EDIT: Updated my proposal after more thought in order to keep staking rewards pretty much consistent with what they are now.
I like to call the concept described above “economic enshrinement”, and strongly support this strategic direction. It gives both communities such a clear narrative and clear focus of what to build. Using IISS to incentivize a network-owned, revenue-generating application that also showcases ICON’s technology is the perfect use of network emissions.
I believe this direction would prove that the sum value of both projects working together on a shared vision is greater than the value of each of them separately. DeFi has a clear product-market fit, and ICON, by economically enshrining Balanced, certainly has a chance to carve out some market share.
I shared my thoughts in more detail on the Balanced forum, where the Balanced community will be discussing the merger component, but here’s some key highlights:
Benefits to Balanced
- Access to new users through cross-promotional efforts with other chains as ICON builds network-owned liquidity in cross-chain assets and Balanced integrates other chains
- Assistance in ongoing funding for development ensuring long-term development support for Balanced, enabling Balanced to build new features and improve/maintain existing ones
- A purchase of BALN at a premium to market price in exchange for a more liquid token that is still tied to the success of Balanced
- Ongoing incentives contributed by ICON Foundation and the ICON Network, or as I like to call “economic enshrinement”
- Liquidity for sICX/bnUSD and cross-chain token pairs (e.g. sARCH/bnUSD) to increase trading revenue
- Incentives to boost the yield on the bnUSD savings rate to increase demand for bnUSD, which enables Balanced to generate revenue from purchasing RWAs (e.g. US government bonds)
- Incentives to provide liquidity on the Balanced DEX to drive LP engagement, increase liquidity, and increase trading revenue
- Funding for an insurance fund to mitigate losses in the case of an exploit
Benefits to ICON
- Access to new users through cross-promotional efforts with other chains as ICON builds network-owned liquidity in cross-chain assets and Balanced integrates other chains
- Flagship user-facing product to pioneer ongoing utility of the xCall general message passing service, which generates additional fees that burn ICX
- Minimum of 50% of the fees generated by Balanced will be used to buy ICX on the Balanced DEX and burn it
- Balanced developers and designers will contribute to the growth and implementation of xCall, ICON products, and other ICON initiatives
- The ICON community gets a user-facing application to rally behind and showcase xCall as a robust interoperability solution
- The establishment of ICON as cross-chain liquidity hub through Balanced powered by xCall
Now having said all that, there’s one tweak I’d like to see on this proposal. I’d like to change the numbers to have network-owned liquidity be at least 50% of emissions, whether that be through cutting from CPS/staking rewards or by increasing emissions more. For comparison, Osmosis has inflation of 10.5% and Solana has inflation of 6%.
Here’s what I propose:
| Proposed Metrics | ICX | USD | |
|---|---|---|---|
| ICX Value | 1.00 | $0.25 | |
| ICX Total Supply | 990,451,000 | $247,612,750 | |
| Monthly Emission | 5,678,910.00 | $1,419,728 | |
| Annual Emission | 68,146,920.00 | $17,036,730 | |
| Annual Emission (%) | 6.88% | ||
| Proposed Annual Budget | ICX | USD | Allocation % |
| Staking & Validator Rewards | 32,369,787 | $8,092,447 | 47.50% |
| CPS | 1,703,673 | $425,918 | 2.50% |
| Network-owned Liquidity | 30,666,114 | $7,666,529 | 45.00% |
| Liquidity Mining Incentives | 0 | $0 | 0.00% |
| bnUSD Savings Rewards | 681,469 | $170,367 | 1.00% |
| ICON Insurance Fund | 2,725,877 | $681,469 | 4.00% |
| Total | 68,146,920 | $17,036,730 | 100.00% |
EDIT: Updated my proposal after more thought in order to keep staking rewards pretty much consistent with what they are now.