fTokens | Ponzinomics & Pumpamentals In Depth

TL;DR

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What Are fTokens?

fTokens are a series of ERC20 smart contracts that will be released within the Food Pyramid ecosystem, but separately from the FOOD token. The FOOD multisig will retain admin key ownership over them at first, in order to change one key variable on a planned schedule.

They are a type of elastic supply or rebasing tokens, like Ampleforth, along with the added innovation of selling a portion of supply during positive rebases that YAM Finance added.

An fToken is a token that is paired with a specific trading pair, such as fUSDC, which would have its price peg & rebase logic dependent on the fUSDC/USDC price. There will be four weekly releases of fTokens:

• Week 1 — Stablecoins (such as USDC, USDT, DAI, etc)
• Week 2 — SOV Crypto (ETH & BTC)
• Week 3 — DeFi Blue Chips (YFI, LINK, AAVE, SNX)
• Week 4 — TBD High Growth Potential (UNI, wNXM, PICKLE, UMA, etc)

FOOD tokens & a percentage of the base pair tokens (USDC, ETH, etc) received from fTokens sold during positive rebases will be distributed weekly to wallets that stake Uniswap LP tokens for a particular trading pair.

In addition to some carefully changed smart contract parameters the key innovation that fTokens add is a constantly increasing price peg. Elastic supply coins are absolutely horrible at being stablecoins, their stated goal, so why not just program them to go up, parabolically and mean revert like all hell along the way? Well that’s exactly what we’re doing. Continue reading for the full details.

Difference Between AMPL, YAM, & fToken Parameters & Their Effect on Price Action

All of these elastic supply tokens follow the same basic model. They have a certain frequency at which they rebase (daily, every 12 hours, etc.) and a RebaseLag parameter, which determines how long the targeted change in supply & price takes effect, and how much immediate price impact this has. If a protocol rebases daily & has a RebaseLag of 10, then only 10% (1 divided by the RebaseLag) of the total rebase amount for that cycle will be added (if price is above the peg) or subtracted (if price is below the peg) from the total supply.

The supply change is recomputed and executed no more than once every 24 hours. This operation is stateless, meaning each day the protocol recomputes a supply target based on the latest price difference, and executes as though the change will occur evenly over the next 10 days without any memory of the previous day’s supply change. — Ampleforth Red Book

AmpleForth Parameters

AMPL rebases once per day, has a RebaseLag of 10, and only if price is 5% above or below its price peg. This long cycle period allows price to stray very far from the peg before increases or decreases in supply can exert their desired effect.

YAM Finance Parameters

YAM rebases every 12 hours, has a RebaseLag of 10, and a +/- 5% price peg window for when rebases are allowed. This creates a shorter (5 days) rebase cycle. Also, YAM sells 10% of any increase in supply during positive rebases, which has more direct impact on price, while also allowing YAM to extract value from the price path, building up their treasury in the process.

fToken Parameters

fTokens will rebase every 4 hours (yes, on the standard 4H closing time), have a RebaseLag of 30 during positive rebases, a RebaseLag of 6 during negative rebases, and a +/- 2% price peg rebase window.

The positive rebase cycle will last 5 days and with rebases being every 4 hours, each individual rebase during the cycle will have less relative price impact than either AMPL or YAM. This will give price plenty of room to pump.

Our negative rebase cycle will only last a day, but with it being spread over only 6 rebases, should have significant price impact. This uneven parameter set is designed to keep the time that price is below the peg as short as possible, so we can spend as much time enjoying epic, programmed price pumps.

A final tweak was made to the YAM style selling of positive rebases. The portion of supply that is sold during positive (and only during positive) rebases scales with the ratio of current price vs. the price peg, from a 5% minimum up to a 50% maximum. This is designed to keep sell pressure low when price is only a little bit above the peg, allowing price room to run, and extract maximum value without regard to price impact when price is likely overextended.

Exponential Growth of the Price Peg

For the first 13 weeks (about 3 months) the price peg will experience some pretty insane exponential growth. 20% daily for the 1st week, then rapidly scaling down to more “reasonable” rates of growth.

Hey, reasonably sized houses ain’t cheap!

After the first 3 months, for the next 3 months the peg will grow 1% per day. Then 0.75% per day for the next 3 months, and 0.5% per day for the 3 months after that. During the 2nd year, the daily rate of growth will continue to decline every three months, from 0.25% down to 0.1% per day. On the start of the 105th week (approximately after 2 years) it will be at 0.05% (5 basis points) per day and remain there indefinitely.

LP Token Staking Rewards & FOOD Distribution

During positive rebase cycles, a portion of the supply increase will always be sold. A percentage of assets received from these sales will then be awarded every week, pro rata, to wallets that provide liquidity & stake their Uniswap LP tokens.

FOOD tokens will also be awarded, pro rata, to LP token stakers, inversely proportional relative to the percentage of rebase sale proceeds that are awarded to stakers.

Rebase sale proceeds will start out on Week 1 at 50% and quickly drop to about 6.7% on Week 10. Then over the course of the next 16 weeks rise back up to 50% where they will remain in perpetuity. All proceeds from rebase sales not awarded to stakers will be deposited in the Food Pyramid treasury.

FOOD tokens will be distributed at a rate inversely to the rebase sales, in order to balance out the rebase sale proceeds cycle. The total percentage of FOOD released for LP token staking during all four weekly cycles will be 12.5%. It is to be determined whether this will be divided equally among each weekly fToken release or front-loaded, with the first weeks’ releases receiving a higher proportion of the 12.5%.

And that’s how the fTokens ponzinomics work. Congratulations, if you read all of that you are definitely a huge nerd.