NOTE: Deleted original post since it was a reply to @SteveNX post accidentally.
Liz token issues regarding liquidity & price impact/profits, added utility to help token price, devaluation of our NFT value and securities regulation. NFT’s as an alternative solution to both problems of security and payment:
Liquidity and price impact:
The document states there will be 10% of the total Lizcoin supply dedicated to both CEX + DEX liquidity pools. Based on this:
- If there is large liquidity in the pool (Lizcoin-ETH pool), the damage or impact of price will be minimal from first in first out users liquidating funds to receive the highest amount of profits → So users may opt into this choice to avoid KYC and take the small hit to profits when converting
- If there is small liquidity in the pool (Lizcoin-ETH pool), the damage or impact of price will be massive from first-in-first-out users liquidating for higher profits → So users may opt out of this choice and go with KYC and be paid in ETH/USDT
- Regardless of large liquidity or small liquidity in the pools (Lizcoin-ETH pool) and price impact of first-in-first-out users liquidating for higher profits → Users may opt in KYC to be paid in ETH/USDT instead of lizcoin
Added utility to positively impact token price (such as whitelists) and liquidity counter-argument:
The buying pressure a WL utility or multiple utilities will either:
- Not have enough impact to affect the price, due to a large liquidity pool which gives market confidence in that pool or token therefore affecting it if people are willing to hold that token. Therefore liquidity is the king here again and is more important than added utilities & the added utility and subsequent buying pressure will not affect the price enough to make an impact as the liquidity pool is too large to be impacted. This is still a healthy view of adding utility for positive buy pressure but with a healthy liquid pool, it makes the buying pressure almost pointless.
- The added utility and subsequent buying pressure having a large impact due to the low liquidity pool, which doesn’t give market confidence and becomes scary and volatile, therefore people will want to sell that token ASAP. Therefore liquidity is king here again and the added buy pressure may even hit the liquidity pool as buying pressure makes the pool volatile. This is a silly argument to make, but it follows the logic of my below conclusion.
Conclusion: Realistically you don’t want large increases or decreases in the price of that token, the more “stable” it is, the more confidence it has. It shouldn’t be used for speculation since we are getting paid RevDis in it. We want to be able to know and predict how much we are making.
It becomes all very messy, hard to manage and predict and an up-hill battle to add utility to add onto the buying pressure, where-in reality its the liquidity that is the forefront of a healthy LP pool and the tokens volatility levels.
The price or compounding of our profits will be directly correlated to the upward buy and value pressure of Lizcoin being swapped with ETH as our DAO increases its profits. So as the DAO turns $50k of ETH into $500k of ETH, some of that ETH will be used to swap to Lizcoin, therefore creating a higher value for Lizcoin each time this happens. This is how our Lizcoin tokens are “compounded” through higher rewards. The aim here (if you believe in the project) is to hold all your tokens and sell them when the price is high after multiple investments & liquidations after a few years.
This is a completely different logic to the NFT idea of “Buy NFT → Stake NFT → Receive RevDis → RevDis compounds over time”. With the NFT idea, we are not selling our NFT’s, we are receiving a constant supply of profits which compound over time as the project grows and DAO treasury increases.
This is a completely different thesis to our original plan and investment.
Devaluation of our NFT and transforming the value into a token:
@G4C_Mindya_HYPE also wrote a nice comment in the governance talk regarding point A) Devaluation based on the documents proposing the 10% lizard token release and 15% founder token release. I will quote it below:
"But what I read with the actual proposition is that our lizards are worth 5% + 5% (10%) of the total Lizcoin and removing the utility from the NFT to give it to the coin? It would mean that our 5250 Lizards are worth 10% of coin, and team are worth 15% ? It would mean the team is worth 7875 Lizard during the coin distribution ?
Our lizards are being devalued in the short-term while the founders cut gets an increase in value in the short term. In the long term, due to the 30% additional staking rewards, this almost evens out besides the people that don’t actually stake for the maximum duration to get the maximum rewards.
Not only are we transforming the value of our NFT’s into tokens, we are completely losing the “collectability” value of having an NFT. Our NFT comes in two values, 1) The collectability and art 2) The RevDis it provides by holding an NFT. No-one gives a crap about a token, its all the same.
Lizcoin as a security/regulation based token:
Gary Gensler of the SEC (American securities exchange commission) and many other politicians and experts have all argued that any token that has or had a pre-determined sale (ICO,IDO) or allocations (give x% of tokens to founders, team, advisors etc) will be labelled a security. That’s the only reason why Bitcoin won’t be, because they had a fair distribution from the get go with no pre-allocation, no ICOS, no public sale, no IDO sale etc and has been touted as such by many in the field, including Gary Gensler of the SEC. It does not have anything to do with node decentralization.
The logic is as stated by Gary Gensler “The fact is, most crypto tokens involve a group of entrepreneurs raising money from the public in anticipation of profits. That’s the hallmark investment contract or security under our jurisdiction,”
That logic includes Ethereum and will include Lizcoin. Lizcoin will only take LONGER to be labelled a security. It’s a band-aid or work-around to stall time, it doesn’t solve the issue and it may well hurt us even more in the long run if the SEC and other regulators label Lizcoin as a security, which will require us all to KYC to receive profits. What is an alternative solution?
Source: SEC chair Gary Gensler says crypto assets are securities and thus ‘core to our remit’ - Financial News
Alternative solution: NFT dividends and DAO buybacks provided by @DVSTR_soon_Polemos :
“Ok hear me out. It’s also a bit risky but it has no need for coin. Once a investment is terminated by the DAO, we count the profit that is to be divided amongst the LIZ NFT stakers ( number of NFT you stake + duration = a certain % of the profits) The profits / the shares that are to be payed out to liz stakers, we create new NFT’s on L2 IMX, for example LIZTAILS NFT. Those NFT of each the same value (Everyone will be able to claim a different number of those NFT based on how many liz they stake and for how long, but all the LIZtail NFT will have a certain pre-derminated value) once you have claimed those NFT, you put them for sale on IMX marketplace ( @cryptish.eth ) and the DAO VAULT buys them back at the pre-determined price. We only lose 2% due to IMX protocol fees.”
What is the logic here of avoiding SEC regulations + being paid in ETH at the same time + avoiding the creation of a token?
- The DAO is not paying anyone directly.
- The DAO distributes NFT’s proportionally to what the user “should be earning” per their weighted-staking length.
- The DAO provides a price-point of the NFTS that will be bought back (profits per liz per weighted staking length). Anyone trying to overprice their NFT to try to earn more, the DAO will not buy back.
- The DAO buys and burns those NFTS. The buying is done using the seed profits.
- The user receives dividends (in ETH) from the selling of those NFTS to the DAO
No token involved. No direct payment.
With DVSTR’s above NFT-buyback method, its brilliant because you absolutely eliminate the need for:
- Liquidity in a token and the token pairing pools - the most important factor when talking about price increase or decreases in a token.
- Providing additional utility to provide buy pressure to help the price which again, helps the liquidity, which reinforces statement number 1 above.
- Removing the “first-come-first-serve” profits of holders and that entire mess that comes with a token and liquidating said token for ETH or a stablecoin.
- Any potential security or regulation concern as Lizcoin may still be labelled as a security, thus making this whole token a pointless endeavour which than forces KYC on users
Based on the above, I believe the Token has 0 benefits. I also believe it devalues our NFT completely while adding multiple risks which come with a token and its price with a completely different profit distribution thesis.
With the alternative method proposed by DVSTR with the NFT-profit-DAO-Buyback&Burn method, I think its genius for many reasons as listed above, and I will support it in lieu of any token creation.