Introduction
LeoFinance users who have been onboarded through Metamask are/will be given an opportunity to cash out their earnings directly into ETH. This is or is hoped to be a selling point for LeoFinance for users coming from outside the Hive ecosystem going forward. They wouldn't have to deal with the native token LEO or HIVE at all if they didn't want to. There is a bit of a problem with this approach, however. I will get into that in this post.
Large-scale Onboarding Of Metamask Users Could Result In Hard Selling Pressure On LEO
Suppose the onboarding effort is successful and the number of weekly active users and authors goes up 10x thanks to the onboarding of Metamask users. Let's assume 90% of them will choose to remain in their comfort zone and not take control over their keys and choose to cash out their rewards into ETH. What this means is constant selling pressure on LEO as a large volume of it is constantly being auto-converted into ETH. That would cause the price of LEO to tank.
Send The Rewards Into the wLEO/ETH pool instead
If the Metamask users are given the option to send their rewards into the wLEO/ETH pool instead, choosing this option will automatically make them liquidity providers whose rewards will be supporting the price of LEO instead of being a drag on it. Of course, they could still pull their rewards out of the pool. But that would be an extra hoop to jump. All users should be clearly explained the benefits of letting their rewards stay in the wLEO/ETH pool.
But Wouldn't The Influx Of New Users Be Enough To Support The Price Of LEO?
Not even remotely by itself. The actual bread and butter of this platform are those users who don't have an account at all. Those people are the consumers of the content who visit leofinance.io and click on the ads. Thanks to the buyback and burn program, all of the ad revenue is used to buy LEO off the market and burn it. The problem is that the ad revenue per reader is very low and that the number of visitors to the web front end has to be very large for the buyback and burn program to even begin to counterbalance the potential hard selling pressure from auto-conversions of LEO into ETH. There need to be hundreds if not thousands of readers for every content creator. Curators bear a heavy responsibility for not rewarding shitposts but rewarding well-formatted and SEO-friendly content interesting to the masses instead.
Conclusion
A high token price for LEO is necessary for LeoFinance to be able to attract high-quality content creators who in turn will be able to attract a large number of ad clicking readers. There are very few capable of attracting the masses on LeoFinance or even on Hive at present. (There are some, though. Check out an earlier post of mine made this week.) Another potential source of value for the token is naturally speculation. But if cashing rewards completely out of the system is made too easy, that has potential to destroy the attractiveness of LEO as a speculative investment vehicle. Little things matter because they add up.
The Geyser model, which will reward liquidity providers to the wLEO/ETH pool the better the longer they keep their funds in the pool, is key. The benefits for becoming a liquidity provider should be laid out in clear terms for authors coming from the Ethereum side of the aisle.
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I will disagree simply because of the amount of tokens distributed on a daily basis. Even if 90% of them are sold for ETH, you are talking about 4,500 tokens.
Plus, it will be hard for them to get that much of the new token distribution since half the post payouts go to curators, who have the stake. We know that, in the early stages, the growth of the smaller accounts takes time.
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4,500 tokens in what time frame? A week?
It's the liquid token holders who determine the price.
But your points regarding curators and most new accounts being small are fair ones.
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I believe there are roughly 5,000 LEO pushed out a day, hence the 90%.
Even on H-E, there were over 10,000 LEO sold in the last 24 hours.
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This is an important observation, but I generally think that the easier it is to do anything on LeoFinance - whether stake tokens, withdraw, unstake, signup, sign in etc - the better.
There are a few other crypto based platforms out there that offer rewards on content. The one thing that hive (and now LeoFinance) have going for it is an easy gateway into and out of the token.
I like the idea of withdrawing into the LP as our gateway. This gives me a few ideas on how to make that possible — allowing user rewards to be claimed as LP tokens. They would send LEO to our account and we would sell half and then provide WLEO + ETH to the liquidity pool. Then we’d send the LP tokens to them.
The claim rewards as ETH feature was actually intended as claim rewards as wLEO. We had to adapt it since wLEO won’t be live again until Nov 10.
Once it’s live, we’ll change it back to claim rewards as WLEO. This will at least give the user the option to decide if they want to LP or sell to the pool for ETH.
I also have an idea for cross chain LEO staking which would involve the creation of a smart contract to lock WLEO. Then on Hive, we would stake LEO out of the custodian account and delegate it to the user. When the user unstakes the smart contract, we unstake the LEO on Hive.
It would take a bit of development, but definitely something I’m interested in tackling for 2021 to add more use cases to WLEO and LEO. + cross-chain staking has an awesome ring to it 🦁
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This is a fantastic idea! To have LEO live on multiple blockchains as wrapped tokens but making staking it really simple for the user sounds really interesting. One of the things it does is make LEO much more robust than when it is a single-chain token - but with all of the complications under the hood.
That would really be a great option. Indeed, it would all add to the growth of the WLEO system seamlessly. Thanks for always being open for feedback from the community.
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Good to know this. I really liked this option, even more as I was almost out of ETH.
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Hmm, interesting angle. I'm not really experienced enough to comment on the technicality of what you say but it sounds logical based on the factors you have taken into consideration.
IMO there is however the possibility of Metamask users who sign into LF migrating to the blockchain rather than staying on the edge en masse and triggering a potential LEO dip. What I'm trying to say is that if users do start earning relatively decent amounts of crypto (this will get more and more attractive as value increases) they will likely have been engaging with content and users who are already on Hive, and thus exposed to the vast ecosystem to which their metamask signup was a doorway. Additionally, if this is the first time they may be using a social media platform on the blockchain (ie earning crypto), they're quite likely to want to continue doing so and thus move closer to the center.
I think large numbers of successful Metamask signups may migrate fully into the Hive ecosystem. Certainly they could still cash out in ETH but may choose not to. There may be many other MM signups that aim for hit and runs with their ETH prize, but these aren't likely to be the ones doing well.
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You may be right. But cashing out into wLEO rather than just ETH is better as the default, IMO.
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Agree with you there and from Khal's reply to you, that was the original option before the hack anyway.
👍
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This was quite very thoughtful of you. Now that Khal has caught a glimpse of your thoughts, we'll be seeing some incredible updates soon!
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What I really like is how it gave Khal food for thought for new developments!
Yeah, that was solid.
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