Chapter Y— Leserve’s core model and how it isn’t a fork

Dear Leservians,

In this Chapter we will closely outline and examine why Leserve is not an Olympus “fork” / “copy” and the many ways in which Leserve and its underlying models have substantially deviated to truly upheld the mission of becoming a yield generating decentralized reserve currency and a DAO.

Many ponder how Leserve is different from any other rebasing DAO. To begin with, the main difference is that the Leserve protocol truly acts as a yield generating reserve currency. By holding gLSRV and committing it (more on that later), its holders are eligible to attain a share of the yield generated by the treasury of the “Leserve DeCentral bank”.

On the surface this may sound similar to other protocols, there are however two key distinctions.

1. Leserve truly pays out and distributes the yield it attains in its respective currencies (tokens)

e.g. The treasury generates a yield of 1 000 000 UST. The actual UST — portion determined by the Leservanomics council — will be distributed to gLSRV holders.

Many protocols generate yield and returns in a number of tokens / currencies but only reward and incentivize their holders solely in their own native token. That is not the case with Leserve, where holders are eligible to attain the actual yields generated.

2. Leserve strives to emit its token in accordance with the true performance of the protocol.

Many protocols provide substantial APYs (and thus make substantial emissions which in turn dilute its token holders) irrespective or greatly detached from the actual performance of the protocol. This shall not be the case with Leserve. The underlying model and initial monetary policy (subject to change by the Leservanomics council) strives to continuously set up and refine emissions in line with the actual performance of the protocol and its treasury.

Now you may wonder, where does the yield come from? These will be the initial methods available after Leserve’s launch:

  • Anchor

The yield will be paid out mainly in UST. However, since Leserve will be taking fees in the native tokens of the projects that will utilise Leserve’s bonding service, the Leservanomics council may decide to pay out yield in those tokens as well.

The yield will be paid in epochs. Each epoch will last 3 months (subject to change by the Leservanomics council). Every 3 months, there will be a singular yield payout event. If a holder has committed gLSRV, the holder will be eligible for the yield that has been generated within those 3 months. This will be the shortest period to qualify for a yield payout.

Who decides what portion of the yield goes back to the treasury and what portion of a payout goes to committed gLSRV stakeholders? The proposals pertaining to this subject matter shall be prepared by the Leservanomics council and approved by the General assembly. As with many other aspects of the protocol, Leservians are in charge.

On the subject of commitment

In the physical world, people are not very loyal to their stocks. People buy them when the time comes to pay dividends and sell them right afterwards. This is called dividend scalping or dividend capture.

With rebasing tokens that have very high APYs, there are bots buying and staking just before the rebase. Immediately after, they unstake and sell. This creates price fluctuations and effectively sucks the rebase reward from the protocol’s true holders and believers.

Leserve views and considers both of those phenomena as a negative influence for the long-term holders of the asset.

To qualify for a dividend payout in the world of stocks, an individual needs to hold a stock on the record date, which is typically 30–45 days before the dividend payout date (this can differ among stocks). However, in order to receive a full payout of Leserve’s treasury yield, holders need to commit and hold the gLSRV for the whole duration of the yield epoch. If a holder commits gLSRV just for half of the yield period, their yield portion will be reduced accordingly. Committed gLSRV is not just a share, it’s a time weighted piece of the pie. A representation of a holder’s true “skin in the game”.

If a holder just wants to hold gLSRV and sell at one point, that is fine, but Leserve strives for its yield enjoying Leservians to be committed long-term and to participate in the wellbeing of the whole community and the success of the protocol.

What prevents individuals from simply waiting for the yield payout event and uncommitting and selling gLSRV right after? Such holders would be missing out on the commitment bonus in the next epoch. If a holder stays committed for the whole epoch, a portion of the previous time weighted shares will be added to their total.

The commitment bonus is computed as = (shares from last yield period + existing commitment bonus) / 2

This is a bound limit function that approaches two. That means that fully committed holders will have two times the amount of effective shares in roughly 1.25 year.

Share multiplication / Epoch Commitment Graph

To sum it up, mathematically speaking, a holder’s yield share is:

Yield Share = [commitment bonus + (amount of committed gLSRV * time committed)] / [total commitment bonus + (total amount of committed gLSRV * yield epoch length)]

How does one commit gLSRV you ask? This is done by obtaining a Leservian citizenship.

Leservian citizenship — NFT that ties together governance and yield generation

By committing your first gLSRV, you are able to mint a soulbound NFT. This NFT represents your citizenship in Leserve DAO. It allows you to participate in governance of the Leserve protocol and commit gLSRV to become eligible for a share of the yield. You can commit and withdraw gLSRV as you please but if you lower your gLSRV holding, you are losing the commitment bonus.

From a governance perspective, it tracks the amount of committed gLSRV and allows individuals to vote in the general assembly. The commitment bonus applies. That means people that are committed for longer have up to 2x larger votes in the general assembly.

Your citizenship card also contains your name and any reputation acquired within councils. Council members must have a minimal amount of gLSRV committed in order to vote.

All of this information is publicly available in a beautiful rendering of the NFT:

An example of a Leserve DAO citizenship NFT

Different mathematical models and mechanics

There is no Olympus mechanics present in the mathematics underpinning the Leserve Treasury.

How Leserve backing compares to Olympus:

  • The backing of OHM is advertised as 1 DAI, however in such a scenario unfolding its treasury would be effectively empty.

A share of the protocol’s profits are used for the purposes of establishing an intervention fund that will enable the Leservanomics council to intervene at a designated level and buy back all tokens from the market and remain to have UST in the protocol’s Treasury. The BBP variable will be significantly below 1 at launch as it is not in the interest of the protocol and its holders to intervene at the start, however the variable will rise in time together with the backing price.

Comparing Leserve’s long-term sustainability with the Olympus model:

Leserve’s treasury is built to be sustainable long-term. The mathematics and mechanics underpinning the treasury are completely different from Olympus and any other rebasing DAO. Leserve’s model features the ability to increase bond price when the token price falls, but it has no BCV or debtratio variables. In the context of Olympus, when the debtratio variable tanks, the system offers unwanted discounts (which are bad for the health of the protocol): as people claim their tokens, the bond price tanks, and the protocol offers huge discounts. The BCV variable with an increasing flow of funds into the protocol returns the discount relatively quickly back to relatively acceptable values (standard or normal discount), however the drops can be really huge and frequent! Therefore, one needs to monitor the Olympus BCV system almost in real-time.

When the token price rises, the Leserve model will be slow to catch up with actual market movement, offering clear benefits. It shall be much more effective in avoiding manipulation which can be arguably done relatively easily in the case of Olympus’s current model. Leserve’s model hence does not rely on the debtratio variable. The Olympus debtratio does not contain any information about the specific pool’s indebtedness which is arguably a disadvantage. Leserve computes bonding rewards in its own Oracle, then spreads them across various pools to balance their pool ratios as the pool sizes affect their own ”d” because the model’s goal is to have effectively balanced pools and to price the bonds as close to market value as possible in order to not provide excessive free value in LSRV that would dilute holders too much.

To flatten the curve and prevent market volatility Leserve uses EMA with a custom-made smoothing and a set of conditions that altogether enable the protocol to automatically react to a volatile market. There is an automatic switch between smoothing and market prices based on a specific market situation to maximise benefits for the protocol.

The math underpinning the protocol adjusts the d (bonding rate) and r (staking rate) depending on market dynamics — for example: When people are dumping, the goal is to stop bonding if the token price is falling. Leserve’s bond price follows the market price with a sort of decay and hence it will quickly become too expensive to bond compared to the falling token market price. If the token price will pump, the token market price will move above the EMA and Leserve will switch the bonding discount to be based on the market token price. Its price will, therefore, be higher and closely tied to the market price.

Should you have any questions pertaining to the models, mechanics and mathematics underpinning Leserve, please feel free to ask in our Discord server.

The underlying governance structure (upholding the meaning of the term DAO)

Besides the clear deviations from Olympus and other rebasing protocols in the models and mechanics underpinning Leserve, another key distinction is Leserve’s active mission to truly uphold the meaning of a DAO (decentralized autonomous organization).

Leserve strives to achieve this by relying on a decentralized and meritocratic governance structure and constitution that were designed in a manner which upholds Leserve’s values and vision.

To understand the governance structure and the constitution please make sure to read the Chapters covering them in detail.

Degenomics; tldr

Are you an Olympus fork?

No ser. While Leserve’s inception was heavily inspired by the aspiration of Olympus to become a decentralized reserve currency, Leserve utilises different features, models and mechanisms to achieve that mission.

How are you different from Olympus and rebasing DAOs?

Ser, Leserve provides access to the actual yields generated by the protocol (not only the project’s native currency).

  1. Leserve shall not provide APYs heavily detached from the actual performance of the protocol.

What tokens do gLSRV holders get?

Ser, gLSRV holders will receive both the UST dividend (and potentially other project tokens) as well as APR appreciation in LSRV. LSRV rewards should be distributed continuously, other tokens are distributed at the end of an epoch.

Are these mechanisms gonna make the numba to go up?

Ser, nobody knows. However, the mechanisms and models underpinning Leserve have been built with long term sustainability of the protocol in mind and with the vision of actually enabling Leserve to become the decentralized reserve currency of the crypto industry.

Thank you for your time and for keeping up with what Leserve is up to.

In the next Chapter(s) we will look into:

Chapter X (Part II): Launch specifics

  • Launch parameters, durations, dates

To stay updated, make sure you are following our Discord and Twitter.

Until then,

(🌖,🌖)

Disclaimers

The above content is published solely for informational purposes. It should not be construed as an investment thesis or be deemed to constitute a prospectus of any sort or a solicitation for investment or investment advice. The information provided in this Medium Post pertaining to the LeserveDAO is for general informational purposes only and is not a formal offer to sell or a solicitation of an offer to buy any investments, securities, options, futures, or other derivatives related to securities in any jurisdiction and its content is not prescribed by securities laws.

The information provided in this Medium Post pertaining to LeserveDAO, its business assets, crypto-assets operations, and strategy, is for general informational purposes only and is not a formal offer to sell or a solicitation of an offer to buy any securities, futures, options, or other derivatives related to securities in any jurisdiction and its content is not prescribed by securities laws. Information contained in this Medium Post should not be relied upon as advice to buy or sell or hold such securities or as an offer to sell such securities. This Medium Post does not take into account nor does it provide any tax, legal or investment advice or opinion regarding the specific investment objectives or financial situation of any person. LeserveDAO and its agents, directors, advisors, employees, officers and shareholders make no representation or warranties, expressed or implied, as to the accuracy of such information and LeserveDAO expressly disclaims any and all liability that may be based on such information or errors or omissions thereof. LeserveDAO reserves the right to amend or replace the information contained herein, in part or entirely, at any time, and undertakes no obligation to provide the recipient with access to the amended information or to notify the recipient thereof. The information contained in this Medium Post supersedes any prior Medium Post or conversation concerning the same, similar or related information. Any information, representations or statements not contained herein shall not be relied upon for any purpose. Neither LeserveDAO nor any of its representatives shall have any liability whatsoever, under contract, tort, trust or otherwise, to you or any person resulting from the use of the information in this Medium Post by you or any of your representatives or for omissions from the information in this Medium Post. Additionally, LeserveDAO undertakes no obligation to comment on the expectations of, or statements made by, third parties in respect of the matters discussed in this Medium Post.

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