According to the Coingecko readings, the Optimism token $OP has a total supply of 4,294,967,296 and a circulating supply of 214,748,364 (quite low compared to the whole supply, but guess what? -#drop 2 incoming)OP token
I understand there exists loads of conversation similar to this such as switching the OP token from being a governance token to a native one of a standalone blockchain (L2), increase utility by using it for gas on the Optimism L2 chain, thus, adding more value to the ecosystem itself as it shows to project owners out there the need to acquire more $OP token instead of just dashing out free tokens. In addition, I think we are also writing off the need to implement all these from the angle of an investor. The realistic secret behind the reason to HODL, or from the factual potential of its ROI in its long term.
The idea to reduce the token’s supply:
Would be healthy for economics improvement, utility, and clarity on the importance of participating in governance provided there are possible incentives
Similar to any network with a collective DAO vision, it is only meaningful if supply is reduced to stimulate price impact as incentivizing organic and active participation in the DAO simply makes it valuable enough for anyone to want to hold $OP as they appreciate in value, thus encouraging “actively participating” in its future beneficial governance.
With the right set of rules and economic incentives that would ATTRACT INVESTORS who understand OP’s potential, greatly reducing uncertainties about probability of hidden supplies favoring price crash.
It empowers current OP token holders and also doubles the representation of what the whole OP community stands for: supply reduction= price impact that inspires increment of ownership and voting power
As I sense more future rewards and grants around the corner for old/new project tokens on Optimism network, there is really the need to subject OP’s supply to reduction with which demands are favored!
Expectation of financial reward is an existential design consideration for the token house. The OP token’s very job is to be selfishly gobbled up (with some consideration given to whom we want to greed for it).
Greed rolls all day long. This is good. I am less married to your exact solutions, but I am aligned with this sentiment. Set up the incentives such that:
People max greed for OP
Their externalties are maximally net-positive
Where I disagree with your exact approaches is here:
The OP token should be valuable in part because it DOES something useful. Staking ethereum secures ethereum. What does OP do? Fancy equity is not enough
Making something deflationary is not enough to give it value. Look at UNI and compound. Great products, pretty not great investments. Value capture matters. Cashflow is the best way to do this IMO. Fee sharing and/or MEV capture seem like the most promising approaches to me
Supply reduction could be used as an incentive for doing something aligned to the OP foundation mission. It’s possible to tie commercial rewards to non-commercial behavior. We should think creatively about how to incentivize market actors to do good (see #2 above). Perhaps the OP burn is tied to difficult to fake KPIs that help everyone (user adoption, dapp development, etc)
In general, I agree with your proposal’s direction. We should not simply drop another vanilla ERC-20 with only “maybe one day does something” governance utility. That’s farm and dump material
Why would people HOLD? Answer that and we unlock the power of the token house. Greed is powerful, but it’s difficult and dangerous to harness. Let’s be thoughtful. Think like miner incentives, not like company stock shares
People sometimes compare “governance only” tokens to growth-focused equities. They’re re-investing profits into the “business” instead of giving a dividend.
I disagree with this comparison as the only model for decision making for 2 reasons.
A) It’s a flawed comparison in a decentralized setting. We have different incentives and different market dynamics
B) Blockchain enabled EVEN BETTER financial alignment (prisoner’s dilemma solutions). 3,3 is a powerful new social technology. Comparing to the last best approach limits our potential
Ultimately, I believe any token without obvious, attractive reasons to hold it is basically a farm and dump scheme. You’re always dumping on somebody when you use tokens as financial incentives. Someone is always left holding the tokens. Question is, who do we want to dump on? By default it’s retail investors.
It’s okay to dump on someone, but what reason do we give people to not just continue dumping their tokens on the next biggest fool? In my mind, we need cashflow tied to critical network health and growth factors and/or measurable advancement OP values. That seems like the homerun
So the final people to be dumped on are happy to be dumped on because THEY want to hold it. What is our recursion base case? How does this not unwind to $0? There must be a backstop of measurable, fundamental value somewhere. Governance utility alone is a bit of a cop out
price impact that inspires increment of ownership and voting power