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

Thank you for your response. You can take your time but as mentioned above just writing this message is enough for now. Please do note that the core issues are the following (1) the Serum Community as a whole owns a maximum of 1% of the total supply. The rest is in hands of the VCs, foundation, team etc. This means that there are probably multiple VCs/team members owning more than the whole community. I.e. they own hundreds of millions or billions of USD worth of tokens. (2) Besides owning an insane amount of money that is centralised with a few people, the power/control is also centralised and the DAO with the current tokenomics will never work.

Please do not go in the direction of delaying unlocking. This is just a ticking time bomb. In my opinion, the only solution is to decrease the FDV and heavily decrease the amount of tokens. Let’s be honest, for any other project that would have similar tokenomics it would be considered a ‘scam’. Its because of your reputation and trust people have we think your intention is not to scam anyone. We think its incompetence in designing the right tokenomics for such a powerful DeFi product. I suggest you not to talk about any side issues and create narratives around it while ignoring the main issues above which is main bottleneck here. If you cannot change the FDV due to contracts/VCs pressing you etc. than so be it. Then you can inform us and we ourselves can make a decision based on that information.

People will respect you if you admit you made a mistake and try to solve it. Please do not try to shift narratives.

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I am glad there is this discussion on the forum. I first noticed about SRM tokenomic problem when one day market cap of SRM jumped from $300M to $1B, and even after that massive unlock, circulating supply accounted for only 1.3% of max supply.
Then I visited SRM trading group on Telegram, they all talked about this problem, and I have never seen any trading group feels so doom and gloom.

There are defenses for current tokenomic here and there.
But all they say is “you will be fine since SBF and VCs and their partners want this project to succeed”. Of course they do, but why do we have to rely so heavily on those people’s goodwill, why do we have to accept so much uncertainty, code should be law not Team and VCs are law. Do you think Bitcoin or Ethereum would be where they are today with a tokenomic like SRM?

Good that team is here. But remember saying “show don’t tell”. Reminder that all questions in entire thread (especially question about tokenomic/deals that is hidden from community) should be responded. You have mentioned “transparency and openness”, so please allow to be full transparency with all questions when team has response, hiding full truth will be clear to community. Serum team had 1 year plus to think about tokenomics, and we are awaiting response.

People complaining about tokenomics are revealing a lot about what they focus on. If we’re airing things out here then its time to say that project serum has a lot of problems. But tokenomics ain’t one of them. The product is difficult to use. There is no official front end so people don’t know where to go. It’s tradfi people who like CLOBs but they aren’t in the market yet. People are coming to Solana for NFTs and not defi. These reasons plus countless others add up to Serum not being a top 20 dex. Playing games with tokenomics is a solution for people who aren’t looking at the product or the market and it won’t help here.

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In the last month people have shifted from purchasing NFTs back to purchasing meme doge coins. However this liquidity is going to Orca’s AMMs, because the GUI / ease of use is unmatched.

In addition, the Orca team handles adding markets (pools) to their product. In contrast, Serum doesn’t have a team that proactively creates markets. Anyone can create a Serum market, but the costs are prohibitive to the long tail of assets including meme tokens and the many tokens that could go through wormhole (4 SOL currently). For example, LRC (Loopring) is hot right now, why is there no liquidity on Serum?

Perhaps a refund program / bounty program could be implemented (costs of bridging + creating a market), but this discussion is derailing the discussion around Serum’s FDV. Which, I fully disagree with your stance that the tokenomics are not an issue.

Project Serum right now seems to be a public good for the Solana ecosystem and has contributed to the rise in price of SOL. For those that chose to invest in SRM, instead of SOL are obviously disappointed that the rising tide hasn’t lifted important boats, such as SRM.

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As mentioned before, we can address multiple issues at the same time. This post is focused on tokenomics. There are other posts focused on liquidity mining, fees, grants, etc. You are free to make a new post to discuss your concerns as well.

If Serum is trying to move to a DAO with 2.4B tokens controlled by team and VCs and only 100M tokens controlled by community, then tokenomics will obviously be a big issue for the community.

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I’d like to further expound on some ideas around tokenomics.

Rent-seeking behavior like the maker/taker fees that are charged when using the dex are not viable long-term. If this is the case, then the burn based tokenomics need to be deprecated.

Some examples of newer tokenomic models:

  • FEI/OHM - Protocol controlled Value - move SRM tokens to the DAO treasury. Project Serum could lease liquidity. Detailed discussion held here: The Secret Weapon of DeFi 2.0 | Zeus from Olympus DAO - YouTube
  • Alpha Finance Labs - Y Combinator of blockchain - Tokenomics incentivises staking, the longer the stake the more you are entitled to receive incubatated projects. A new Serum staking contract could reward stakers with tokens of projects being built on-top of the Serum order book or using Anchor. Projects would have to allocate their tokens to the Serum community, so Project Serum would have to provide some added value. This could be via liquidity incentives and additional incubation type consultation. I.e. Project Serum could hire the best project managers / product managers in the space.
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Some sort of staking utility could be useful for SRM, but I think SRM needs fee burns to control hyperinflation from future token unlocks. Burns are permanent because the tokens are forever out of circulation, but staking depends entirely on some sort of reward for staking, which isn’t reliable considering the billions of future unlocked SRM we’ll have to incentivize to be locked up.

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Is one of the partners, VCs or foundation members able to respond with something a bit more concrete? It’s been about 2 weeks now already.

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I’ve been following this discussion from the first post. I’m a SRM holder since week 1 of this year. I’ve always defended the tokenomics based on Sam’s vision of 1+ billion people using it on Solana. I’ve staked onchain since the day it came out so got my share of fees and applauded the burns. I’m a SRM believer and advocate and always will be. But I do feel a change may be required from the initial vision to the strategy required now. Defi moves quickly.

Anyhow, in response to your post:-

FABRIC have put forward a plan for the very thing you mention - it is noteworthy in this thread as:

1- It facilitates the use of Serum as one of the primary forms of Collateral that underpin the synth dApp. Given that the current collateral in Synthetix (the closest equivalent to FABRIC on Ethereum) exceeds $690m dollars, having this additional long-term utility for the Serum token is an extremely exciting value proposition.

2- Creates a potential opportunity for a more equal and decentralized distribution of SRM

Note: You correctly point out the need for staking incentives. FABRIC team have 5 times their own Protocol Token allocation for dApp rewards at 60% of all tokens

It might be more constructive to propose solutions to the problems you raised in your earlier posts. Whatever the solution, it shouldn’t be rushed. I think it might take a little longer than 2 weeks to solve. Please be patient and keep all posts on this thread constructive.

For more informal discussion, there is a governance channel on the project serum discord.

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At this point there cannot even be a full-sized solution from the community, as we don’t have full information about situation!! How many tokens does DAO have available? Why this DAO was created with no community allocation, so what was prior plan to decentralize? Does DAO control which proposals are announce or will Serum Twitter be silent and not announce some proposal? How can we get adding 2 number solution when we don’t know which number we are adding?

Please Serum team give answer for list of question I have posted before along with all other clarifying question asked in thread. Those answers does not require solution, that only requires team to list already existing information and give community answers. I don’t think answering all questions take more than 2 week when you have many people on team… Then we can provide full-sized solutions.

Serum team has to take lead and responsibility for all decisions and give truthful answers because we are in this situation because of Serum team decisions. We are awaiting all answers.

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Is Syntheitfy not largest synthetic project on Solana, not is Fabric? I don’t think this is good use of token and is not large scale enough to help in this thread discussed problems.

My point is that the main problem right now is the one sided communication here. Without 2 sides communication we are not making progress. This is why it would be great if the foundation would respond.

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Agree with @Defi_Degen here. It’s unreasonable to expect the community to come up with realistic solutions without having the full context of usage of previous tokens, amount of tokens available, and reasoning for all things mentioned in this thread.

Suppose someone proposes we allocate the 75% of tokens not given to the team and VCs to the DAO. Then the Serum team says that’s not possible, many of those tokens have already been distributed. Ok, how many are available for the DAO and why? Serum team says… Then someone proposes a burn, including diluting insider tokens, to increase decentralization. Then the Serum team says that’s not possible, we’ve already signed legal contracts to allocate all those tokens. And so on… Why not clarify all the questions asked in this thread upfront and make the solution finding process move faster?

This is probably the most important thread on this forum for Serum’s future, and frankly, the team is dropping the ball here. This would be a great opportunity to display some leadership.

Who is exactly part of the ‘foundation’ of Serum? Keep seeing ‘advisors’ on Twitter but who is exactly managing/running things behind the scenes? Would be great to get some more transparency on this.

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I am still looking forward to Serum team’s response to above questions.

By the way, in the worst case scenario that the team keeps ignoring this topic, I wonder if the community could fork Serum project and design a better tokenomic? Is that possible at all?

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Finally, someone says it.

Imagine Mango forks Serum (looking at you @daffy). Who do we think would have more community support? The project where insiders control all the tokens and respond to zero of the community’s crucial concerns while talking about how their pets drink tea [Alasd_gem (or Ed)], or the pinnacle of a community driven, fair launch token?

What if Raydium forks Serum and moves all its market making there? Take a look at Raydium’s Twitter following and tokenomics and look at Serum’s, then answer this question.

Then what happens to the SRM token as it enters hyperinflation with no burns since all activity moves to the new community driven orderbook? Serum will try to incentivize more liquidity with massive liquidity grants, dumping the SRM token price even more. Not even mentioning the major dump after a new fork is announced.

Farewell Serum and thanks for the shorts. This post will probably be deleted by the team, but Sam, please stick to centralized projects, you don’t understand how crypto actually works. Serum team, please be honest with yourselves. Really, think about what’s going on here. In this world, communities win.

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From all the teams in history, this may be the worst team to actually launch a DAO. And people wonder why everyone calls Solana a ‘VC chain’. The foundation will probably write a blog with a vague narrative and say ‘we are listening to the community’ and think it’s solved. They have literally no clue of the layers of problems that they are facing at the moment by ignoring the elephant in the room. They’re just making this DAO environment more and more toxic. And when these issues were raised on Discord they just banned people. It’s so frustrating to see one of the most innovative products that has even been released in crypto to be managed by the wrong people. I guess it’s all about money at the end of the day and they are in the 9 figures 10 figures range on paper so they can afford to ignore people here.

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Serum team, @bonfida @JumpCrypto have no opinions for this thread? You have been very talkative in other thread, and not even single small word for this most important issue??? Jump is worst VC I have seen interact with any DAO, only care about insider and no input for community. I hope other project see how they interact with Serum community and not take their investment. Serum team is worst team I have seen handling DAO, only focus on random tweet, keeping good face to public, banning community member, and hiding information. These people think crypto project is like traditional corporate company. Reason crypto exist is so we have open community and discussion, not like corporate company where management says corporate language and forget about community.

Does insiders understand that only way they sell token is if community and greater public buy from them, so what if nobody want to buy this shitcoin becuase there is better community focused coin?

Here is what to be done - answer all questions with full truth, then distribute tokens to community with some program. If this is not done, SRM is dead token. You ignore community, community ignore token.

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