Kepler V2.0 — a model for a truly return-focused decentralized VC
We’ve been working on this for a long time, taking our learnings from the recent bear run and developments at other DAOs. There were only two goals that we were chasing after a lot of deliberation — how to build a process for gaining long term sustainable returns for our investors and how to incentivize the stakeholders who believe in this goal.
And with these two goals in mind, here’s what we finally decided. Like always, this is open for review and feedback, but we want you to take the lens of building a healthy protocol which will probably stay with you in your web3.0 journey along with the growing Kepler community.
What is Kepler V2.0?
Kepler V2.0 is an essential upgrade to achieve the long-term vision of Kepler DAO — become the world’s first treasury-backed investment protocol. A lot of thought was put into it, including the best time to launch it, and we believe that for the future of the protocol, Kepler DAO must start with V2.0 at its core. Let’s understand what Kepler V2.0 brings to us.
- Single token model (one token to rule them all): We will only have a single token governing our protocol — the mighty $KEEPER. The price of $KEEPER will be decided by the value of the treasury and the investment fund. SPV ownership and governance will be solely decided by the ownership of this token. Also the staking has been simplified, you stake your $KEEPER tokens which notionally grow daily and you get back your $KEEPER + staking rewards once you unstake. More information can be found here.
- Buying: No need to go to any DEx, you can directly buy $KEEPER tokens on the website without any vesting period. The first set of supported tokens will be USDC, USDT, DAI & ETH. As mentioned before, the price will be decided solely by the market value of the treasury and the investment fund. More information can be found here.
- Selling: No point in holding tokens if you can’t sell them, right?
The protocol will allow you to sell your KEEPERs in exchange for USDC, USDT, DAI or ETH. Since we will not create any LP pool on a DEx, this was a logical step to take. But such an action would quickly drain the treasury. Therefore, a premium will be charged for selling your tokens, which will increase as the selling of tokens increases.
Who gets this premium? The premium will be distributed to the staking contract and the DAO in a 90:10 ratio, where the staking contract will use it to increase the rebase rewards for the current rebase. More information can be found here.
For more information on buying and selling, please read up here
- Sustainable Staking APY: Instead of using a random large number, the staking APY will be composed of 2 components — a fixed rate of 15% which will always be present, and a dynamic rebase reward which will be added to the fixed rate. This dynamic reward will be decided by the selling premium earned by the staking pool. A portion of the selling premium will be given to the staking pool, thus higher the selling, higher the premium earned, and higher will be the rebase rewards for the stakers. And since these rewards come from the selling premium itself, the price remains the same. It’s important to note that the APY is not just 15%, our simulations show that it can blow up to insanely high values (without a limit, actually!) if there is run for unstaking and selling. The added benefit in our model is that the addition tokens that was flowing into the staking contract due to selling actually accrue profits for the treasury.
Why Kepler 2.0?
- Controlled price volatility: We want to abstract away from price volatility due to factors other than fund performance. The price of $KEEPER should be directly proportional to the performance of the fund.
- Incentivizing the right actions in a sustainable manner: Maintaining a high APY should never be the goal of any protocol. We want the people to accrue the same profits as the investment fund, not earn high APY while praying that the price doesn’t crash. The goal of the protocol is to raise the treasury, invest in innovative projects, and give the profits back to the community. Simple, straightforward, long-term.
- Too many tokens: V1.0 was plagued with too many tokens, KEEPER, TROVE, wTROVE, cKEEPER… Even after nearly 2 months of announcements/docs/articles explaining them, people are still confused about the utility of each token. To be honest, we were greatly inspired from OHM to begin with, but we now understand that it’s not the best model for an investment vehicle. In fact, in principle, we’re not at all an Ohm-fork now.
What are the major differences from Kepler V1.0?
- Single token: You only need to know about $KEEPER (and $aKEEPER if you have it) and forget the rest.
- Sustainable APY: Since the APY is much more reasonable, the price will relatively remain stable and only be affected by the fund performance.
- Selling permitted with premium: We are allowing selling of $KEEPER tokens on our platform so that the value of your KEEPER tokens is unaffected by market sentiment. A small premium is charged to dis-incentivize selling and increase the rebase rewards for stakers. The initial value of the premium will be set after the copper launch when we have the final number of tokens circulating in supply.
- No vesting on buying: You will get your $KEEPER tokens as soon as you buy them. No need to wait for any vesting period.
- Why is there no vesting on purchasing KEEPER tokens? Will this not cause volatility?
There is a selling premium on KEEPER, governed by the equation
Ps = Pb*(1-premium). As the net selling pressure increases, the premium shoots up making selling unprofitable.
- How will you prevent volatility at the copper launch?
Out of the 55k aKEEPERs currently in circulation, about 42k have already been locked in (they are redeemable only after the copper launch). This was done to ensure fair public participation in the copper launch without the fear of excessive price movement. Furthermore, the max allocation to a whitelisted wallet address was 200 aKEEPER tokens in the IDO and 100 aKEEPER tokens in the pre-public sale. This design had led to the tokens being distributed across several whitelisted wallets and thus whale action is improbable.
- Why is the APY only 15%?
The price of KEEPER directly depends on the circulating supply. High APY would immediately crash the price. So a nominal APY is given to stakers, with the added benefit that the premium charged from selling of KEEPER is distributed as KEEPER to the staking pool, which increases the rate for the current rebase.
- Why do you not accept LP tokens from your pools?
This is because LP tokens accrue a fee of ~0.3–0.5% which is too low to incentivize us to put a dollar in an external pool. Why? The ROI on $1 invested through the SPV is potentially 20x. So for now, we have chosen to forego LP fees when we can rent DEX liquidity costlessly. We might choose to decide otherwise in future.
How to participate?
- I have staked my aKEEPER: Great! After the copper launch, you can withdraw your staked $aKEEPER along with the rewards, which can be redeemed 1:1 with $KEEPER on mainnet launch. Or, you could wait for the mainnet launch and directly convert the staked aKEEPER to KEEPER in order to save gas.
- I hold aKEEPER: Wait for the mainnet launch, then you can redeem them 1:1 for KEEPER.
- I want KEEPER: You can buy $aKEEPER on the Copper launch which will be 1:1 redeemable for KEEPER, or you can buy KEEPER directly on mainnet launch on the website.
You can read our docs explaining everything here
We hope that you will understand the nuances behind upgrading to this new model. We can’t wait to see it unfold, and also reveal the look of our investment dApp that we’re currently BUIDLing! ;)