This consideration is for those who want to discuss increasing the intrinsic value of the optimism token without taking the route of performing complex technical/structural maneuvers on the chain such as the ones some other well received proposals have proposed.
(Think about stock buy backs)
Optimism Buyback and or burn
DAO can use profits or a certain share of profits from buy back Optimism
tokens.
Make it a weekly/monthly operation and direct the tokens to a DAO controlled wallet
Revenues directed to a DAO controlled wallet, effectively removing tokens from supply.
This is a rather streamlined way to bring value or rather increase the value of the Optimism token by reducing the circulating supply in the market.
Rationale
There is much debate about whether or not there should be emphasis on “increasing the price of optimism” and it is apparent from discussions that some in the community frown upon the idea doing things to make the price “hike”. Some argue that a governance token should be just a governance token and governance should be the only inherent value the token has. So if you are one of those members, well the rationale below is not for you.
Every business decision pertaining to Optimism’s governance should be geared towards increasing the Optimism token’s price and NO we should not make short sighted decisions to “pump” the price in the short term. Adhering to a core belief of optimism, we should continue with the belief that impact=price. However, in this industry, whether we like it or not, price of a project’s token is how everyone takes a temperature check on the project’s health. Market cap in fact is a great indicator of consumer/user confidence and taking measures to improve that will attract more users. We need more users and a greater community to create a greater impact. However, how do we attract more users and more importantly how do we attract quality governors? Unfortunately perception is reality and we have had a bit of rough launch. How do we signal that we will bring value? Nobody wants to spend time “governing” if it doesn’t generate personal gain; why would they? There are plenty of other uses for one’s money. As such there is a great use case for doing something like a buyback and or burn program in order to gain traction and communicate value propositions.
There is absolutely nothing wrong with taking measures to increase the value of the token in a way that will garner attention. An announcement of buy back and burn is exactly what we need to make noise. Once we make the noise we don’t have to worry about coming down hard because the fundamentals are there to carry us all the way. As long as we are certain that the product is a 100% there is nothing wrong with doing something to demand the price it deserves. This is an L2 pioneer.
Keep in mind all the market leaders (ETH, BNB, MATIC etc.) have done some version of a buyback and burn program with great success.
There are two types of income: explicit income and MEV.
The Optimism Foundation runs a single centralized sequencer that is solely responsible for generating Layer 2 (L2) blocks and adding transactions to Ethereum’s Layer 1 (L1). The sorter fee consists of two parts, the L2 execution fee and the L1 data fee.
L2 execution fees are similar to Ethereum gas fees. The amount of fees to be paid depends on the complexity of the transaction, i.e. its computational and storage requirements. That’s about 1% of what users pay.
The L1 data fee is the cost of publishing a batch of transactions to Ethereum. The sorter uses a cost-plus approach, charging users a price higher than the L1 cost. It currently charges 1.24 times the sum of the gas required to submit a transaction and 2,100 gas. This generates surpluses that will be used to fund the growth of the ecosystem. It’s worth noting that 99% of the fees charged by Optimism are L1 data fees.
So far, these fees paid by users have brought in $24.5 million in revenue for Optimism.
There is an inherent assumption in these “numba go up” proposals that OP is somehow undervalued or that the price is lower than it should be. I think those of us holding OP should be very happy with the current price.
I don’t think we should support schemes that aim to solely benefit holders of OP and don’t demonstrate any concrete benefit to the ecosystem.
Can you elaborate why holders of $OP should steer away from value inflation? On the same note can you elaborate how increase in MC or gaining a footing among market leaders will not bring any concrete benefit to the ecosystem. I am genuinely curious how these don’t go hand in hand.
I can understand why an individual token holder would want the price of their tokens to go up. Of course as an individual I feel the same way. But Optimism is a collective and its goals (amongst other things) are to provide an EVM equivalent layer 2 Ethereum scaling solution and to support public goods funding.
Diverting protocol revenue towards token buybacks and burns would reduce the protocol revenue available for public goods funding.
I think that there is merit in considering sharing some of the sequencer revenue with tokenholders in the future once it increases, but probably the best way to do that is as part of the sequencer decentralisation.
Disagree with your statement! Cryptocurrencies are valued by market share or market cap. Market cap comes from the circulations supply and the price of the token. Coin market cap, coin gecko ranks crypto projects according to the market cap. In order to become the market leaders all the projects are working towards increasing the token price and the market cap. Also Crypto is speculative asset and in a speculative environment PRICE of a token and Market Cap is everything.
Value of the token goes up = Project ranking goes up
Crypto Ranking = More fees, More people use the chain, TVL goes up
I believe there is a separate allocation already in place for public goods funding. So growth will mean more for that pool as well. I am uncertain if i was clear enough in my original post; effort to improve the price is not coming from a place of price pumping for individual token holder gain. My proposal should not be construed as such at all. This is not about pupping price for the sake of it or to pump our bags. This is about creating future value propositions to attract formidable players. It is about gaining a spot among leaders. Do you think $265 million mc (with current outstanding tokens) is a fair valuation for a L2 pioneer like $OP?
Let’s be creative about this. Instead of Burning supply based on network/token metrics let’s just burn the tokens people want to use for governance. That said, we could burn OP for soulbound NFTs indicating the amount of tokens burned and this amount would be the voting Power. Holding OP, providing liquidity or whatever people want to do with OP wouldn’t give voting power, it would be entirely speculative but anyone willing to participate in governance would need to burn OP.
Instead of focusing on artificial ways to increase the price, we should be focusing on creating proposals that will bring more users to Optimism. This in turn will increase the price of the token in a sustainable manner.
There are a number of projects doing this and have submitted proposals.
Optimism has created a vision and it’s not about focusing on making token go up. It’s about creating a Desoc that is focused on scaling ETH and retroactive public goods funding.
I would be interested in diverting all sequencer fees/profits to buying back OP tokens to then put in a fund for future distribution, such as Retroactive Public Goods Funding. We could therefore align token price with health/activity of the actual network (more network activity means more profit for the sequencer and then more OP tokens for RPGF) Just as Ethereum is working on aligning whether ETH the asset is deflationary depending on gas prices (how much the network is being utilized) I think OP should do a similar thing. I could be completely off point, perhaps the profits of the sequencer are for now being used by the Optimism Foundation, but maybe they would love the idea of “pumping their bags” too since they have some OP locked up currently. All in all, I think everybody wins in a situation like this.
Can’t we use OP tokens as the currency for public goods funding? The sequencers buys back OP and puts it in a treasury of some sorts for future PGF, token price goes up and everybody wins. Value accrual for the OP token I think will benefit all goals this L2 network is trying to achieve.
I think both things dont need to be mutually exclusive. Sequencer fees go to OP token buybacks, and some of those OP tokens then are used in the future for PGF. I think if OP turned into a governance token that had value accrual and was tied to the health of the network itself, people would view price going up as a good metric for how much activity and value is actually locked on the Optimism network itself. I think we can have both.
THIS^ Buybacks and burns do not cause permanent user growth, utility, and demand for OP. I think we need to stay true to the vision but this doesn’t mean we couldn’t implement buybacks/burns sometimes.
It too early for this. Optimism should focus on using its funds to grow the ecosystem, then in a few years when its reached full potential they can look at directing funds back to investors.
Governance tokens are broken. The majority don’t give much relevance to governance, they even give their voting power to delegates because they don’t have enough time available for everything. Value of something like that can only trend lower, with or without PGF.
The only way to change this would be burning tokens in exchange of voting power (ideally minting a soulbound token in the process). There’s no better buyback/burn mechanism than one done by users willing to put their time and effort into governance.
First, we should not focus on pumping the price, artificially. This is never a good idea, its not gonna help anyone.
Rather, we should focus on knowledge sharing, user on-boarding and overall OP ecosystem growth.
Well if the token is divorced from the value of the network (which it is) it doesnt necessarily mean it will. If the sequencer profits are tied to OP buybacks then the network and token are more connected in action/growth. This is what Im saying. We can have both RPGF and positive price action tied to the growth/development of the network.
Here is one idea! I believe you understood they core tenet of my proposal. Buyback and burn is a rather blanket approach and I would love if people contribute to mold that idea.
support this!