Rethinking $CROWN Incentives: A Path to Sustained Growth and Stability
Hello horse enjoyers!
In this blog, we've got some changes to announce regarding how $CROWN racing incentives (also known as ‘stimmies') will work in the coming seasons. But before we start, let's review the tape.
The $CROWN token plays a pivotal role in incentivizing racing within our platform as we work towards maturing our economy. We announced our specific plans to use $CROWN for this purpose in a blog post published on April 25, 2023. You can read it here.
The distribution scheme outlined in that blog was an allocation of 4.23M $CROWN each season until April of 2024 (Season 14). That was more than seven months ago, and in this space, it might as well be an eternity. The originally outlined model presents significant challenges, in that without a sufficient subsidy post-April 2024, racing might devolve into a negative sum game, freezing our economy to the detriment of all participants.
Foresight is 20/80
Predicting the future is hard, and as we outlined in our original post, we always had to reserve the right to make adjustments, to stay nimble, to achieve what we are all aiming for. And indeed, a number of important things have changed and become clearer since then.
First, the price of $CROWN has changed materially as our platform has grown and our players have realized the value it provides. When we published our original post, $CROWN closed at $0.09, typically trading in the $0.05-$0.10 range.
Today, $CROWN frequently trades above $0.70, even hitting all time highs above $0.85. At those two values, the value of the $CROWN stimmies at announcement would have been up to ~$380,000, and today would be over $3,000,000.
Second, and importantly, the wager economy still needs to make large strides to replace $CROWN's value in this ecosystem, making the exhaustion of the $CROWN stimulus treasury a high priority for us to address.
We explored three new models for distributing $CROWN stimmies. Utilizing some simple names, they're referred to as “Lower for Longer”, “Long Tail Decay”, and “Step-wise Halving.” Evaluating these different allocation strategies is challenging. There are many assumptions and projections that must be made, and many effects that must be accounted for.
- The number of horses bred
- The number of horses retired vs racing
- The amount of entry fees paid per season
- The amount of platform fees collected per season (marketplace and stud barn)
- The growth of the wagering economy
- The level of “+” in EV+ racing that must be offered to incentivize a full race schedule
- The dilution effect on $CROWN (from both stimmies and PFP staking)
- The price of $CROWN and a valuation mechanism for it
For any one of these factors (and more) the range of reasonable possible outcomes is quite wide. Nevertheless, we do the best we can because we want to make the most informed choice possible. All of these models were evaluated through Season 36.
To briefly describe each of the proposed models:
- The “Lower for Longer” model implements an immediate drop to 1.07M $CROWN per season, then continues that steady allocation per season at the new level
- The “Long Tail Decay” models a decay rate, where a fixed percentage of the remaining balance is allocated each season (meaning less and less each season)
- The “Step-wise Halving” is a sort of mash-up – where periods of steady emissions go on for periods of time and then step down to a new lower level. This is likely familiar to many crypto-forward players.
When comparing these models, you can think of them as a spectrum in terms of their performance, with “Lower for Longer” at one extreme, “Long Tail Decay” at the other, and the “Step-wise Halving” model somewhere in between.
Primarily, the difference between the two extremes comes down to what they optimize for. The “Lower for Longer” optimizes for time at EV+ racing under varying conditions. The “Long Tail Decay” optimizes for a gradual change to the existing program, less likely to shock the system, and for stimmies in some form continuing indefinitely.
The risk inherent in this entire exercise is that the future is unpredictable. If things play out one way, one model might be best, but if they go another way, another might be. For instance, the “Lower for Longer” is better able to endure a decline in $CROWN price because the amount of $CROWN being distributed in the far out seasons is not less than today. It might face a headwind on price, but would not face one on volume. The “Long Tail Decay” approach would face both headwinds.
But, alternatively, consider if the racing ecosystem grows robustly, and that an increase in $DERBY yields warrants a lift to $CROWN's valuation, overwhelming the decay of the allocation. In that scenario, “Lower for Longer” might introduce a large cut in allocation right at a critical early growth stage of the ecosystem.
Given that the future is so uncertain, and that things seem to be working out pretty well at the present time, optimizing conditions two years from now at the expense of conditions today seems unwise. And, also we must consider that over time there will continue to be more and more $CROWN “sinks” in the ecosystem, which make up a currently growing corporate treasury of $CROWN that can be used to ensure success if eventualities call for it at some point in the future.
For these reasons, we believe that “Long Tail Decay” is the best solution at this time.
That said, as always, should conditions or our forecasts change, we reserve the right to make additional changes to this program in the future. After all, we are committed to a successful enterprise, not adherence to plans made in highly uncertain times.
Congratulations on having made it here through our mental gymnastics! Now we get to the specifics of our plan going forward.
Thus far, with our expectations through the completion of Season 9, only about 26M $CROWN of the initial 55M $CROWN allocation (33.8M $CROWN released so far) will have been granted as $CROWN gifts. This leaves 29M $CROWN of remaining budget for Season 10 and beyond.
Starting in Season 10, we will be allocating 10% of the remaining $CROWN stimmies treasury each season. Therefore, Season 10 will receive an allocation of 2.9M $CROWN, and then Season 11 will receive 10% of 29M – 2.9M, or 2.61M $CROWN. Since the remaining balance will always be greater than 0, 10% of that amount will also always be greater than 0 ensuring an indefinite sequence of allocations.
While not our primary intent, we believe it is important to point out that this revised schedule will delay some of the previously anticipated dilution of the public $CROWN supply, an important consideration for $CROWN holders' and stakers' own plans and projections.
As always we look forward to hearing your thoughts and feedback, and we'll close with the reminder that everything is still fluid, and just like always we'll continue to make sure we make changes with longevity and sustainability in mind.
See you on the track!
Paul Fleetwood, CTO