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REP-0011: Ronin Buyback and Burn

Preamble

REP-0011
Title: Ronin Buyback and Burn
Author: Artic
Type: Process
Status: Stagnant
Created: 2024-02-18

Abstract

REP-0011 describes how to use the Ronin Treasury to buyback and burn RON.

Goals

  1. Create precedent for a rules based approach to Ronin Treasury management.
  2. Reintroduce tokens that would have been previously rendered stagnant in the Treasury into the Ronin ecosystem.
  3. Combat RON token inflation from token emissions.

Rationale

As of February 18th, 2024, $4,400,000 of token value is held in the Ronin Treasury. This value consists of ETH, RON, USDC, AXS, SLP, and BERRY. The Ronin Treasury currently has three inflows. Katana trading fees (0.05% of volume), Mavis Market fees (0.5% of volume), and RNS registrations / renewals (30% of all fees).

As adoption of & activity on the Ronin Network increases, the amount of tokens held in the Treasury will increase significantly. Currently, the Ronin Treasury is a dead end in the Ronin economy. Tokens which could be reintroduced into the Ronin economy are instead stagnant. Using tokens in the Ronin Treasury to buyback and burn RON reintroduces these stagnant tokens into the Ronin ecosystem and works to combat RON inflation from token emissions. This system also creates a simple, rules based approach to treasury management.

Specification

The current proposed implementation on the buyback is split into 2 parts:

  1. Treatment of Current Funds held in Treasury
  2. Treatment of Future Funds into Treasury

Treatment of Current Funds held in Treasury

100% of the RON currently held in the treasury will remain untouched to enable future use cases. 20% of the non RON tokens currently in the treasury will remain untouched to enable future use cases. 80% of the non RON tokens currently in the treasury will be used to buyback and burn RON. These tokens will be used to buyback and burn RON over a 3 month period.

Treatment of Future Funds into Treasury

80% of all future inflows will be used to buyback and burn RON. For RON, 80% will be burned and 20% will accrue to the treasury. For non RON tokens, 80% will be used to buyback and burn RON. The remaining 20% will accrue to the treasury in the form the fee was charged in (ETH, USDC, etc). This is to promote a semi-diversified treasury which could be used for other initiatives in the future.

Example: $200 ($100 of RON + $100 of non RON tokens) flows to the treasury. For the RON, $80 is burned and $20 accrues to the treasury. For the non RON tokens, $80 is used to buyback and burn RON. The remaining $20 accrues to the treasury in the token form it was collected in. End state: $160 of RON burnt, $20 of RON in treasury, $20 of non RON tokens in treasury.

Note:

  • All specific percentages, timelines, and other details can be changed to reflect the will of the community.
  • The buyback and burn is executed via smart contract in 1 transaction.
  • How non RON inflows remain in the treasury can be changed (keep in the form the fee was charged in, swap all to RON, swap all gaming tokens to ETH/USDC, etc).
  • This model should be reevaluated periodically, perhaps quarterly, to measure success and explore further use cases to augment or replace buyback and burn.

Reference

https://docs.roninchain.com/ https://app.roninchain.com/address/0x22cefc91e9b7c0f3890ebf9527ea89053490694e

Economic Analysis

The amount of value burned each month varies based on how much volume each treasury inflow source experiences. This analysis is roughly based on current volume numbers and assumes a $2.00 RON price. Written in January.

Katana currently has around $200M of monthly volume. The 0.05% fee results in $100,000 accruing to the treasury in one month. 80% of the $100,000 value will be swapped to RON and burned, resulting in $80,000 of RON bought back and burned and $20,000 accruing to the Treasury.

Mavis Market currently has around $200,000 of monthly volume. The 0.5% fee results in $1000 accruing to the treasury in one month. 80% of the $1000 value will be swapped to RON and burned, resulting in $800 of RON bought back and burned and $200 accruing to the Treasury.

RNS currently has around $10,000 worth of monthly registrations. The 30% fee results in $3000 accruing to the treasury in one month. 80% of the $3000 of RON will be burned, resulting in $2400 of RON burned and $600 accruing to the Treasury.

Based on current conditions, this proposal would result in $83,200 of RON burned each month. At a $2.00 RON price this would result in 41,600 RON burned each month based on described conditions.

Additionally, there is currently around $2.5M dollars worth of tokens excluding RON & WRON in the treasury. 80% of these tokens would be converted to RON and burned over a period of time, resulting in around $2M worth of RON burned if the proposal was implemented.

End State: $83,200 of RON burned each month from all inflows. $20,800 of RON+non RON tokens accrues to the Treasury each month. $500,000 of non RON tokens remains in the Treasury. $750,000 of RON remains in the Treasury.

The amount burned monthly will increase as activity on Ronin Network increases.

Ideas for Future Treasury Direction

Criteria: Automatable to minimize human involvement once implemented.

Buyback and Pool: Treasury inflows are used to create liquidity positions owned by the treasury. This would bolster Katana’s liquidity over time and create a new source of Ronin treasury inflows.

Distribute treasury inflows to Ronin stakers pro rata. This could bolster staking rewards as allotted staking rewards decrease.

License

The content is licensed under CC0.