TrueROI — A New Standard for Sustainability
At the core of every node protocol, it is revenue and emissions that define whether they will sustain for the long term — can the amount coming in match the amount going out?
Revenue — We have this area covered with our numerous plans. Sister projects, angel investments, and other DeFi strategies to grow our treasury as explained in our whitepaper.
Emissions — While we do have reasonable node emission rates, they are still quite high from a purely APR perspective.
Fuji — 292%
Krakatoa — 365%
Novarupta — 438%
The transition to nLAVA will ultimately help control these emissions, however we feel that a decay system in place prior to Phase 2 will help to ensure that emissions don’t run rampant. Some protocols have enabled a decay system based on ROT (Return On Tokens), where they will cut rewards once your node has paid out the same amount of tokens you initially bought it with.
This system is ultimately flawed and highly favors those who get in early. If the token price starts to dip, anyone who purchased their node at a high price has their time-to-ROI (in USD) constantly increase. The token price decline is accelerated by people who got in first cashing out constantly. What if there was a system that could actually track an individual node’s ROI and balance reward emission accordingly?
Starting at launch, our system will be tracking each individual node’s initial cost and its subsequent claims in USD value. This gives us the ability to see when each node has reached its own ROI and is now in profit. At this point, we believe it is in the best interest of the protocol to decay that node’s rewards. We expect TrueROI to allow users to reach their breakeven point sooner due to the overall reduction in sell pressure.
Life cycle of a node with TrueROI:
Node is created → Snapshot is taken, recording the cost of every node in USD value.
Node is claimed → 100% of the USD value of the LAVA claimed is subtracted from that node’s TrueROI value.
Node is compounded → ~5% of the USD value of the LAVA compounded will be subtracted from that node’s TrueROI value.
Node reaches TrueROI → Reward rate will become reduced; the exact reduction rate will be determined via governance vote.
Rewards won’t be cut until you’re in profit
Regardless of when you create/compound a node, each node will enjoy the full reward rate until it reaches true breakeven in USD value. This separates us from other projects that cut rewards globally — a particularly unfair method to those who may have entered at a higher price.
Sell Pressure Reduction
Timely tapering of rewards at the node level provides a significant reduction in emissions, and therefore a reduction in sell pressure. We expect True-ROI to allow us to have healthier price action over the mid-long term. This will allow us to steadily grow our treasury in Phase 1.
Incentivizes node creation when $LAVA is at a high price
With TrueROI, it encourages users to buy and compound at a high price to lock in a higher USD value for their nodes. In Phase 2, the USD value of nodes will be one of the factors that will be considered to determine the amount of nLAVA reward received.
We’re in this together.
We understand that implementing a change like this post launch can have major effects to overall community sentiment. We wanted to make this clear prior to going live, as transparency is essential in this space.
This decay decision will be put to a governance vote allowing for 7 days of community deliberation post launch. Using gLAVA we will conduct a 3 day vote via snapshot.org.
TrueROI decay mechanics will not go into effect until after the governance vote
Our TrueROI mechanism will allow the project to save a substantial amount of emissions in Phases 1 and 2. This novel node-level ROI tracking system will also help provide fair treatment to users regardless of when they enter our ecosystem. We feel it will generate demand even when we are at all time high. In conjunction with the other measures championing our sustainability-first principle, TrueROI will truly differentiate our protocol from others in the space.