[Exclusive Interview] JAM from Sacred Finance gets grilled on the SACRED tokenomics!
The Sacred Finance team released an updated version of their Gitbook with some new crunchy information about their Tokenomics. We spent some time going through it and had a few questions. As a follow-up from our first interview, we have JAM with us to go through the SACRED tokenomics. Enjoy the read and stay safe! Nothing in this interview is financial advice.
[SurferInvestor] You decided to apply 8 months vesting (3 months lockup) to your airdrop receivers. What inspired you to do this?
[JAM] Airdrops are great at involving potential DAO members to be part of the journey. As stated in our Gitbook, we have 2 categories of who we will airdrop to. Airdrop for early contributors and marketing.
[JAM] For early contributors, we won’t have a vesting period and they will be able to be part of the DAO right after it launches. These are people who have been involved in the initial building of the Sacred ecosystem and we value their input so we want to get them involved in the decision-making right from the get-go of the DAO launch.
[JAM] As for the marketing airdrop, we want potential wallet addresses that could be influential for our upcoming DAO. However, we noticed a trend of airdrop recipients dumping their tokens as they receive them. To address this, we are being strategic about the marketing airdrop. Since they weren’t involved in the early contributor program, the recipients will have a short vesting schedule to control the potential inflation of the tokens.
[SurferInvestor] A marketing airdrop? Sweet. Probably not yet public information, but could you give a hint of how you will select addresses to make sure they fit the Sacred Finance standards?
[JAM] Without giving too much away. We are trying to target users who are interested in the DeFi partners that we are partnering with and existing Tornado Cash users. I believe since they are the ones who will be using our protocol the most, they should be given a chance to partake in the airdrop for Sacred.
[SurferInvestor] Which protocol do you consider as best practice in terms of Tokenomics? Who was your inspiration?
[JAM] I would say our best practices came from Tornado Cash. We learned from the mother of all mixers on EVM chains. However, our team felt that there were some parts that Tornado Cash missed while developing their tokenomics. So we are advancing from their undersight and creating better tokenomics, ensuring that our users can hold on to our governance tokens. We also looked at Olympus DAO and their bonding mechanism to take advantage of the idea of Protocol Owned Liquidity. We believe that bonding is a great way for us to create liquidity without creating too much inflation (in the long term) as well as create another revenue stream.
[SurferInvestor] What mechanisms will you implement to avoid farm dump behavior?
Great question. To start off, we are attempting to attract a lot of capital into our Sacred Boxes so we predict we will see a bit of farming and dumping. However, we have proposals in the pipeline to control the inflation of the liquidity rewards so that the rewards are calculated based on an algorithm rather than just an arbitrary amount. Our intention for this upgrade will be to maximize privacy, as that is the basis of all of our tokenomics programs. It will tackle the following problems:
Flexibility: Continues to incentivize deposits while at the same time managing inflation better. Newly started or smaller pools will not need as many inflation incentives as larger pools.
Longevity: By managing inflation, the contract ensures long-term rewards for incognito miners.
Constant reward peaks: Rather than starting extremely high and trailing constantly downwards, the rewards peak every few days, encouraging randomized traffic into and out of Sacred and improving the anonymity set.
The algorithm is still in the works, so we will come out with a detailed article to a deep dive on it soon.
[SurferInvestor] Without giving any financial advice, could you talk a bit about the different use cases of the SACRED token?
[JAM] I think the SACRED token is the gateway to be involved in bringing privacy to web3. We are one of the first to bring privacy to DeFi and the first mixer that maximizes capital efficiency. We also have long-term plans to evolve the product into something a bit more scalable – but that’s under wraps for now. So if a user is passionate about bringing privacy to web3, getting involved in the Sacred ecosystem is the right path for him/her/they!
[SurferInvestor] Do you plan to create future incentives to hold the SACRED token? For example “ve” model or cross-protocol value such as airdrops from other projects?
[JAM] I think that’s an interesting question. I foresee a lot of potential with our current tokenomics setup. Our structure resembles the curve wars that are going on but for the private space. As we continue to build out more DeFi integrations, I think that there could be a “privacy war” when it comes to securing more liquidity for a Sacred Box. If there is an increased number of transactions as people take advantage of the boosting of liquidity rewards, there will be more privacy for users in the said box. I also believe that as protocols shift their focus to privacy, protocols might make a move to secure more liquidity for their DeFi integration with Sacred to gain more privacy. This will secure more governance tokens for the users who are using their Sacred Box, which will be the ticket to securing more votes to sway the liquidity rewards. Just food for thought!
[SurferInvestor] How would you ensure privacy for people who lock up their veSACRED?
[JAM] I want to note that veSACRED isn’t a privacy token. It’s a governance token that governs a privacy protocol. Unlike Monero or Zcash, we cannot guarantee the privacy of the users holding SACRED, rather the assets that are going through Sacred will be private. One option is opening up a Sacred Box for veSACRED, if the DAO decides to vote for it. Ultimately when we launch, major decisions will need to be passed through voting through the DAO. We are currently in the DAO’s design phase and we hope to invite the community for feedback soon. Watch this space!
[SurferInvestor] Time for the degen question that you probably expected. “Ser wen TGE, wen Airdrop, wen lambo?”
The biggest question to answer is the TGE date. Our original TGE date was scheduled for August 2022. However, after discussing with the internal team, the team has decided to keep further building & developing the product given that current market conditions are not as conducive for a launch. Our goal is to have SACRED in the hands of a large community so that they can take part in governing and steering the protocol and effecting changes to the network and system.
To that end, we are intending to postpone the launch until mid-next year (or if the market becomes a bit more green).
In the meantime, we will focus on:
Growing our community base
Getting the DAO ready so that users are able to steer the protocol
Improving the protocol with some new, unique features (stay tuned for updates!)
Big thanks to JAM for his time answering our questions on the tokenomics of the Sacred token. Being a member of the Sacred community since early on, I am personally very excited about the launch.
I wish JAM and the rest of the Sacred team all the best for the launch and TGE.