diff --git a/packages/website/_posts/diva-price-based-vesting.mdx b/packages/website/_posts/diva-price-based-vesting.mdx new file mode 100644 index 0000000..8b9af7a --- /dev/null +++ b/packages/website/_posts/diva-price-based-vesting.mdx @@ -0,0 +1,82 @@ +--- +title: Price-based vesting - Powered by DIVA Protocol +description: Price-based vesting - Powered by DIVA Protocol +date: 2023-07-08T13:37:00.284Z +coverImage: diva_token.png +coverImageDescription: Price-based vesting - Powered by DIVA Protocol +coverImageWidth: 1500 +coverImageHeight: 600 +author: Walodja1987 +--- + +**TLDR;** this article presents a novel price-based vesting approach leveraging DIVA Protocol. The goal is to achieve a more balanced token +market activity after listing and to improve the alignment of incentives among different project stakeholders. + +

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+ +Vesting has emerged as a crucial element in token distribution models, enabling the gradual release of investor and funding team token +allocations over a predetermined period. The primary objective of vesting is to manage sell pressure in the market by spreading it +out over an extended timeframe. + +While time-based vesting appears sound in theory, it assumes that buy demand will sufficiently counterbalance increasing sell pressure +over time. If a token fails to gain traction, the price will decline. + +A more effective approach to vesting involves basing it on the project's token price. Under this model, tokens are unlocked only when +the price surpasses a specific level. This means that **sell demand becomes linked to realized buy demand**. The unlocking process occurs +at regular intervals, such as once a month, based on an oracle-reported outcome such as the average price during the designated period. +Any unreleased tokens would automatically roll over for an additional month. + +## ⚙️ Implementation + +The implementation of a price-based vesting can be realized by a simple smart contract, referred to as “vesting contract” in the following, +that interfaces with [DIVA Protocol](https://www.divaprotocol.io/), a highly versatile smart contract-based system for creating and +managing derivative contracts peer-to-peer. + +The envisaged process is as follows: +* **Funding:** The vesting contract is funded with the project’s token. +* **Specifying unlock conditions:** The project team specifies the price-based payout conditions, observation period, and the oracle +responsible for reporting the outcome (e.g., the existing integration with Tellor Protocol). These payout conditions can be static or +dynamically adjusted over time following predetermined patterns. +* **Token unlock:** The vesting contract deposits the project tokens into the DIVA Protocol smart contract and releases the payout +associated with the LONG side of the contingent pool - the side that benefits from an upward movement in the token's price - to the +eligible parties upon price reporting by the oracle. +* **Roll:** Any unreleased payout, as represented by the SHORT side of the contingent pool, is re-deposited into DIVA Protocol and +released in the same manner after the specified observation period. This process continues until there are no tokens remaining to roll. + +A couple of technical considerations that are worth noting: +* As the eligible parties are not holding any SHORT or LONG position tokens directly, the issuance of new position tokens +resulting from rolling unreleased tokens into a new contingent pool is not a problem. +* The parties eligible for payout claims can be stored within a mapping inside the vesting contract or derived based on the more gas-efficient +approach of using Merkle proofs, particularly useful for a large number of participants. +* The rolling of the unreleased tokens into a new contingent pool may be triggered automatically when the first party claims their payout from the vesting contract. +* Payouts that remain unclaimed in one period will accrue to the next period. + +## ✨ Key benefits + +* **Balanced market:** The price-based vesting model ensures a more balanced and healthy token market by allowing tokens to be sold only after there is realized buy demand. +* **Long-term oriented:** By linking token unlockings to the token success, the price-based vesting model incentivizes project stakeholders to remain engaged and committed for the long term. +* **Market maker protection:** Price-based vesting provides protection against large token sell-offs, enabling a favorable environment for market makers, including liquidity providers +in automated market makers (AMMs). This protection incentivizes market makers to offer increased liquidity, enhancing the overall market depth. + +## 🪡 Risks + +* **Miscalibration:** Tying payouts to overly ambitious price targets may result in no payout for project stakeholders. Careful consideration of achievable price levels is essential. +* **Extended lock-up:** Despite setting realistic price targets initially, a bear market can extend the lock-up period for tokens, keeping them locked for longer than +anticipated. Incorporating a dynamic approach to the payout conditions may be used to respond to changing market conditions. + +## 🌔 Conclusion + +The adoption of a price-based vesting model represents an innovative and market-driven approach to token unlocking. By aligning incentives and fostering a +sustainable ecosystem that grows in accordance with buy demand, this model promotes a balanced and healthy token market. We firmly believe that this use case +holds significant potential for numerous projects seeking to enhance the alignment of incentives among project stakeholders and ensure a successful token launch. + + +## 🔗 Links + +- 🌐 Website: [divaprotocol.io/](https://www.divaprotocol.io/) +- 🍏 Github: [github.com/divaprotocol/diva-protocol-v1](https://github.com/divaprotocol/diva-protocol-v1) +- 📚 Docs: [docs.divaprotocol.io/](https://docs.divaprotocol.io/) +- 🦜 Twitter: [twitter.com/divaprotocol_io](https://twitter.com/divaprotocol_io) +- 🤖 Discord: [discord.gg/8fAvUspmv3](https://discord.gg/8fAvUspmv3) \ No newline at end of file diff --git a/packages/website/public/images/posts/drake_meme_vesting.png b/packages/website/public/images/posts/drake_meme_vesting.png new file mode 100644 index 0000000..dad84d2 Binary files /dev/null and b/packages/website/public/images/posts/drake_meme_vesting.png differ