Distribution/Tokenomics

Bao Finance is first focused on providing a fair early distribution, and then on the creation of synthetic assets, where BAO will be used to pay fees to mint synthetics and burned, continually reducing supply and adding value to all BAO holders. Staking mechanisms can also be voted on by the community to distribute other fees collected from our products to BAO holders.

Distribution:

For our distribution, we will be using a modified version of the SushiSwap farming infrastructure.

Since Bao Finance does not intend to create its own competitor to Uniswap, we will not be migrating to our own pools. Instead we will just use the yield farming model for distribution.

We have made a number of changes to the distribution system in order to:

  • Prevent abuse/exploits from flashloans and flash minting.

  • Encourage long-term participation in the ecosystem.

  • Create a robust and diverse treasury.

  • Create additional treasury funds that the community owns.

  • Penalize users who leave pools too quickly and try to manipulate prices or optimize farming.

  • Create locking and vesting to reduce deflation and align stakeholders long term.

Total Tokens:

While the community will have the ability to vote to change the caps of the token, the current plan is for BAO to produce a maximum of roughly 1.5T tokens over 5 years.

The total tokens is not a hard cap, as we close in on distribution it will be up to a community vote to cap the tokens.

Distribution: There will be a total distribution of 1T tokens. When a user earns tokens, 95% of that token balance is locked on to a 3 year vesting cycle that is 1 year delayed from the start of the distribution schedule. This means users will receive 5% of the earned BAO upfront, then starting around 1 year later users will receive the remaining 95% of BAO evenly distributed daily for 3 years. Tokens start to unlock on the same block for everyone (https://etherscan.io/block/countdown/13766564). Team members also have the same vesting schedule.

While the initial earning phase of BAO is expected to cover a 2 year time frame, it will take 5 years before all distributed tokens are in circulation. The following chart shows the token distribution across time by farming with liquidity pool tokens. This chart doesn't represent circulating or total supply as it does not account initial issuance and treasury funds.

This chart show the token distribution by farms and doesn't include initial issuance, grants or treasury.

The distribution will take place in three phases:

Phase #1 - Yield Farming:

During the yield farming phase, user will earn rewards each block for staking their LP tokens in the Bao Farming page.

During this one year period we will distribute 800 billion bao.

These bao will be distributed using the bao yield farming page on bao.finance that is based on the SushiSwap MasterChef protocol.

Users will receive their bao for staking LP tokens in this page.

The goal of this distribution model is to reward a diverse set of users with the governance protocol token, as well as encourage the habit of depositing LP tokens.

These deposited LP tokens in the future will act as the users collateral for synthetic assets, margin and other crypto trades.

There will be 250 base BAO tokens distributed every block. During the first two-years, these blocks have a multiplier ranging from 0x-4096x which increase the number of BAO tokens in distribution. The rates are outlined in the distribution tables below.

The remaining Bao tokens are not distributed, they stem from the initial issuances, and the treasury (community fund, LP fund, dev fund) and the founder share.

Distribution Tables

Phase #2 - Synthetic Assets

At the end of year one (or sooner based on dev team being ready and community governance vote) the protocol will switch from rewarding users for adding LP tokens to rewarding users for creating synthetic assets with their balance.

The distribution of these tokens will follow the same curve and the same lock and release cycle.

However, users at this time may vote to increase the rewards or add new rewarded behaviours in the event that the existing rewards are too low for encouragement of creating these assets.

What is the use of the Bao token?

The users who hold Bao tokens will be able to:

  • Vote in governance polls.

  • Create governance proposal.

  • Decide on new features and devs.

  • Elect oracles for pricing synthetic assets.

  • Remove oracles for pricing synthetic assets.

  • Decide which synthetic assets to create/list/remove.

Bao will also be used as collateral where users will require:

  • 25% of collateral limit to be held in bao for making synthetic assets.

  • Have margin, leverage and option limit capped at max of 5x bao balance.

(Users can vote to change those rates)

Lastly, bao users will own:

  • The Bao in the devfund/treasury.

  • The community fund.

  • Smart contracts/deploy process.

Initial Issuance

In order to seed the Bao pool so that there is not a mass collapse like other early yield farming assets, the contract allows the Bao deployer to mint Bao tokens, they are limited to 74,701,360,000 tokens which is roughly 7.47% of total tokens to be issued.*

*The full initial issuance was not used and the community under governance locked and staked the bulk of the issued tokens.

It represents less than 25% of tokens to be issued in the first week of distribution so the amount will quickly become irrelevant from the dilution, but it ensures a larger distribution.

This initial issuance was used for:

  1. Providing initial liquidity to the Bao<>ETH pool on Uniswap.

  2. Creating a bounty for users to create useful dashboards for Bao pools (similar to https://sushi.zippo.io/)

  3. Paying rewards for an audit of Bao ecosystem.

  4. Initial listing or liquidity bounties with exchange and trading partners before the Bao rewards begin to enter into the liquidity fund.

The Bao Team will not keep any of these funds from the initial issuance, any remaining funds that do not get used for #2 - #4 will be used to create liquidity in the Bao<>ETH pool.