Flywheel & Game Theory
Game Theory: ((3,3) -> (⬛,🪨))
There are 5 actions that holders of $BTC can do: Stake, Hold, and Bond, Unstake Early, Unstake Post Consolidation
EV (Expected value): describes the long-term average level of a random variable based on its probability distribution. The more positive the EV, the higher the outcome for the player.
RFV: risk free value. In context of BlackRock $BTC, the backing of each $BTC.
With our debase mechanisms, the EV value for simply holding $BTC has been greatly reduced as their $BTC will be subjected to debase. That being said, the most +EV action will be to stake. Staking $BTC not only earning rewards but will later earn real yield as we transition to the final stage.
As investors buy and stake $BTC, the circulating token supply will be reduced and sell pressure will be reduced. Coupled with the debase mechanism, the price is likely to go up.
Coupled with the debase mechanism, the price is likely to go up.
=> As a result, the discount for bonding will become more attractive for bonders which will attract bonds and raise our treasury. During the bonds, the same circulating supply will be reduced at the same rate via rebase. As a result, stakers can stake and earn without worrying about their shares being diluted by bonders.
What if token is up so much and there’s a big flush?
When the token is too overvalued, there might be a dip and cause some panic stakers to unstake and sell. To solve this, we have an immediate unstake fee of 5% that’s burned forever. Stakers will have to stake for 2 days before they can unstake without fees.
This means that during big flush events, the supply will be greatly reduced and increase the rfv of $BTC, making it attractive to buy and stake at lower prices again. And as price rises again, we can continue bonding and gather even bigger treasury. With this, we are essentially creating an infinite loop that makes the supply neutral to deflationary while growing our treasury and rfv overtime. As a result, the intrinsic value of the token will continue to increase and increase.
We call that the SSS Flywheel: Slump Spurs Surge
| Action | Outcome for Induvidual | Outcome for BlackRockFund | Notes |
|---|---|---|---|
Stake | Positive: Earns rewards and real yield, contributing to a reduction in circulating supply and less sell pressure. | Positive: Reduced circulating supply enhances token value. Increased staker engagement bolsters protocol stability. | Most advantageous in the early and final stages (Expansion). |
Hold | Negative in comparison: Subject to debase mechanism, leading to a reduction in token value over time. | Neutral: Passive holders neither contribute to nor detract significantly from protocol dynamics. | Less advantageous due to debase mechanism. Encourages transitioning to staking or bonding for better returns. |
Bond | Positive: Contributes to treasury growth, benefiting from rebasing which balances circulating supply. | Positive: Treasury growth directly supports protocol stability and enhances intrinsic token value. | Attractive during all stages, especially during Expansion for treasury bootstrapping. |
Unstake Early | Negative: Immediate unstake fee leads to a loss, reducing immediate liquidity. | Positive: Fee contributes to supply reduction, increasing the token's relative value. | Discourages short-term trading and promotes stability. |
Unstake (After Lock-in) | Neutral: No immediate fee, but potential loss due to market conditions. | Neutral: Regular protocol operation without additional benefits or detriments. | Encourages consideration of market conditions before unstaking. |
| Action | Stake | Hold | Bond | Unstake (early) | Unstake (After Lock-in Period) |
|---|---|---|---|---|---|
Stake | (⬛,🪨) | (+2,-2) | (+2,0) | (+2,-1) | (+2,+1) |
Hold | (-2,+2) | (-f,-f) | (-2,0) | (-2,-1) | (-2, +1) |
Bond | (0,+2) | (0,-2) | (0,0) | (0,-1) | (0,+1) |
Unstake (early) | (-1,+2) | (-1,-2) | (-1,0) | (-1, -1) | (-1, +1) |
Unstake (Post Consolidation) | (+1,+2) | (+1,-2) | (+1,0) | (+1,-1) | (+1,+1) |
Hold vs. Hold/ Unstake Early: (-2/-1,-2/-1) Both suffer due to a price war.
Stake vs. Unstake (Post Consolidation): P(A) gains more (+2) from the staking pool and subsequent redemption, while P(B) also benefits (+1) from increase between entry & exit RFV.
Unstake (Early) vs. Stake: P(A) Sold for quick profit compared to potential gains (-1), but P(B) gains more (+2) from increased debasing rate due to P(A) selling into LP.
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