV also gives them a huge war chest of dollar value of tokens in theory (even when it wouldn’t be true fully diluted) and that’s too powerful to give up.

The Serum team can’t admit these things, even if they would from a neutral perspective, since that would simply invalidate the legitimacy of all that has happened. Nor can any other parties involved admit these things. @AlphaRay and @kaiba are the only relevant individuals that have come close to honestly acknowledging that there is a big problem, but even then they can’t suggest any concrete radical solutions (the only type of viable solutions), since those solutions wouldn’t pass because insiders wouldn’t approve them. @bonfida and @JumpCrypto can’t say anything, since there’s not much they can legitimately say. Even though it’s obvious to the community that there are private discussions being had about all of these proposals and ideas where the outcomes are effectively decided, these parties can’t publicly admit that.

These things and the vacuous or nonexistent responses from insiders and small acts of censorship are actually the most relevant information the community requires to make a decision about what to do now. Serum is not Mango, or Sushi, or any other thing anyone has ever called a DAO. But the great thing about crypto is that things are open source (GitHub - project-serum/serum-dex: Project Serum Rust Monorepo). People don’t have to fight, they can simply leave.

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In short, even the team agree that there is a huge problem but they can’t do anything about it. On top of that, we have people like @JiangNotYang trying to cover this mess by saying people only care about the price. Well no shit, investors invest to make money. However, in this case, there is no light at the end of the tunnel. Far better projects out there to invest money in. I am out. Good luck.

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Yes I agree so many red flags I will try to Exit too.

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Everything what is happening right now is so confusing. We have a highly analytical team that is heavily skewed towards development and trading but morally autistic. They seem to lack common sense and some sense of empathy. I feel like if they go over this thread they are flabbergasted and still probably don’t get what the issue is. They don’t see that one of the most centralized projects in history launching a DAO is problematic. And all the money and power is controlled by them, the 1%. I’m wondering who is running things behind the scenes. Looks like SBF distanced himself from the project. People like Burg (see https://twitter.com/burglol) and Armani (see https://twitter.com/armaniferrante) seem to be running things but unclear how much. I just don’t understand why almost nobody from the Serum team is mature enough to respond. Learn to take the heat and be at the front lines instead of hiding behind other people. People will respect you more.

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Here’s something like another side to this:

I don’t think Serum expected to change to a DAO when the initial tokenomics were drafted. It should be so obvious to someone as smart as SBF (and other Serum founders) that a DAO where the public owns less than 1% while the vast majority of the tokens are locked for insiders is in no way a legitimate DAO, and that the community would audibly confused if the Serum team started calling this thing a DAO. They also couldn’t have predicted the recent rise of DAOs (actually “fair” DAOs, Sushi, Mango, etc…), so they probably thought having sort of centralized tokenomics are fine. This “DAO” was probably created for legal reasons rather than to actually decentralize Serum, because I don’t think even the current Serum team is dull enough to think they are actually decentralizing anything here.

But Serum’s FDV is probably another thing completely. This low circulating market cap and large locked/FDV was intentionally chosen so Serum could have a theoretically huge treasury (in fact, largest in crypto), in dollar value terms, so that they could give grants to build the ecosystem or possibly raise future fundraising rounds at huge valuations. This is great for the insiders that got in early, since they’re worths many millions or even billions on paper, but is absolutely horrible for retail investors getting in later.

Serum’s FDV is currently almost equal to Solana’s market cap. Even the Serum team themselves couldn’t say with a straight face that this is reflective of Serum’s true current value (check out Serum’s volume compared to UniSwap), but they sure will claim the token price is real when they give token grants.

Anyhow, for Serum to 10x in the next 3 years, with a FDV of $50 billion, its FDV would be $500 billion. That’s bigger than Ethereum’s valuation right now. Compare to Mango, with an FDV of $3 billion, a 10x would be only a $30 billion FDV. Or Raydium, a 10x would be a $50 billion FDV. Even UniSwap, a 10x would be less than $200 billion. This isn’t even considering the billions of the team’s SRM that will be unlocked in the next few years, surpressing the price. With fees being lowered even more, burns will be negligible too. Serum is an awful investment for retail, who are looking for outperforming gains in crypto.

But many of the current team members might have not been around when the initial tokenomics were drafted, and they’re probably just employees working for a paycheck, not the founders of this project. Even though they might have many millions of SRM locked up, we can’t blame them for this situation. @JiangNotYang is probably a Serum contributor who can’t say much else, like the rest of the team. Funnily enough, even though SBF was active on the Sushi forum about a Raydium proposal earlier this year, it seems like he doesn’t care about his own project’s DAO forum for the thread that he probably caused.

I want to say that Serum’s position is actually notably weak in a crucial aspect: having a truly loyal community. Check out Sushi or Mango’s governance discord, and compare it to Serum’s. Check out the replies to Serum’s tweets where most tweets are express displeasure about price, and compare them to Raydium’s tweets replies. No amount of swag or grand presentations at conferences can fix this issue. Serum’s only saving grace is @armaniferrante’s open source projects, like the Anchor programming repository, which is fortunately under the Serum name.

Serum’s product is very valuable for the Solana ecosystem, but their tokenomics and team have forced them in a peculiar position. I hope other developers in the space see this opportunity to build an authentic community with much better tokenomics and radical transparency that give upside to the community. @AlphaRay @daffy @mschneider and any other developers that have a focus on community, consider this on your roadmap, the opportunity is huge.

(I’ve spent too much time being annoyed on this forum :laughing:)

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But what would you do about it? I think most of what you have said is right/reasonable. So what steps would you take?

For Serum, the following are the only options for legitimate decentralization and a realistic FDV, but they won’t happen for obvious reasons. My quote from before:

Serum would have to do huge liquidity mining (or some other “fair” token distribution) to get the community’s share remotely close to insiders’ shares as their tokens unlock, effectively doubling inflation and crashing price, or would have to do token burns which include insiders, and insiders would of course never agree. Serum’s FDV also gives them a huge war chest of dollar value of tokens in theory (even when it wouldn’t be true fully diluted) and that’s too powerful to give up.

It’s heresy for this forum, but like I said before, I think forking Serum is the only option to build a loyal community and have a project that isn’t run by insiders. To quote above:

I hope other developers in the space see this opportunity to build an authentic community with much better tokenomics and radical transparency that give upside to the community. @AlphaRay @daffy @mschneider and any other developers that have a focus on community, consider this on your roadmap, the opportunity is huge.

For your question, I don’t have enough knowledge of Serum or know the right people to create a successful fork, but steps I would take would be to whole-heartedly contribute to a fork that has good intentions. Raydium and Mango already have very good integrations with the Serum orderbook, so forking Serum and switching their product to their forked orderbooks might be easy. They also have much better community focused tokenomics, with Mango even having the best DAO on Solana. It would be a big decision for both of these projects, but benefit they would get from community support would be huge and this decision might also increase their valuations. Could also be an entirely new team that does this!

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I think you can appreciate how posting on the serum forum you would fork and start again isnt going to get any traction :slight_smile:

The issue is complex as others have discussed, but I think one possible answer (or part of one) may lie within burns - they need to be genuinely meaningful relative to the growth of Serum as the backbone of Solana within the context of the whole crypto space such that, given reasonable time, the tokenomics will make sense. Right now, the burns are more symbolic and have little relative weight. They might be meaningful within the context of world domination & decades timeline, but how can Serum reach that level if it can’t create community? The large supply functions as a sort of success insurance (a war chest) but it should help ensure success, not stifle it. With a large enough war chest and constant unlocks, this creates a manufactured “top” where growth is stunted. I know some have mentioned the people on this forum raising these concerns only care about price. Please note that price is a metric like any other metric. It is metric of adoption and often the health of a community. We are not in it for the pumps (we’d be long gone by now), but we are looking for some sensible reasons to be a part of the community long term.

So is @Alasd_Gem, or anyone else from Serum team going to tell us how much SRM the DAO controls?

In Mango, it’s clear that their DAO started off with 9B of the 10B tokens. Can we get the same transparency for the Serum DAO?

I’m not sure how to solve the FDV issue, but I have an idea for making the DAO actually more decentralized.

From what I’ve read up to now, due to how tokens were initially distributed, the community holds a very small % of SRM and therefore control a very small % of voting power in the DAO and we can easily get veto’d if any “whales” (VCs, etc) vote in opposition.

A simple fix I see is to “lock up” all the voting power of the current circulating SRM supply and unlock after 7 years, only when all the SRM tokens are unlocked to the public. This means that the next unlocking, Aug 2022, we can put those SRM into a pool or some way to efficiently and fairly distribute to the community and everyone will have a FAIR chance to accumulate serum.

Maybe to prevent confusion between the old SRM tokens and the newly unlocked ones, another actual DAO governance token can be swapped 1/1 with newly unlocked SRM, and this code can filter between locked/unlocked SRM in terms of voting and only swap the amount eligible from the new distribution.

Tl:dr; Void all voting power of current supply for now (unvoid in 7 years). Next unlocking of SRM Aug 2022, actually fairly distribute DAO governance from an even playing field.

So… we had 1 single reply from an official Serum team member swearing that they will respond on this immensly important subject. Almost 2 month have passed - NOTHING!

Are you f’n kidding me?

All while Serum hits 2 dollars breaking its 2.4$ bottom which it had during the last summer BTC crash. Solana was 20$ back then, just for the sake of comparison.

Please!!! If someone has any personal connection to SBF or any of the key team members - alarm them on the matter of this topic!