$JADE introduces Backing Treasury and Price Floor — all you need to know, and more.

  • How this works
  • Its sustainability
  • What are the Advantages and Disadvantages and what does it mean for long term DAO prosperity
  • Propose changes to this mechanism and outline how these might impact DAO longevity and benefit its treasury balances.

How does the “Backing Treasury” maintain $JADE’s Price Floor?

  • Investment Treasury, used as a Venture Capital fund to generate ROI (return on investment) for DAO holders.
    This is the value/revenue creation part of the treasury.
  • Backing Treasury, used to purchase $JADE when market price falls to the Price Floor, where Price Floor is calculated as (Backing Treasury / Circulating Supply).
    This is the price control part of the treasury.
Screenshot actual as of 06/01/2022
  • Investment Treasury Balance
    $47,760,124
  • Backing Treasury Balance
    $26,560,501
  • Circulating Supply $JADE
    1,269,016
  • Price Floor
    $20.92
  • Investment Treasury Balance
    $47,760,124
  • Backing Treasury Balance
    $20,932,687 = ($26,560,501 initial minus $5,627,814 required for buy backs)
  • Circulating Supply $JADE
    1,000,000 = (1,269,016 initial minus 269,016 bought and burned)
  • Price Floor
    $20.92

Advantages, Disadvantages & DAO implications

  • 1. Price Floor introduces a “guaranteed” minimum price that investors can “rely on” to calculate their total risk, since in theory we should never go below this Price Floor.

    In other words, even if there is a mass sell off (bank run) the minimum investment value will be fixed at # of $JADE owned * Price Floor. Once word of this spreads, it will drive up demand for $JADE immensely — or more likely a bunch of $JADE forks will come about...
  • 2. Price Floor in theory should be increasing over time. As the Investment Treasury is deployed and starts generating revenue (ROI), a portion of those funds will be transferred to the Backing Treasury.

    As the Backing Treasury value increases, this will drive the Price Floor higher and higher as there are more and more funds backing each $JADE. This introduces a mechanism in which the DAO has control over minimum price and can reward holders by increasing the minimum value of their investments when it finds it viable to do so, by moving funds from the Investment to the Backing Treasury (as explained above). For further explanation on this, and value creation money flow click here (Twitter thread).
  • 3. Price Floor burns control against supply inflation. As we have established from the most recent bank run, increasing supply and increasing price do not go hand in hand and as such it is important to keep supply in check. Since BuyBot burns $JADE, this will decrease supply every time we hit the Price Floor, keeping it under control and preventing supply inflation.
  • 1. Burning $JADE is burning hard-earned treasury money. It may seem okay now but consider when price, marketcap and volume are all 10x and instead of burning $5.6M to defend the Price Floor (as per the above example) we are burning $56M. What if there was a $SMRTr way, in which the DAO treasury would grow as it defends the Price Floor
  • 2. Price Floor, despite being a “guarantee” is not 100% safe! This point is more of a disclaimer than anything else, but important to raise awareness to risks investors might not have considered: coding errors, rug pull events, failure to grow treasury, treasury wallet being hacked, all are potential risks that will negate the effectiveness of the Price Floor, leading to a loss of the “guarantee” JadeProtocol promises.

My thoughts on how to improve the current Price Floor mechanics, and yield further benefits.

  • Disadvantage 1; Burning $JADE is burning hard-earned treasury money.

    Suggestion;
    As mentioned under Advantage 3 above, burning has immense benefits as it protects against supply inflation. However, this feels like a huge waste — burning millions of $ worth of potential investment capital.

    What would happen if instead of burning 100% of the bought back $JADE, we only burned a certain % and the remainder was kept in the Investment Treasury?

    It makes total sense to me why we are burning the bought back $JADE — to maintain the Price Floor formula at parity (constant) and ensure that the Backing Treasury can successfully preserve future Price Floor retests.

    But would it make any difference if for example 50% of the bought back $JADE was not burned but instead deposited in the Investment Treasury? In other words, the DAO would act as a depository during times of uncertainty and will sell the same deposited $JADE supply back to the market, once confidence in the protocol has been regained and market price is trading at a premium.

    I don’t think it would… the deposited $JADE would be in the “safe hands” of the DAO depository and the Backing Treasury would not need to have funds backing it anymore — as it won’t be at risk of being dumped.

    Lets understand this better by re-enacting the above example where $5,627,814 was used to purchase 269,016 $JADE at the Price Floor of $20.92… but this time instead of burning it, lets deposit it in the Investment Treasury!
  • Investment Treasury Balance
    $47,760,124
  • Backing Treasury Balance
    $26,560,501
  • Circulating Supply $JADE
    1,269,016
  • DAO $JADE depository
    Assume 0
  • Price Floor
    $20.92
  • Investment Treasury Balance
    $53,387,938 = ($47,760,124 initial+ $5,627,814 in DAO $JADE depository)
  • Backing Treasury Balance
    $20,932,687 = ($26,560,501 initial minus $5,627,814 required for buy backs)
  • Circulating Supply $JADE
    1,000,000 = (1,269,016 initial minus 269,016 bought and removed from circulation)
  • DAO $JADE depository
    269,016
  • Price Floor
    $20.92

Signing off

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