Building an Economic Framework for $OATH
The OATH token has never had tokenomics in the traditional sense. With a data-driven “minimum viable issuance” strategy and a growing supply of veNFTs, the circulating supply of OATH has actually shrunk since its inception over a year ago. This has happened despite millions of dollars worth of incentives issued to users through our DEX partners.
Now, with the dawn of Ethos Reserve, OATH is once again being made more accessible to users. The $ERN stability pool is receiving 200,000 OATH per month, or 0.65% of the total supply per year, and the community finds itself at the foot of a new growth curve.
Shifting the OATH economic strategy from a liquidity-focused approach to a product-focused approach has revealed a number of pain points related to our flexible, cross-chain strategy. Put simply, the transition has been challenging.
If you haven’t been keeping up-to-date with town halls and other events, you’re probably a bit out of the loop. To get up to speed on where the OATH Ecosystem stands, we’ve outlined a brief SWOT for you below.
Through a tokenomics solution for OATH, our team seeks to maximize strengths and take advantage of opportunities while solving weaknesses and mitigating threats. Simple enough, right?
Exposure to multiple networks was a huge advantage in 2022 as it allowed us to access new ecosystems without huge expenditure – there just wasn’t a lot of competition in the second half of the year. Since then, we’ve been able to attract hundreds of new connections and loads of valuable partners, along with a growing collection of veNFTs.
In 2023, our advantage quickly turned into a disadvantage. New projects began to launch across the industry and our multi-chain strategy evolved from a moat to a prison. Penetrating markets across 5+ networks is simply not possible with a single team and token, especially against native competitors.
We went back to the drawing board to redesign our growth strategy from the ground up, starting with liquidity.
For protocol-owned liquidity, we’re keeping things simple: all assets will be concentrated in a single pool on Optimism. Additionally, most of our ecosystem growth strategy will revolve around bOATH to further enhance on-chain liquidity conditions.
bOATH and Protocol Fees
Shifting our incentive strategy to a product-focused one means getting buy-in from OATH governors. To us, the best way to do this is by directing all platform fees to Bonded OATH stakers as real yield.
This process will trigger a constant stream of incentive distributions to bOATH liquidity providers in the form of ERN, ETH, BTC, and OP. As we continue to scale Reaper and Ethos, this will give OATH governors a strong incentive to use OATH Ecosystem products and help to deepen liquidity for OATH.
oTokens, also called Option Tokens, are ERC20 contracts that act as perpetual call options for their parent token. When you receive oOath, for example, you gain the right to exercise an option at any time to purchase OATH at a discounted price.
Our team has been interested in Option Tokens for a while now, and seeing their successful implementation by ecosystem collaborators – Bunni, Retro, and Velocimeter – we feel they have a place in our technology stack as a mechanism to encourage deeper buy-in. Additionally, learning from our friends at Ramses, we want to add an alternative to exercising the oToken normally to encourage users to create and stake bOATH tokens.
Instead of having to put up ETH for discounted OATH, users may choose to receive the OATH for free by pairing it to form bOATH and locking it for a period of time. We want to encourage users to think of bOATH as a sustainable source of income, translating deeper ecosystem participation directly into greater yields.
Users’ locked bOATH positions will receive a steady stream of real yield from a variety of sources and help provide liquidity to the OATH token. This functionality will ensure that users of native OATH protocols have an easy, low-cost entry into our expanding network of software.
We encourage users to join us next week on forum.oath.eco to help define an optimal locking period for bOATH earned through the oOATH system.
For the past three years, our team has been committed to setting standards in Ethereum development. In that time, our speed-to-market has been reduced significantly while security, stability, and maintainability have increased.
These organizational improvements have given our team tools to address market needs across the industry. Combined with our ecosystem development efforts and all-star roster of partners, OATH technology is poised to gain significant adoption.
We find ourselves, however, faced with our biggest weakness: liquidity fragmentation.
So we asked ourselves: “How can we leverage our team’s strengths without fragmenting our liquidity?”
Through the Chapters initiative, OATH’s core team will transform into a modular monolith, with small units branching off to create new implementations of our software stack on alternative networks while continuing their collaborative development of the stack as a whole.
OATH Chapters will be formed through governance and include new tokens, marketing strategies, and branding tailored to the target ecosystem. These tools will allow us to form deeper relationships with DEXs and foundations and allow our technology to be utilized to its utmost potential.
Every Chapter will be led by a senior engineer whose goal is to craft bespoke solutions to seize that network’s biggest opportunities. A Base Chapter of the OATH ecosystem, for example, may feature an implementation of Ethos Reserve V2 with a focus on USDC, cbETH, and RWAs alongside a clean corporate aesthetic, with Reaper Vaults being utilized to build leveraged products on top.
So what happens with new tokens?
New OATH Chapter tokens will have simple, predictable emission curves and tokenomics similar to those described earlier in the article, with a focus on long-term sustainability and ecosystem buy-in. OATH governors can expect a portion of these tokens to be set aside for staking rewards on their respective networks.
So What’s Next?
Together with the launch of Ethos V2 system and overhauled tokenomics, OATH Chapters will give the ecosystem vital tools to expand our reach to new networks. Users can enjoy real yield through bOATH, enhanced incentive alignment through oOATH, and more fees being directed to stakers from Reaper, Digit, and exercised options.
For OATH Governors, expect exciting new staking opportunities across the industry as we tap into new networks with bespoke implementations of the Ethos platform.
For Ethos Reserve users, experience greatly enhanced asset support and network coverage with our modular approach to growth.
For those new to our ecosystem, get started learning about our mission at OATH.eco and discover how Ethos Reserve is building the next generation of DeFi.