Awesome work, I’m in full support for this.
If this gets passed for vote, I think it would be nice to maybe consider a periodic review schedule where the results can be analysed, potential strategy changes presented or extension at the current terms, then passing this to the community for vote.
Allow me to begin by expressing my utmost appreciation for @ri_ri and all the individuals involved in getting this proposal to the community. The fact that Alchemist is publishing this proposal is a great sign and I look forward to seeing the final result.
I believe this proposal does a great job at addressing many of the problems our current tokenomics has faced since our inception. However, I believe that there are some problems that are still left unaddressed with this proposal. The largest problem left unaddressed is the liquidity pairing of MIST with WETH. I would argue most, if not all, of our price action is so determined by two factors: MIST liquidity being tied to WETH and LPs being rewarded in MIST. This proposal changes the rewards for LPs to other coins and addresses that issue. However, if we continue to use WETH as the liquidity backing of MIST we will continue allow our coin to be susceptible to the extreme volatility associated with ETH. A rising tide lifts all boats and falling tide lowers them as well. This volatility is unnecessary for us to be exposed to at this point in the evolution of crypto, as there are a variety of stable asset solutions that MIST could be paired with to mitigate our exposure to the volatility of ETH. That is why I would like to amend this proposal with the following changes:
1. MIST liquidity be paired with the stable asset RAI.
2. MIST liquidity be provisioned via a Balancer 80/20 pool.
3. Increase MIST inflation rewards for Alchechad LPs to 22.5%
4. Increase MIST inflation rewards for Alchechad stakers to 7.5%
These proposed amendments share the same goal: increasing the stability and resiliency of the Alchemist Ecosystem by significantly reducing the volatility of MIST.
RAI is an un-pegged overcollateralized stable coin that is only backed by ETH. Over the course of the last year the difference between the highest and lowest price of RAI was roughly 5 percent. The difference between the highest and lowest price of ETH during the same period was roughly 80 percent. Obviously, that is a significant difference in price action over the last year. Stables assets all have their own risks, however of all the stable assets available on Ethereum, RAI is arguably the least risky. RAI is a fork of SAI (MakerDAO’s precursor to DAI) and only has a couple of changes to the code-base. RAI was made to forever be backed solely by ETH and is overcollateralized. RAI shares a similar ethos as Alchemist, and I believe that there could be a strategic partnership between RAI and Alchemist. I will elaborate on that possibility later, but for now here is a good article if you wish to learn more about RAI: A Money God RAIses — RAI is live on Ethereum Mainnet! | by Ameen Soleimani | Medium
A Balancer 80/20 pool reduces impermanent loss and more closely tracks the price of the 80% weighted asset when compared to a Uniswap 50/50 pool. However, these benefits come at the cost of increased slippage compared to a 50/50 pool. Despite increased slippage, I believe an 80/20 pool be more beneficial to the Alchemist ecosystem over the long run than a 50/50 pool. This is because I believe we should prioritize the stability of MIST and the organic price action of the coin rather than the efficiency of trades. Since Alchemist’s incubation efforts hinge on the ability to use MIST to fund those being incubated, it is critical that MIST prioritizes stability and liquidity over anything else. If you would like to learn more about Balancer’s 80/20 pool check out this article: 80/20 Balancer Pools. One of the main motivations behind… | by Fernando Martinelli | Balancer Protocol | Medium
Liquidity is what allows for the Alchemist experiment to preserver during times of low revenue generation. The MIST-WETH pool has been a backbone of the Alchemist ecosystem since our experiment’s beginning. That is why I believe that Alchechad LPs should receive 22.5% of MIST inflation. Alchechad LPs will be locking up their LP for a full year to help provide a stable source of liquidity for the Alchemist Ecosystem to draw upon. As such, I believe that these individuals deserve to have a significant increase in the rewards they earn over that period when compared to Alchechad stakers and the normal Chad LPs/stakers.
Currently, LPs receive 50% of inflation and 50% of ecosystem revenue. This proposal would drastically reduce the amount of inflation loyal MIST LPs have been receiving from 50% to 2.5%, and it may also reduce the ecosystem revenue received from 50% to 25% if over 69.420% of the free-floating MIST supply is successfully staked. I understand that if this proposal were to be implemented in its current form that it would likely drastically reduce the sell pressure of the MIST token which would benefit everyone. Nevertheless, this proposal would drastically hurt the loyal LPs who have never withdrawn their LP or sold their MIST tokens. These are precisely the type of ecosystem participants that Alchemist desperately needs more of. These individuals would likely participate in the Alchechad rewards programs. That is why I believe increasing the inflation received for Alchechad LPs and Alchechad stakers from 2.5% to 22.5% and 2.5% to 7.5%, respectively would work to further increase the stability of MIST and reward our most loyal participants.
The largest risk associated with what I have proposed revolves around the changes I have suggested around LPs. They would have to break up their 50/50 LP, buy or mint RAI, and provide liquidity in the Balancer 80/20 pool. During this process some LP may decide that they wish to stop providing LP and/or sell their MIST. We could end up with a lower MIST price and a smaller liquidity pool. However, these same individuals may decide to do this because they will not be receiving MIST any longer and may end up getting a smaller cut to Alchemist’s revenue sharing. I think that if there is a time to make these huge changes to our LP program it is now. If LPs have lost faith in Alchemist or no longer wish to hold MIST or provide liquidity it is better to have them exit now. They should recognize that they are exiting at all-time lows and that it would be better to go through with the proposal to stabilize MIST. The moment our liquidity is no longer tied to the price action of ETH we will be in a better place even if we have less liquidity. At the end of the day, most of the previous price action of MIST has been because of the volatility of ETH. We need to get off the ETH liquidity train so that we can start stop worrying about MIST price action.
If we enact my proposed amendments, we will shift the price action of MIST from being a derivative of the ETH price action to purely MIST entrants and exits. We may have some exits and a lower liquidity pool size but in the longer run I believe it will benefit the health of the Alchemist dramatically.
Partnership Possibilities
There are a fair amount of 80/20 pools that are earning BAL rewards from Balancer. Considering Copper is one of, if not the, most successfully application built on Balancer technology, I would imagine it may be possible to get some BAL rewards from Balancer for transitioning our liquidity to an 80/20 pool.
I believe there could be a possibility to form a strategic long-term partnership with the Reflexer DAO, Reflexer Labs, and the overarching RAI community. Here are the steps Alchemist could incrementally take in a partnership with RAI:
We hold RAI as a portion of the stable asset reserves in the Alchemist Treasury and/or Mulitsig.
We allow for Copper LBPs to use RAI as a base asset.
We perform a token swap between the Reflexer DAO and Alchemist. Swap MIST and FLX.
We reward FLX/ETH LPs with some MIST
What would be the benefits of Alchemist partnering with RAI?
Reflexer DAO could reward the MIST-RAI pool with FLX via a Crucible rewards program.
RAI could transition their custodial staking rewards program to Crucible’s non-custodial rewards program.
The Alchemist community could expand and benefit from becoming strategically intertwined with the RAI community.
Perform a token swap of FLX for MIST between entities.
Alchemist would simply want to partner with RAI to accumulate their ungovernance token FLX in a passive manner. RAI charges around a 2% annual fee to mint RAI which is then auctioned off and can only be purchased using FLX. The FLX is then burned. The longer that RAI can remain reasonably stable and become less and less influenced by outside forces the great its legitimacy of being the one and only truly decentralized stable coin will become. As this narrative grows stronger, more RAI will be minted which leads to more revenue and an increased demand for FLX while also decreasing the supply via the burn mechanism.
I am keen to hear everyone’s feedback on my proposed changes to the tokenomics proposal put forth by the Council. Once again, thank you to @ri_ri and everyone who contributed to this proposal as I believe it is a step in the right direction.
<3 Santa 
Thanks for the great post Santa.
I have to admit I am not overly familiar with Rai. I’ll have to do some reading up on this. I’m not sure I get the reward structures that would exist under your proposal, could you dumb it down for me?
If I remember correctly the Council did discuss the balancer 80/20 at some point. I cannot remember what the outcome was, maybe it was just to get this initial proposal out here for discussion and see what feedback we get 
Either way, great post and I look forward to seeing what others think.
Thank you @Stew! My apologies for not being clear enough. Here are my proposed changes to the rewards programs.
| Proposal | CHAD Stakers Inflation Rewards | CHAD LP Inflation Rewards | Alchechad Stakers Inflation Rewards | Alchechad LP Inflation Rewards |
|---|---|---|---|---|
| The Council | 0% | 0% | 2.5% | 2.5% |
| Santa | 0% | 0% | 7.5% | 22.5% |
I support the proposal in general but I wonder if there are room to increase the 50% revenue share with the two reward program ?
If yes, I would suggest to increase it to incentivise current reward program participants to vote in favour, because @ the first glance they will no longer be able to receive reward from inflation, but the revenue share stays @ 50%
Re:Santa’s idea, I support the idea of exploring possibility to pair with a stable instead
1. MIST liquidity be paired with the stable asset RAI.
A lot of interesting ideas to explore here Santa. I think certainly worth exploring a RAI pair in the future. Right now I feel like there’s a big tradeoff vs WETH because if the LP community is longterm bullish on WETH a WETH-MIST pairing would help offset the impermanent loss effect of MIST appreciating in price.
For example using this calculator Impermanent Loss Calculator, MIST going to $30 relative to present levels while RAI retaining same value would result in about a 40% impermanent loss percentage. Whereas is in a pairing with WETH if WETH goes to $3000 during the same time frame impermanent loss would be around $20.
The other thing is RAI’s market cap is currently $15 million and it’s still relative new. Going all out RAI could be quite risky for our whole liquidity pool, but I would be in favor of exploring new pools pairing MIST with RAI in the future.
2. MIST liquidity be provisioned via a Balancer 80/20 pool.
Big fan of 80/20 pool architecture. Something I think we should definitely look at. Maybe Alchemist could continue building out a protocol owned liquidity pool on Balancer while giving LPs the option to use it as well as part of the reward program. Maybe it could even be a RAI pair 
. Personally I think we shouldn’t risk massive change like this that could destabilize LP in an all or nothing way and we should experiment with them gradually instead.
If the goal is to transfer MIST funding towards the incubator growing the above rates too high defeats that purpose as it’s not a “productive” use of inflation. In the direct sense that it’s not funding new products. Alchemist’s mission is hypergrowth through incubation. Incubation revenues should be what incentivizes LP and single sided staking.
Thank you for a very detailed write up of your thoughts and the research behind them. Hope more community members engage this way and maybe going forward we could create some sort of working group to analyze and map out these type of ideas collectively. I think a bunch of the things you list we should experiment with, but without the disruption and unpredictability of completely scrapping our current set up.
Curious what others think. I like the idea of the The Based Alchemist Games. would be a lot of fun and could be a great way to onboard new community members while also keeping the community engaged throughout the experience. The actual act of staking would still be quite simple, but I think the BAGs adds an exciting ongoing component rather than staking and forgetting and not feeling a need to stay engaged with the community.
The thinking behind the gradual ramp up is also because if we go with instant high reward rates LPing loses its appeal. a large chunk of MIST is locked up in LP and the LP rewards pool. want to avoid causing harm through that. single side staking gets as a baseline a reward, but beyond that it requires reaching further thresholds. otherwise there’s no incentive for someone that’s already staking to convince others to stake because it dilutes them. with the way we’ve designed the thresholds everyone stands to win by getting more people to stake.
I think going beyond that would make retaining founder level talent and great builders within the community quite difficult. Agree with you on exploring additional LP pairs in order to satisfy varying risk appetites for LPs.
I think introducing some sort of burn mechanism would be wise in the long-term since inflation is compounding and could get out of hand in long-term.
My starting idea for this 
Phase 1:
Burning unused tokens in Alchemist incubator leaving just necessary amount for a new incubation project and for sustaining existing project.
Phase 2:
Decreasing or turning off inflation when current Alchemist ecosystem projects are generating enough Revenue to sustain Alchemist incubator without a help of inflation.
Benefits:
.also makes sense for investors to HOLD mist if they know mist eventually will be deflationary.
I agree. After having a look at Rai I think you summarize the risks well. This could be something to look into in the future.
How would you know what is the “necessary amount for a new incubation project”?
Different project will require different funding amounts at different times of the market cycle. and we may have more than one project to incubate.
Any unused inflation would reside within the multisig wallet and be used only for incubation, it would not enter circulation otherwise.
Maybe instead of giving a limit to the fund that is allocated to the project individually, we could give a limit to the total incubator teacup, if the savings balance is too high, the funds spill out and burn🔥.
Of course, the question remains, how high is this theoretical limit?
500k, 20kk…? I feel that we can find a golden middle if we put our heads together. 
As I’ve stated in Telegram, I appreciate the council’s efforts to improve current tokenomics. I don’t however agree with the proposal to eliminate all of the MIST that lp’s receive from the inflation. I believe that receiving a portion of the MIST is an important incentive that helps to offset some of the dilution that continually occurs every 14 days as well as potential impermanent loss.
I do like the suggestions for single sided staking, reduced inflation and possible burning of MIST as revenue increases, and perhaps protocol owned liquidity. I’m not as sure about the risk of a RAI pair as I would need to research the risk reward more to have a strong opinion.
I’m disappointed to see the lack of community participation in this important initiative. With only 21 total votes at this time, the team/council can pretty much push through any agenda they choose.
I’m not saying that as an attack on the team or counsel in anyway. I have a lot of respect for both. I would have just liked to have seen what more of the community thinks. I hope the council is open to changing their proposal based on the feedback they did receive. I’m also hoping the MIST team has something up their sleeves that will reignite the community in this down market.
MIST is the key to accessing incubated projects’ revenue and would only really be acquirable via purchasing on Uniswap. Alchechads would be required to stake their coins for a year and Alchemist has only existed for a year and a half. I would imagine, many people could see the benefit, and risk, in locking up their coins for a year, as such I feel that they should be rewarded with MIST inflation proportionally to the value they provide to the Alchemist ecosystem.
Alchechads would be the liquidity and stability reservoir which could be drawn upon by incubated teams to help turn MIST into fiat currency. I believe this value add to the Alchemist ecosystem deserves less than 50% and greater than 5% of inflation.
To the Alchemist Council I’d like to say that, this proposal, MIP-1, has been very well thought out. And it is very well written and it covers a very important topic.
I do think that $MIST tokenomics are the second step, in analyzing our project, Alchemist. The use case drives tokenomics, not the other way around.
I propose that we begin an examination of our current use cases within the Alchemist Ecosystem, and document where we are as a project, with developers and with dev-ops.
Given our current token price and our current uniswap daily volume, combined with the significant amount of $MIST treasury holdings, the $MIST token price is important to us.
And with this dangerously low level of interest in Alchemist
– I suggest we consider creating a new Alchemist Ecosystem project, that is a service, and it is paid for in Ethereum by users, and it is governed by $MIST.
The first few things that came to mind were Ethereum 2.0 staking, Yearn Vaults & Inverse Finance’s - Anchor Money Market. These were only examples.
If we didn’t have the individuals we needed to contribute to such an undertaking, we have other avenues we can explore.
However, I strongly believe that our use cases will be what helps us break down the tokenomics.
Thank you for the MIP-1, it is a very well put together document. And I look forward to all comments.
Around a year ago we internally scoped out the work involved in running an ETH 2.0 validator node/staking network and at the time it was apposed by the reward and competitor advantage/domination of LIDO
Maybe it’s time to revisit this, only comment would be that the current active builders within Alchemist would not be able to afford the capacity to execute on this, so this will need to be factored in as part of the scope.
Identifying who could lead the effort to look into this further, or seeing who would put their hand up to this might be the biggest hurdle to overcome, unfortunately I don’t have the capacity to do this otherwise I would have been willing to contribute here.