# Bonding and Staking: Growing a Robust Treasury
### Educating the DAO on core protocol mechanics ### 
We laid out the vision for our grand strategy RPG in our last piece.  In that piece, we discussed where our gaming team is now, where it’s headed, and how the gaming side of our DAO will contribute revenue to the protocol over time.  In this piece, we’d like to focus on one of the other core pillars of growth for our protocol: bonds.  We’ll provide an overview of how bonds work and also discuss RomeDAO’s goals in managing bonding revenue in connection with staking rewards.

### What is a bond? ### 
Bonding is the primary means by which RomeDAO acquires assets for its treasury.  When participants bond, they are actually selling their assets in order to buy ROME directly from the protocol, typically at a discount.  At any given time, the protocol will quote the bonder with the amount of ROME the bonder will receive.  A key difference, however, is that you don’t get the ROME up front.  Instead, it vests over a pre-defined period (currently 5 days, or ~32000 blocks) and becomes redeemable linearly as it vests (i.e. in a 5-day term, after 2 days into the term 40% of the rewards can be claimed).  

### How do bonds work? ### 
RomeDAO sets the capacity for how much of an asset it wants to intake and, correspondingly, how much debt (i.e., what remains owed to the bonder) it wants to accrue in connection with that particular asset.  The protocol will then attempt to keep this capacity filled at all times through what is essentially a dutch auction process.  If the protocol has filled up all it wants on a particular asset, there will be zero (and even sometimes negative) discount available for any participant seeking to bond that asset.  However, over time, the debt will vest and capacity will open up.  As this happens, the discount will grow in size until it finds a bonder willing to bond at that discount.   

### Why should I bond? ### 
The expectation is that bonds will give you some amount more ROME than you would get if you bought on the market and staked. How much more is determined by the discount available at the time you bond and the rate at which you claim and stake your ROME as it vests.  For example, if the discount for a bond that vests over 5 days is greater than the 5-day yield for staking, then it may make sense to you to bond instead of buying and staking.  This is compounded by the fact that you can claim and stake your bond before the end of every epoch (~8 hours) and begin earning staking rewards while your bond vests.  These strategies, however, are more active and you should only do what makes sense for you.

### What assets can I use to bond? ### 
RomeDAO determines which assets it wants to acquire and in which capacities and this list of assets can and will change over time.  However, they largely fall into two different categories:

* Reserve assets (e.g., FRAX, MIM, WMOVR, gOHM, etc.)
* Liquidity assets (e.g., ROME-FRAX, wsROME-gOHM, etc.)

RomeDAO must balance, at all times, the mix of assets in its treasury and will increase or decrease its bonding intake for each type of asset to accumulate more or less in accordance with its risk appetites and its long-term strategy.  To build a sustainable foundation, RomeDAO has focused initially on accumulating two types of assets in its initial bootstrapping phase: (1) stablecoins and (2) liquidity for ROME.  However, it is either already accumulating, or planning to begin accumulating shortly, other strategic assets such as WMOVR and gOHM.  

### Why doesn’t ROME just crank up the capacity on all its bonds and build its treasury quicker? ### 
Low capacity means less ROME offered to the market at a discount.  High capacity means more ROME offered to the market at a discount.  More ROME offered to the market at a discount means (1) less ROME being bought on spot markets; and (2) more staked ROME being unstaked and sold to bond for even more ROME (i.e., the staking-to-bonding strategy).  As you can see, this both reduces buy pressure and increases sell pressure for ROME itself.  

Bonding is necessary as it is the primary source of revenue for the treasury in these early days.  The DAO, however, monitors and tunes bonding capacity for the long-term health of the protocol, balancing the needs of the treasury against the effect on the market.  

In other words, rather than overbonding, which builds treasury very quickly but potentially collapses market price, we aim instead to build treasury slowly but steadily over time, waning off bonds in favor of sustainable revenue sources like our NFT marketplace and other core sources of yield. 

### Why does RomeDAO seek to build a treasury? ### 
RomeDAO aims to build a free-floating, decentralized reserve currency that’s foundational to the Dotsama ecosystem and that is backed by a basket of decentralized crypto-assets in its treasury and by the revenues generated by the DAO.  Initially, our focus has been on accumulation of FRAX, MIM and other risk-free assets to build a secure foundation and ensure resiliency.  We will continue to hold the majority of our reserves in these assets but, because the purchasing power of U.S. Dollar-pegged stablecoins only decreases over time, the DAO plans for ROME to become increasingly backed by reserve assets that are decentralized and native to the crypto-economy.  As we will discuss in a later article, we believe gOHM to be the driver of that strategy.

Because ROME is a free-floating asset, the market determines the value of ROME based on a number of factors, including (1) the total supply of ROME, (2) the value of RomeDAO’s treasury, and (3) projections of growth for the protocol based on its current and future revenues and the ecosystem in which it resides.  RomeDAO can’t directly control the premium assigned by the market for this last factor.  It can, however, exercise control over the first two factors.  

For the first, the DAO determines the rate at which its token supply inflates.  For the second, the DAO determines the assets that it accumulates in its treasury, the rate at which it accumulates them, and the deployment of those assets for the growth of the treasury.  Its goal as a DAO is to carefully manage these levers so that the amount by which ROME is backed grows sustainably over time.  

Let’s dive in on the basics for why this is the case.

### Is supply inflation bad for me? ### 
That’s a complicated question but let’s try to simplify the answer.  Let’s say there are 100 tokens in circulation owned by 100 different people.  If a protocol decides to double the token supply by giving each existing holder 1 extra token, does that devalue the existing holders?  The answer is no, each holder continues to hold 1% of the token supply.  Does it, however, decrease the perceived value that outsiders will have for each individual token?  Absent any other changes, the answer is most likely yes–each individual token now represents only .5% of the token supply, or half its previous value.  There are two obvious but key takeaways here:

If supply inflation is going equally to all existing holders, it doesn’t, by itself, actually increase or decrease each holder’s voting interest or each holder’s share of the pie.
Supply inflation does inherently reduce the perceived value of each individual token, absent any other changes.

Let’s explore these two points in the context of ROME.  

### How does the total supply of ROME increase?### 
Currently, there are three sources of inflation for the protocol:
* **Staking Rewards:** The protocol mints a certain percentage of the total supply of ROME every epoch (~8 hours) and rewards this ROME to those holders who have staked their ROME with the protocol.  This mechanism is how the protocol distributes to holders their share of the growth in the protocol.  
* **Bond Payouts:**  As mentioned above, in order to acquire assets for the treasury, the protocol must sell ROME to the public through bonds.  In order to do this, the protocol will mint ROME each time it sells a bond.  This additional ROME that is minted and granted to the bonder is an expense the protocol pays to grow its treasury, including its protocol-owned liquidity.   
* **DAO Expenses:**  In order to develop the protocol, pay DAO contributors, and conduct other market operations for the benefit of the DAO, the protocol currently adds, for itself, a 10% fee on every ROME that is minted and sold to a bonder through a bond.  If a bonder receives 1 ROME as part of a bond, the DAO will mint and set aside .1 additional ROME for the DAO treasury.  From this DAO warchest, RomeDAO will make distributions that are approved and authorized by the community. 

Today, the vast majority of ROME supply inflation (~75%) occurs through the staking rewards.  This is because RomeDAO strictly manages the bond capacity so that it does not overly dilute existing stakers.  There are many other projects and protocols that employ similar mechanics but do not do this and, as a result, they may build treasury and backing very quickly but shortchange existing stakers and ultimately collapse their market price. 

So, going back to the first takeaway, if a participant stakes their ROME with the protocol, they are capturing the majority of the supply inflation that occurs naturally through the protocol.  The remaining inflation that they are not capturing (unless they are active bonders or paid contributors to the DAO) is going toward necessary expenses for the protocol: (1) bonding to accumulate assets for the treasury and (2) expenses to operate and manage the protocol.

Why is bonding to accumulate assets for the treasury a “necessary” expense?

For that, let’s explore the second takeaway, which is that supply inflation will likely reduce the perceived value of each individual token, absent any other changes.  

### What can counteract the effect of supply inflation on the perceived value of each individual token?###

Another complicated question but let’s again try to simplify the answer.  In the example above, where there are 100 existing tokens with 100 different holders, let’s further assume that the treasury holds $100 and therefore each token is backed by $1 in the treasury.  Nonetheless, the token trades on the market at $100 per token (or 100x the backing per token).  This premium that the market assigns may be for a number of different reasons: projections regarding future growth, projections regarding the ecosystem the project is connected with, faith in the strength of the community, etc.  

Whatever the case, let’s imagine that the protocol, prior to doubling the supply of the token, first sells 1 token to the market in exchange for ~$99.  What’s the new state of the protocol?  There’s now almost $200 in the treasury.  Instead of 100 outstanding tokens, there are 101 outstanding tokens.  All existing holders are slightly diluted because they have slightly less than a 1% interest in the overall project but perhaps they don’t mind too much because the treasury has roughly doubled.  And now, when the protocol doubles its supply, it has a doubled treasury to back it up, which strengthens the perceived value of each individual token.  

This simple example, blown up to scale, illustrates the core mechanics for RomeDAO’s bonding and staking mechanisms.  The token supply is inflating through the staking rewards.  Most of this inflation is going toward stakers, which encourages them to continue staking.  The remaining inflation is essentially an expense that stakers are paying to ensure that the treasury grows commensurately with the token supply and ROME’s backing per token remains steady or grows.

### How does the protocol grow its treasury?###

**Currently, there are three sources of treasury growth for the protocol:**

* **Bond Revenue:**  As discussed above, the protocol acquires assets for its treasury through bonding.  If ROME is trading at, for example, $100 per ROME, it can mint 1 ROME for a bonder (and .1 ROME for its own DAO fee) and sell it at $95, collecting that amount for its treasury.  As long as ROME trades at a premium to its backing per token, this activity has a net positive effect on ROME’s backing per token. 
* **LP Fees:**  Because RomeDAO owns 99.8% of its own liquidity pool (acquired through bonding), it receives 0.20% in fees any time a participant swaps assets within the pool.  The fees accumulate within the LP itself and grow the treasury without addition of any ROME to the total supply so this revenue increases the backing per ROME.  As the protocol begins to bond other LPs, such as stable-to-stable LPs, and as trades increase in volume and size through these pools, we expect the revenue from this source to grow.  
* **Staking Rewards:**  RomeDAO stakes a portion of its liquidity pool with Solarbeam in exchange for liquidity incentives in the form of SOLAR.  As with LP fees, no additional ROME is minted for this source of revenue so this activity increases the backing per ROME.  As the protocol deploys its treasury in other yield generating activities over time (e.g, staking to earn gOHM incentives through the Proteus program), we expect the revenue from this source to grow.

Just as staking rewards are the primary source of inflation for the protocol in the foundational era of RomeDAO, bonding is similarly the primary source of growth for the treasury today.  There are a number of additional sources of revenue planned for RomeDAO, including through its APYRPG and through its launchpad product.  

Over time, as we grow the treasury large enough to make it productive and generate significant yield, as we capture the major liquidity rails on Moonriver and Dotsama and earn significant fees as a result, as we earn ownership in high value Dotsama projects through our launchpad, and as we begin generating fees through our APYRPG, we expect these sources of revenue to become a larger and larger proportion of our growth for the treasury.     

However, until we reach a state where treasury growth through these other core pillars is sufficient to match our supply inflation, it is important for RomeDAO to maintain its price premium so that it can continue to successfully use its bonding mechanism as the primary source of treasury growth.  Which leads us to our final point.

### What next?### 
RomeDAO has successfully accumulated over $35M in its treasury.  This includes accumulation of liquidity greater than $20M and accumulation of risk-free value held in reserve of greater than $15M.  With a total supply of ~420k ROME, this means that each ROME is backed by a treasury value of $83 and a risk-free value (RFV) of $36.

As we discussed, in order to maintain or grow this backing per ROME, the protocol must balance the rate at which it inflates supply against the rate at which it grows the treasury.  

Currently, this is not a problem.  We are inflating supply by, very roughly, ~6500 ROME per day.  In order to maintain our RFV per ROME, we’d have to grow the treasury by ~$200,000 per day and, in order to maintain our backing per ROME, we’d have to grow the treasury by ~$500,000 per day.  We are actually growing the treasury by anywhere between ~$900,000 and ~$1,200,000 per day (variance based on how we adjust bond capacity).  This delta means that we are growing both metrics slowly but steadily.  

However, if we stay at the current staking reward rate, all of these numbers above increase exponentially with time.  We will reach 1 million supply in about 6 weeks, which is not unreasonable.  However, in another 4 months, we’d reach 10 million supply.  4 months later, we’d reach 100 million supply.  And 4 months later, we’d reach 1 billion supply.  You can see how the compounding effect of the staking reward rate makes the total supply reach exponential levels within a year.  

Supply inflation, by itself, doesn’t increase or decrease an existing holder’s interest if it is shared equally with existing holders.  It does, however, put downward pressure on the perceived value of each individual ROME token.  Left unchecked to grow exponentially, this downward pressure will reduce the market price and, as we discussed, the reduced price will hurt our ability to grow the treasury through bonding.  

Our long-term goal is for dividends to stakers to be paid primarily through the revenue that the protocol generates through its other three (or more) pillars.  But until we start to grow these revenue sources, it’s important that we use our policy levers to manage inflation (and its corresponding effect on price per token) to maintain our premium and our ability to bond assets profitably.  Letting the token supply inflate to 1 billion tokens before we’re ready will be counterproductive to that objective.  

So, like OlympusDAO before us, we’d like to propose a framework to the community that allows us to taper the supply inflation over time to levels that the protocol can keep up with in terms of revenue, while maintaining a price premium that allows the protocol to continue to bond assets to grow the treasury. 

The policy representatives from each of the houses have been working on a framework for this that will be put to the community for discussion on the forums.  After incorporating any feedback from the discussion, the framework will be put to a vote.

For Rome. 

bafyreifaew7l45h4xgzvx2jr4kausag5a7yebhetgdk647gslmhcs4xndi

RomeDAO Staking & Bonding: Growing a Robust Treasury

# Bretton Woods 2.0: ROME <> OHM
## Setting the standard for Bretton Woods 2.0, a model for cross-chain currency collaboration.
### Background on Bretton Woods
In 1944, on the heels of the conclusion of World War II, delegates from 44 countries met in Bretton Woods, New Hampshire to determine the future of international trade and commerce. Following World War I, these countries had, for decades, been setting up barriers between their economies, imposing restrictive trade policies and competitively devaluing their currencies to gain an advantage against one another.

The lessons of the resulting Great Depression and the experience of World War II led these delegates to forge a new path forward. This new path focused on a cooperative effort between nations in order to promote economic growth for all, whilst avoiding a 'beggar-thy-neighbor" policy. Bretton Woods was eventually ratified, putting both the dollar and a gold backing as imperative to each country's monetary policy.

### Opportunity in Today's Crypto-Economy
In many ways, we find ourselves at a similar point in the young history of decentralized economies. Today, we have burgeoning ecosystems on a number of different chains, fragmented but with each encompassing their own unique offering, be it on Ethereum, Avalanche, Polygon, Solana, Cosmos or Dotsama. 

Across these ecosystems, dollar-pegged stablecoins have been the most utilized assets, acting as the primary trading pair, option for folding leverage, safe haven, and otherwise key to how every ecosystem functions.

But every dollar-pegged stablecoin faces a similar issue: their value depreciates due to soft currency economics and the perpetuation of easy monetary policy. 

At Rome, we believe in a future where truly decentralized currencies form the basis of the crypto economy in each ecosystem. And while there are many contenders, ROME was designed to build on top of OHM, the premier cross-chain reserve currency representing DeFi 2.0.

The question we must ask ourselves is whether this is again a zero-sum game, with each reserve currency on each ecosystem competing with OHM itself for primacy, whether by currency over-inflation, by carving out restrictive or exclusive spaces, or by racing to beat each other to every chain. 

**We don't think so–we believe that, just as in 1944, this is a moment to forge a path forward through cooperation that promotes economic growth for all.**

Our focus as a DAO is on serving the Dotsama ecosystem and growing unique revenue generators that cater to this ecosystem. We aim for Rome to become the dominant trading route on Moonriver & Moonbeam. We aim for RomeDAO to own the stable-to-stable liquidity rails. We seek to incubate and support the next generation of DeFi projects on Moonriver. And we're building APYRPG, a gamefi experience that leverages ROME as its base currency and the RMRK NFT legos that will be native to Kusama and Moonriver. Lastly, we intend to support the Moonbeam ecosystem and the wider Dotsama ecosystem as we grow.

But, just as in 1944, it was not the United Kingdom's aim for the pound sterling to become the reserve currency of Japan, it's not RomeDAO's goal to become the reserve currency of Ethereum, Avalanche or Polygon. We believe Olympus is best situated to achieve said result. Rather than competing with Olympus on this front, both OlympusDAO and RomeDAO can mutually benefit from each other's success. In doing so, we can set a model for other projects across chains to collaborate in a positive-sum manner for the benefit of all.

### Path Forward for RomeDAO <> OlympusDAO
The first step in accomplishing this collaboration will be to accumulate gOHM in our treasury through bonding, which we will initiate soon. As we stated in our pre-launch Medium articles, our initial goal will be for roughly 33% of our treasury's risk-free value to be held in gOHM.

Our intent is that, as Olympus proceeds along its path to establishing itself as the preferred medium of exchange and unit of account of decentralized finance, we will shift more and more to being backed by gOHM and eventually OHM-backed stablecoins such as oUSD.

The DAO has 3 basic steps to accumulate gOHM as its primary backing:
* Shift a high percentage of bond capacity to gOHM bonds for a 3-week period (without adjusting aggregate debt targets).
* After ~33% of RFV is reflected in gOHM, the capacity for gOHM bonds will be adjusted to maintain a similar % of treasury as the treasury grows. The DAO will vote on any further substantial increases to gOHM's relative standing within Rome's treasury.
* Once ready, the DAO will seed a wsROME-gOHM pool with Proteus rewards enabled, allowing the pool to farm additional gOHM + SOLAR + MOVR rewards out of the same pool. The original Proteus proposal included Moonriver as a primary liquidity target because of Rome; we will reaffirm these rewards through a freshly posted OlympusDAO forum post.

#### How does this benefit OlympusDAO?#### 
* Increased demand for OHM.
* Liquidity for OHM on new chains.
* Reduces need to focus scarce resources on Moonriver/Moonbeam or more broadly Dotsama. Rather than competing with Olympus over the bottom of the monetary stack in this ecosystem, Rome will be building on top of Olympus, and increasingly so over time.

#### How does this benefit RomeDAO?
* Obtain gOHM incentives through Proteus.
* Obtain trading fees for all gOHM trading on-chain (note that in addition to natural demand, cross-chain arbitrageurs will drive fees).
* Promote establishment of a decentralized cross-chain reserve currency.
* Holding a high quality yield bearing asset as a high % of RFV. 

#### How does this benefit both Rome and Olympus?
By being entangled in such a manner, both DAOs encourage each other's growth vis-à-vis the Bretton Woods model. By default, the growth of Rome means the growth of Olympus by merit of our continually growing gOHM backing. And likewise, the growth of Olympus means the growth of Rome by merit of the value of our gOHM inflating.

Rome (III, III) 🤝 (3,3) Olympus.

### Why so much conviction in OHM as a reserve currency?
OHM presents as a "reserve currency." While it is still early (un-ironically), there are two key milestones it is on its way to achieving to gain true reserve currency status:

a.) Relative stability: Become attractive to asset allocators of all kinds (individuals, institutions, DAOs, etc.) regardless of market cycle. In times of risk-on markets, it presents as a robust currency that will maintain value and provide attractive yield; in times of risk-off it presents as a robust currency that is a relatively safe flight-from-risk. 

Ideally, it functions as an asset that is neither risk-on nor risk-off but rather an all-weather crypto asset. OHM's treasury growth flywheel, deep liquidity, and tapered inflation will enable this milestone in the not-too-distant future.

b.) Treasury presence: Be held in some capacity by the majority of treasuries across crypto. The majority of treasuries are currently overexposed to their own tokens or hold a high volume of pegged stablecoins.

A few primary factors will eventually give OHM its permanence in the ecosystem:
* Size: in just 8 months, the OlympusDAO bond model has helped the treasury accumulate nearly $200M in RFV and a push in the direction of $1B total treasury value. Olympus also has a diversified and robust stream of non-bond revenues from investment activities, market making (LP positions), bonds-as-a-service to other protocols (Olympus Pro), in addition to various sources of revenue from quality projects choosing to partner and incubate with the protocol.
* Lindy: age is perhaps the Achilles heel of OHM to date. True trust in the protocol has not yet been achieved, but every day that passes, OHM survives and grows stronger/more trustworthy. This presents an opportunity for early adopters to participate in the growth of the network as it matures.
* Diversity: holder diversity is important as the asset quickly transitions from lofty APYs as a primary attraction to robust revenue streams and relative stability. A diverse audience of holders such as individuals and funds looking for a risk-off substitute, un-pegged maxis who seek to escape from servitude to the dollar, and perhaps most importantly, treasuries that use OHM to diversify.

As we move into a multi-chain reality, it's vitally important that OHM establishes itself across the hubs of crypto activity. This expansion is essential for both the size and diversity factors above. As capital expands to other ecosystems, holder diversity across each ecosystem differs. 

For example, Avalanche presents as a low-cost chain for a risk-on appetite but also cares about decentralization. Solana presents as a VC-heavy chain with massive throughput. Kusama presents as an experimental community-chain for pushing the limits of the Dotsama design while Polkadot presents as a more white-label option. 

gOHM in treasuries, liquidity rails, and eventually native status in each of these ecosystems is crucial in that it expands holder diversity and robustness under a large array of market conditions.

Others talk. Rome and Olympus BUILD.

For Rome and Olympus. (🏛,🏛)️

Twitter: https://twitter.com/romedaofinance

Discord: http://discord.gg/romedao

bafyreiho5g2vlzf6b2jkndmpze422dma2zqo3ap6kfrzqi3v5zxhpefaty

Bretton Woods 2.0: ROME <> OHM

## Core Principles
#### We worked from four core principles in designing Tokenomics 2.0 for $ROME:
1. Those who have the highest conviction in $ROME and are willing to take the most risk with $ROME should earn the highest potential rewards and have the most say in the governance of the game; 
2. Because $ROME will be the core currency for the Houses of Rome ecosystem, players should be confident that $ROME will not be devalued through hyperinflation; 
3. The economic incentives should be designed to push players into more interesting, more fun, and more value-accretive forms of gameplay; and
4. The game economy should be designed with the long-term view in mind as Houses of Rome should have lasting power rather than burn out with unsustainable economic principles.

Let’s explore each of these.

## Vote Escrowed ROME (or veROME)
To accomplish the first objective, we will move from a liquid staking and rebasing model to a vote escrow (or vote locking) model.  $ROME holders will have the option of locking their $ROME for anywhere between 2 weeks and 3 years.  The longer you lock your $ROME, the more voting power you have (and greater share of vote-locked rewards you can earn).  

The initial vote-locked reward pool will be set at a fixed percentage of total $ROME supply, which will decay over time until reaching a low floor for tail emissions.  The fewer participants that have locked their $ROME, the larger each locker’s share of the vote-locked reward pool.  Conversely, the more of the $ROME supply that is locked, the smaller each locker’s share. In addition and as mentioned above, each locker’s share will be modified based on the length of time they lock their $ROME.  

The initial vote-locked reward pool will be sized such that, assuming 50% of $ROME supply is locked and all participants lock for an equal length of time, then each participant will receive rewarded $ROME at 100% APR.  Since we cannot predict how much $ROME supply will be escrowed and since each participant’s locking duration will vary relative to other participants in the ecosystem, the actual APR on an individual basis will range both above and below this target.  For example, if you lock for double the average locking duration, your individual APR would be roughly double the average APR.  

The vote-locked rewards will accrue on a block-by-block basis and can be claimed by lockers at any time.  The locker’s underlying escrowed $ROME will remain unavailable until the expiry of their chosen lock duration, which duration can be extended (but not reduced) by the locker at any time.  

These mechanics will ensure that those with the highest conviction in $ROME have the most say in the governance of Houses of Rome and receive a higher percentage of rewards.  The decaying emissions also encourage early participation.

## Mitigating Inflationary Pressures
To accomplish the second objective, we rely on three different mechanisms:

1. Reduction in emissions;
2. Replacing emissions with revenue; and
3. No additional sudden inflation or unlock events.

## Reduction in emissions
As noted above, emissions will be reduced from our current high inflation rates to a much more reasonable rate, which will decay further over time.  In addition, while the protocol will continue to issue $ROME to acquire liquidity and manage the Bank of Rome’s balance sheet, these bonding tools are expected to be used selectively in times of high demand.  

We have secured over $26 million for the treasury, including almost $6 million in liquidity.  These amounts are more than sufficient based on our current market cap and will need to be expanded only as the market cap multiplies.  

## Replacing emissions with revenue
The above reductions in issuance, by themselves, would be sufficient to ease any hyperinflationary concerns.  However, our goal over time is to remove inflation through vote-locking emissions entirely as the game launches and as it begins to absorb $ROME through core game mechanisms.  

As we will discuss in a later article, Houses of Rome will contain a number of “sinks”, the most significant of which is the marketplace fee and/or royalty on the sale of items.  These sinks will be designed to remove $ROME from circulation without overburdening players and affecting the enjoyability of the game.  

The $ROME absorbed through these sinks will be first directed to the vote-locked reward pool to offset the inflationary emissions.  As game activity increases, the composition of the vote-locked reward pool will become less and less inflationary and more and more of a revenue loop.  

To illustrate, let’s say that we are allocating 2,500 $ROME to the vote-locked reward pool to be split amongst lockers daily.  Initially, the 2,500 $ROME will be newly minted and inflationary.  If there’s $1,000,000 of monthly marketplace volume, the price per $ROME is $15, and the marketplace fee is 5%, then ~100 $ROME per day can be directed to the vote-locked reward pool and only ~2,400 $ROME need be minted.  If $5,000,000 in monthly volume, then only 2,000.  If $10,000,000, then only 1,500, and so on.  The more activity and the more sinks in the game, the less inflation for $ROME.

The game will launch with a number of carefully designed sinks, but we expect to iterate over time, adding new sinks and adjusting existing ones to achieve optimal results for both players and lockers.

![Diagram1](https://i.ibb.co/KjdWSm1/diagram1.png)

## No sudden inflation or unlock events
As we will discuss in a later article, Houses of Rome is unique in that there are no VCs or other middle men who are vesting and unlocking with a zero or low cost basis.  For many GameFi projects, as much as 40% of total supply is vesting and unlocking for VCs and founders in the background, adding a hidden cost that must be borne by existing and new participants.  

For Houses of Rome, less than ~8% of total supply has been allotted to founders and the core development team.  The token supply is otherwise fully in the hands of the community.  

In addition, because of the completely variable locking nature of the vote escrow contract, every participant will be unlocking their escrowed $ROME positions at different times, with no particular day or time resulting in a mass unlock event.  

These two protections mitigate inflationary pressure from large amounts of $ROME suddenly entering circulating supply.

## Incentivizing Player Behavior
We have discussed so far how to reward lockers and how to protect players from hyperinflation.  But a core element of our tokenomics revolves around how to reward the right player behavior. 

Houses of Rome is designed so that any player can join the game, create a character, begin playing, begin farming, and begin trading resources they’ve farmed for some return.  No player has to participate in governance or demonstrate their commitment by vote-locking $ROME tokens.  They can play purely to extract as much $ROME as possible by spending their time, attention, and engagement. 

While we don’t want to impose any roadblocks to prevent this, we do want to create incentives to do more.  We want to push our players into more engagement and, with more engagement, into higher levels of gameplay and core gameplay loops.  The more engaged our players are in the game, the more sticky the game becomes and the more value players are willing to put in, rather than simply extract.

![Diagram2](https://i.ibb.co/R2ymn9x/diagram2.png)

As we discussed, marketplace activity is a core sink within the game’s economy.  We want to encourage players to move from just farming to crafting and to trading.  One of the mechanisms we will use to do this is a rebate within the marketplace fee design.  

This rebate will take a portion of the marketplace fee and distribute it back to buyers and sellers as trading rewards.  In this way, traders will earn profits in $ROME not just from their sales but also in cumulative $ROME rewards for trading activity.  (Wash trading will be unprofitable since the majority of the fee still flows away from the seller.)

## Building to Last
A game can sustain itself on demand from new players for a while but at some point growth in the player base will slow down or stop.  At that point, the game will survive only if at least some players are motivated to put value in rather than all players looking to simply extract value out.  

Our goal is to leverage game design and rewards to push players into becoming value accretive for the protocol rather than purely value extractive:

![diagram3](https://i.ibb.co/NnTLv0d/diagram3.png)

While the marketplace fee rewards will encourage value extractive players into activities that are more value neutral, we can do more.  Players have to be motivated to spend $ROME to buy items, whether for competitive gameplay reasons or for social status reasons.  They have to be interested in accruing veROME to have influence on gameplay decisions.  They have to be encouraged to participate in the community and build social connections, which will in turn  increase the collective desire to improve standing within the community.

Designing a fun game will do 90% of the work here but, in crypto, we have additional tools in our toolbelt.  As we noted above, $ROME that is removed from circulation through in-game sinks will first work toward nullifying vote-locking inflation.  As we add more sinks to the game, as game activity increases, and as the locking reward rate decays, the amount of $ROME collected from the game will outpace the amount of $ROME needed for the vote-locked reward pool.

All such excess $ROME will overflow to a player incentives contract.  This player incentives contract will be used to reward players as they move along the net value flow axis, from outflow to inflow.  As players complete raids, unlock certain parts of the story, eventually compete in PvP, and otherwise perform in-game actions that indicate high levels of engagement and interest, they will have the opportunity to earn additional $ROME.  This $ROME will be non-inflationary as it simply re-routes value extracted from the game to activities that drive the most value for the game.  

We have a number of ideas for what activities should be incentivized, but we welcome community input along the way.  We also have a number of ideas, which we will share in a later article, for how to gamify House structure to further incentivize participation, governance, locking of veROME, and ultimately close community within each House.  These social and political elements we believe will be one of the critical factors distinguishing Houses of Rome from other games and provide the fuel to make the game last for years. 

Note that, ultimately, all decisions regarding what to do with the excess $ROME in the player incentives contract will be decided by the DAO through veROME voting.  Lockers could, of course, vote to redirect incentives to themselves.  We have confidence, however, that because long-term lockers have the most governance power, these participants can accurately evaluate the long term benefit of incentivizing player growth on the value of their locked tokens (especially in a low inflation token) over the short term benefits of receiving more supply.  

## Token Split
One final point is the topic of a token split. We propose a roughly 1:100 split to inflate supply to 150M token target. Participants in ROME will need to migrate their tokens from the current contract to the new ROME for the split. This inflates to our target supply and sets unit bias/price targets aligned with a game currency. More modeling work and discussion on this front required and will be included in the final proposal. 

## Conclusion
There are a number of detailed elements on game economy design (e.g., resource inflation, item inflation, item balancing) that we have not covered here.  We will share plans for these elements through later articles to go in-depth on the game mechanism design pieces that we've spent a few months designing. Each of these pieces are either an ongoing spec or have been in the implementation phase from the contracts team. We hope, however, that the conversation can first start with the focus on the updated mechanisms of Tokenomics 2.0 outlined above.  The scholars will be following with a proposal for how we should manage the transition over the next few weeks and months to Tokenomics 2.0 from our current state.

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Houses of Rome: Tokenomics 2.0

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Houses of Rome

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Core Principles

We worked from four core principles in designing Tokenomics 2.0 for $ROME:

Those who have the highest conviction in $ROME and are willing to take the most risk with $ROME should earn the highest potential rewards and have the most say in the governance of the game;

Because...

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