Preventing an Installation Bank Run

Problem

In Gotchiverse Bible Chapter 2 the below is stated:

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However this 50% refund comes from the great portal and theoretically, if everyone destroyed their installations at once there would not be enough alchemica to go around and we would end up with a potential bank run scenario. This has already been identified and solutions are still up in the air.

Ideas

As unlikely as this scenario is to play out it may be worth brainstorming some ideas.

One thought I had was to lose the 50% alchemica refund altogether and instead, allow players to redeem 1 of 2 "Secondhand Installation NFT"s upon destruction of their installation. These NFTs would have the following characteristics:

  • The NFT holds a record of the type and level of installation at destruction,
  • Burning 2 of these NFT’s allows a player to build that installation at its destroyed level on a new parcel instantly,
  • These secondhand NFT’s can be sold on the Bazaar/secondary market

Potential Benefits:

  • Won’t drain the great portal if an"installation bank run" occurs,
  • New long term game dynamic for players who might be able to snipe discount high level installations in 2-5 years time,
  • Requiring 2 of these NFT’s prevents players from destroying and relocating their installations (i.e. is abuse proof)
  • Less alchemica emissions and more reuse of old installations
  • Moar alchemica left in the great portal for game events
  • Moar bazaar fees to support long term rarity farming and DAO activity
  • Interesting secondary market when trying to collect the second matching NFT that will allow you to build a brand new installation

Welcome any comments on this idea or other mitigative ideas to the potential bank run!

4 Likes

If this happens, it means the project is over because something catastrophic has happened. Given that it looks extremely unlikely except in cases when all bets are off anyway, I’m comfortable just having a message saying “redemption pool is empty, your alchemica will not be sent until there are sufficient funds.”

1 Like

Perhaps. But I feel a message like that may also stress some people out?

Maybe a better idea would be to source temporary loans from the DAO? (as the DAO and GP together make up 65% of crafting revenue which easily covers the 50% return rate). This would at least prevent a “The hallowed portal is out of funds! Please try again next week” message that I’d personally be concerned about.

They will never see the message. If they do, they will already be extremely stressed out because the project is over, and for most the 50% they would get back in a market likely already crashed to ~0 wouldn’t actually mean much. Point is, this is really an edge case where everyone is already screwed. Maybe my estimate of the likelihood is way off though.

1 Like

Bump cause i like this idea. Need to figure our how to incorporate GLTR.

@Penske_M had another really good idea in the Discord today too.

If I understand correctly it could work as follows:

Refund rate is dynamically adjusted based on the Great Portals (GP) current % of its total capacity.
e.g.

  • GP at 100% of its capacity = 50% demolish refund
  • GP at 50% of its capacity = 25% demolish refund
  • GP at 10% of it capacity = 10% demolish refund

Note: this is a simple linear scale only and could be substituted for a more intuitive curve.

Installations take time to demolish

  • Demolish time can be sped up with GLTR
  • Time limitation reduces likelihood of mass concurrent liquidations

Benefits

  • Demolishing installations becomes far less appealing as the GP capacity reduces
  • GP capacity is available onchain and is easy enough to query when calculating the dynamic refund rate
  • Further use-case for GLTR
  • Demolishing is spread more by adding a time component
1 Like

Seconded. I like the idea of sacrificing two to build on another paarcel, but it likely isn’t as enticing if we’ve experienced a bank run, so I’m not sure it’s really a solution to the problem I flagged back in January (but it would be nice to have anyway). Also really like demolition taking time that can be sped up with gltr–the rebuild could take longer than building from scratch, too.

In the interests of not rugging anyone who’s invested in installations to date, could we design future installations (radio tower etc) and decorations to syphon a higher percentage of the alchemica costs to the great portal to build up enough funds to cover the burn as currently described in the bible?

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Yes please. Stop moving pieces that are in play. Stash some deco money in there or something, anything but breaking deals we paid in on already.

This isn’t even a PROBABLE thing. This is either as Actaeon said, apocalyptical, and who cares at that point, or it is some fluke that will self resolve as people cycle through, to build.

You probably just need to mostly avoid having an error message that says “bank run, freak out” and it’ll be fine :smiley: The game reverts all the time… that’s blockchain.

Edit: for the great portal, and the glitter ticket refund stash, we should be as least as robust as dai/the curve in our overcollateralization. I trust that PC will make sure the portal is more than just a wallet, long before the time it’s even feasible that people would be emptying out parcels en masse.

1 Like

Wouldn’t that essentially ensure a bank run would happen? Players would see the refund % starting to get lower and rush to get their refund before it diminished further.

3 Likes

Probably the simplest way to solve this issue would be to increase the Capacity of the Great Portal to 100% of supply, meaning that tokens will never be recycled.

The recycling mechanism was intended to be used for Alchemical Channeling, so the economy would eventually reach an equilibrium where new tokens weren’t constantly being minted from Alchemical Channeling, because they had been sent to the Great Portal (from crafting or other sources).

Increasing the capacity would remove this mechanic, meaning that Alchemica inflation will continue, even in market conditions where it isn’t necessarily required.

Of course, we are still very early in the game, and the DAO has plenty of Alchemica to refund to players who may decide to demolish their installations within a certain period (maybe 30 days) if the DAO votes to remove the refund.

I personally would choose to remove the refund + issue one-time refunds to players who choose to demolish within a certain period, rather than setting capacity higher.

The problem with removing the refund, like some have said, is that it’s possible some people already made decisions based on it existing. I suppose we could have a vote for it, but it would feel like rugging people if we removed it.

I like the idea of removing the refund. However, people will want to redecorate without having to sacrifice valuable, high-level installations.

What if we turn the refund into another sink? Give people the ability to move an installation for an alchemica fee?

in order not to offend anyone, we need to disable refunds for installations built after a certain date, and everything built before this date can receive a refund at any time. I don’t know how to implement it technically, but it seems to me that this approach is the most fair

Maybe the easiest idea that doesn’t rug people who already factored in the refund is to just add a time component to demolition?

Benefits:

  • Simple (I think?) to implement,
  • GLTR use case,
  • Helps mitigate bank run event as GLTR price would spike and the cost of instant demolition could outweigh the refund if demolition volume mooned,
  • Nice UX as it does seem a little odd that building takes time but demolition is currently instant
  • Players would need to work out a nice decommissioning schedule that slowly tapers back their farming plots if they didn’t want to burn GLTR

Cons:

  • GLTR price spikes could make insta-building less appealing,
2 Likes

How would that be different than having an official Refund Policy that is active for 30 days after the CoreProp is passed? Basically during that time, anyone who demolishes an Installation could get a 50% refund. Once the 30D period is over, there would be no more refunds.

If someone builds a new Installation during that 30D period and immediately demolishes it, they’re still 50% in the hole, so there’s not much economic incentive I see to game the system.

Worst I can see would be people building a lot during the 30D and then demolishing everything at the end of the 30D, but their ROI on that investment would probably be negative anyways.

1 Like

I still think this kind of rugs people. If you built up your parcel to a certain level to be able to get 50% back when the parcel is empty, destroying everything now for 50% back still wrecks you because you would need to build back up to a point where you can farm.

Why not just put 50% of the Alchemica in a reserve? Where does it go currently when someone upgrades an installation? If you’re worried about redemption then this solves it. I’m going to guess that the alchemica goes to devs currently, and honestly it should. Any value that can be skimmed off of sustainable value could go to the developers and it should as it’s a positive feedback loop. They skim value from game mechanics to design more game mechanics to skim from as long as it doesn’t dip into the underlying 50% reserve. But there’s a way for them to still make money. The Aavegotchi vault earns GHST for lenders and a small percentage for itself. It can pair that GHST with the Alchemica that needs to be reserved, while the installation exists it will earn GLTR for the dev team, or if there is more Alchemica to be reserved then the GLTR can trade for GHST. This can be more long term investment for the protocol if they’re looking to make money with their own protocol. When the installation is flipped to destroy the NFT and gain 50% of the underlying value, 50% of that value has already been given to devs when it was created. The alchemica comes from the LP tokens and are unstaked, the GHST goes back to the vault and can be restaked when more installations are made. If you leave the GHST in that reserve when breaking the LP token, then it provides a hefty buffer for FRENS staking.

This may be better for devs to generate funds if they’re also involved with the vault. People don’t like the idea of the protocol raising funds through raffles, they essentially crush players in raffles, and then they sell it on market, extracting GHST from players. Some wearable owners are concerned the value of their wearables will decrease the more raffles are done because it affects scarcity. I’m not sure how true that is, but it’s apparent owners don’t like whale involvement in raffles that are supposed to be fair for all. This may be a better solution, and it makes the value of the protocol more illiquid.

This will at least solve the sustainability issue. There’s a few different alterations to the pathways to gain certain advantages depending on market conditions. Here’s a few suggestions:

  1. If there is not enough GHST in vault to match the 50% value of Alchemica then it can sell the 50% it just received in Alchemica and pass the cost along to the player. It’s unfortunate when this happens but it maintains sustainability, something like this would happen if the market demand for Aavegotchi spiked and economics need to scale to match demand of builders. So this option helps scale up economic sustainability.
  2. If the protocol is sunsetting FRENS then new buildings can be used in that transition. Any new installations could take funds out of the FRENS staking pool for the Alchemica staking pools.
  3. Selling the installation for 50% could maintain its GHST by just putting it on a waitlist for restaking rather than to send it back to the vault for possible mismanagement of funds.
  4. There’s always room to restake in the GHST-GLTR pool rather than in installations if there’s GHST sitting around in the vault. Moving away from the raffles would be better to allow players to get better odds there and be more favorable.
  5. You could do option 1 and 3 where creation of staking contracts is on the players when building (they pay more in gas). The flow would be easy also, if someone sells, GLTR rewards stop paying out to the vault and instead get staked again with the GHST that would go back to vault. When more buildings are made, the GHST parts from the GLTR to partake in the installation. It’s like the GHST-GLTR LP is a waitlist for GHST-Alchemica LP. The GLTR rewards drop to zero if people are selling installations, but the GHST obtained while minting will be around for the next installation or GLTR. The rewards drop to zero because GLTR is rerouted to maximize GLTR rewards to the vault. The more installations, the more this GHST pool will grow in value, rewards revenue increases when amount of installations goes above it’s all time high (in total alchemica value). This model ensures no mismanagement of funds from devs/vault managers but also gives them revenue from GLTR rewards, and fixes the original problem of sustainability (being able to always redeem installations for 50% of its original cost).

I’m pretty sure you just drew up the great portal?

edit:

I see there is already a warning in the docs, that a prop that cancels refunds is likely.

The event this thread is concerned with, is TWO YEARS AWAY. There is zero reason to rush into solving a problem we don’t have, that could possibly happen two years from now.

This went from “that is interesting to think about” to “how do we ameliorate the rug burn?” really quickly.

There are surely creative solutions that will appear between now, and when it matters. Can we please try a little harder on this? We already went form 75% to 50%, and that’s a huge change, especially considering that there are no refunds on time or glitter. Next year, glitter is sure to be a much greater percentage of a build cost, as it will be spread far thinner and people will be working on parcels that have a backlog of alchemica. This means that the amount you are getting back from an installation, already declines over time.

There’s another side to this, too… market activity.

See, glitter is a genius gigabrain token of the future. The recipe redesigns put the focus on the glitter, but the pricing still scales exponentially on the altars. This creates a tough decision, when you are trying to move on to a new parcel, as the new one needs an altar, but you have an L9 you certainly do not want to delete on the old one. The only thing of real value is the altar.

If you sell all your tuff and leave the altar, you only have 25% of the build alchemica needed to do the new parcel. And remember, glitter is scarce at that point, so… ya, you sell your gear, keep the altar, and put the whole stack into building a new altar on the new parcel. This is all good economic activity, and we should not stifle this. Getting to start broke, but with a L6-8 altar on new parcel, is something I would do. Starting with nothing… that’s a hard sell.

Do you want this to be “run it out and dump” or “this is a land rush, to see who can get as many parcels going full tilt as possible”? I want the one where you are looking at the weakhands on the bazaar as your goal, because you know the plan is to slide on over at some point, and you need it for later. Think of the humbles and reasonables, too… those are not a good plan at the moment, but once the spacious run out, e’ll be moving on to those in a mop up operation. The refund might make that smooth… you tap out one of the alchs on your spacious, sell most of the related gear, and start up a reasonable with the funds.

No refund also rugs the single miners. When you single mine, you don’t single mine the whole time… you go really hard on one first, but later, you start adding in the low rolls, so that it balances out. That’s fine on a spacious. Doing that to a humble is cruel, as the humble doesn’t allow any finesse to your balance. You have to skip something, to go harder on another. Honestly… we should up the harvester cap on the humbles to at least 6. They aint worth the trouble as they are.

2 Likes

Can we consider not giving refunds for farming specific installations (harvesters, reservoirs) yet keep them for lodges, altars, and other non-farming specific installations?

1 Like