Hello, Oolong Community! OolongSwap launched its farm 6 days ago and we have achieved great success in this five-day time- we broke 100M TVL in less than 1 hour; 300M in 2 days and just earlier today, we have single-handedly flipped Optimism’s TVL. However, with great success and high TVL in farms comes with side effects too — we have heard concerns about the inflation with $OLO. After listening to the community’s feedback and discussing with some of the smartest people we know in crypto, we think, we reflect, we improve and we came up with the following proposal to discuss with our community members yesterday and got majority support. Therefore starting from today, the Oolong team will start to dynamically adjust the LP farming emission rate according to the market demand.
The current emissions are too aggressive and do not properly incentivize long-term participation in the ecosystem. The current inflation rate also over-dilutes individuals contributing to the ecosystem.
- Reduce inflation and sell pressure of the $OLO token while still rewarding liquidity providers.
- Introduce new mechanisms to benefit the entire Oolong community, both the LP providers and $OLO token holders.
Solution and Reasoning:
We should adjust the emission rate based on the DOLLAR value of $OLO instead of the number of $OLO. Emitting 500 tokens per day when they are worth $1 are very different from emitting 500 tokens per day when they are worth $1000. Blindly sticking to the same emission rate despite the rise of the token value results in the market doing it for us. We want to be proactive, not reactive.
The emission rate will stay the same, but instead of emitting all 40% of the tokens to LP farmers, which creates high sell pressure for the $OLO token, we will start with redirecting 20% of the 40% to a separate lock contract on-chain to effectively take them out of the circulation and can be used later for bonding, staking or farming for Oolong. Note that this 20% adjustment is dynamic instead of permanent, we will adjust it to better suit the market.
The emission transfer will start tomorrow while the devs work on the bonding and staking contract for the $OLO token, which we aim to launch in the following weeks. More articles on bonding and staking will be released in the next few days.
By lowering the token emission to LP farm, the expectation is that the $OLO price will be rising and so that LPs can expect the same payout rate but not overly dilute the total supply.
We understand that this decision could potentially disrupt TVL in the short term, but believe it will be healthy for the protocol and OLO token in the long term.
Now that we have a decent amount of circulating supply, reducing emissions to the farm will drastically reduce OLO token inflation going forward.
Till next time!