UIP-002: Proposal to Prevent the Trading of rUMB2

Summary:

This proposal is submitted to discuss the possibility of building a mechanism into the rUMB2 token to prevent the trading of rUMB2 on decentralized exchanges on both Ethereum and BSC.

Abstract & Motivation:

There have been some concerns raised by the community that having liquidity available on the Umbrella Rewards token detracts value from the UMB token, and provides a market for a rewards token that inherently shouldn’t be trade-able. Additionally, as the rewards period begins to draw to a close, there may be opportunities for rUMB to be purchased and then converted within a fairly shorter timeframe, which may further deter someone from buying and staking UMB directly. As rUMB1 has already been deployed, there is no way to add new functionality to prevent it from being traded, but there is a small window currently to implement this functionality into rUMB2 before it is deployed around the second week of February 2022.

Rationale:

There are some rationale to take into consideration with this proposal, both pros and cons:

Pros:

  • Removing liquidity will prevent potential speculation on the rewards token
  • Removing liquidity may give more incentive for some in the community to purchase and stake UMB instead, particularly during the tail end of the rewards period
  • Removing liquidity from the rUMB2 token will prevent the potential for arbitrage between the rewards token and the UMB token upon conversion

Cons:

  • Adding additional code to the rUMB smart contract will increase transaction costs. Current estimates are that it will be 20% more expensive for any type of transaction including staking and unstaking as well as transfer between wallets
  • The solution to prevent trading on DEX’s is to implement a whitelist/blacklist functionality, which means we would have to keep track of all the DEXes. There may be new DEXes that come up so this would have to be continuously monitored
  • Forcibly making the rewards token to not be trade-
    able somewhat goes against the crypto ethos of a decentralized, free market where people are free to choose what they want to do with their assets, including trading them if they wish

Budget / Resource Requirement:

The budget/resource required for the implementation of this would be minimal and would only require some additional code revisions to the rUMB2 contract. Given the short timeframe, this would need to be implemented by or before Feb 7th if we are to include this for rUMB2 rollout.

Conclusion:

In summary, this proposal is to get feedback from the community, and weigh the pros and cons, of whether we should implement a feature to prevent rUMB2 from being trade-able on the exchanges, specifically DEXes, on ETH and BSC. Given the shortened timeframe, we will look to gather feedback until end of this week, Friday Feb 4th, and then immediately put the proposal to a vote from the 4th until the 7th, with plans to implement a solution, should that come to pass, by the 7th.

  • rUMB2 should be able to be bought or sold on the market.
  • rUMB2 should not be able to be bought or sold on the market.

0 voters

5 Likes

I think it would be pretty unfair to change the game’s rules 1 week before the release of rumb1 and beginning of rumb2.

The best argument i can give, is that if we are not able to sell rumb2 on Dexs, a lot of rumb1 holders wont choose to stake their rumb1 for 12 months period.
That means they will probably convert their rumb1 into UMB tokens and will dump them on the market asap.

On the opposite, if we can stake rumb1 and sell rumb2 on Dexs, we will be encouraged to stake rumb1 for 12 months, having the opportunity to recover some cash by selling rumb2

I will vote to keep the game’s rules as they are now, hope everybody will do the same !

Best regards

3 Likes

This is not really changing the game’s rules as the team did not decide rUMB1 to be tradable on a DEX. A person created the LP on Uniswap and paired it with WETH. Disallowing the trading of rUMB2 would give more purpose to UMB as more people are currently buying rUMB1 to convert it to UMB instantly and then either sell it off for a profit or accumulate as it is a cheaper UMB. This will provide 3 more years of downward pressure on the price of the native token as it’s tied to its reward token, which should not have any purpose other than eventually becoming UMB.

I think your arguments are quite poor and stand on the idea of being able to sell off in case you are staking for rUMB2. If we were to follow through on being able to “recover some cash” by selling rUMB2 , it would keep the price of rUMB2 down which would also keep UMB token down because more people will keep accumulating the cheaper form of UMB which decreases trading volume and encourages selling off your UMB stack to get double the amount of rUMB2. What’s the point of ever buying UMB when you can buy 2x the amount of it for the same price and only have to wait a year to convert? This will keep happening until the end of rUMB4, which is February 2025. Even if this did not go through, we are allowed to instantly convert our rUMB1 to UMB after Feb 15 anyways which is going to make people dump the new UMB they just converted. This goes against your first point and we cannot prevent the dumping of UMB after the conversion with our current conversion model.

5 Likes

Overall, I think the proposal to prevent the trading of rUMB2 is a step in the right direction as it stops people from accumulating the “cheaper form of UMB” or selling off their entire UMB stack for 2x the amount of rUMB. Many of the community members have given up on purchasing the native token and have focused on buying as much rUMB1 as possible since it will eventually be UMB anyways. The situation that has now risen is that the price of the UMB token is now attached to its reward token as a consequence of both being tradable.

Voting to prevent the trading of rUMB2 would re-emphasize the value of the token, which is nothing until it converts to UMB, and indirectly increase price action of the native UMB token. This will remove multiple years of downward selling pressure and allow the team to potentially have a bigger marketing fund to branch themselves out and acquire more user adoption without giving as many tokens away from their designated Marketing Fund. The same applies to the other funds, which will include and benefit the community the most long-term.

8 Likes

rUMB2 SHOULD NOT be able to be bought or sold on the market, as it stands that rUMB is reward-UMB token. It should have its original purpose as a “reward token only.” not another tradable token.
It also can push more people to buy $UMB instead of $rUMB, because you can only get $rUMB by staking the main native token ($UMB). People also will focus to add more liquidity on $UMB only.

6 Likes

Inherently the project would evolve a lot with better tokenomics than this simplistic binary outcome.

The ability to claim rewards, restake, pool and farm should be the goal.

As it is, we’re duetting put for a ICP/ FIL /FLOW scenario where Al there are no real incentives to keep tokens stakes for longer periods of time or to farm via single asset stake, or to pool via LPs that can then be farmed.

The current attitude of restrictions like rIMB have been a complete failure in my mind. The token value has dropped from around $2.3 to $0.166.

Dictatorial outcomes stopping people from selling makes them seek arbitrage. Strategic tokenomics planning can get them to lock up for long periods, farm, pool etc.

4 Likes

Happy that this topic is brought it up. Rumb2 should not be allowed to trade. It should be only use for reward and allowed to exchange 1:1 against umb.

2 Likes

I think the prime goal of this staking model with rumb and lineair conversion was to prevent selling pressure. Since that did not work i think the token/rewards model should be under review. I would just as well like to see umb rewards in umb and be done with rumb. I think this will take away a lot of selling pressure and uncertainty.

4 Likes

Hi,
I don’t know if it’s possible but maybe we could implement a system inside rUMB contract that it’s possible to sell off or buy reward token but if it happens before the end of the duration you have an autotax for buy back UMB token (25% or 33% or as you want)
thx
ps.sorry for my english

I have thought very long and hard about this. It is something that I don’t think that developers should take lightly and I certainly don’t think a decision should be taken based on a vote by 50 people.

I will weigh it up in the below post and I must be clear that my first instinct upon reading the above was to automatically click that rUMB should not be tradable. I have never purchased rUMB via a DEX and all rUMB I own has been generated solely through staking rewards.

Assumptions

  • All rUMB currently in circulation has been generated by legitimate means, ie as a reward for somebody buying and staking UMB tokens and this is the only way rUMB can be generated

  • The purpose and indeed the reason for the existence of rUMB is as a reward for staking (hence the ‘r’)

Explanation

So at first glance, why did I think rUMB should not be tradable?

  1. There is a perceived negative impact on the current price of UMB
  2. In some cases, users can purchase rUMB at a cheaper price than they can purchase UMB. Indeed some members of the community only hold rUMB despite never buying or staking an UMB
  3. There is an assumption that the above people are simply going to convert their rUMB to UMB at the first opportunity and dump their tokens onto the market, thus further suppressing the price.

These 3 things are naturally the main emotional points that all users who stake their UMB and await rewards gravitate toward and will likely cause them to make a snap decision to not allow rUMB to be traded

The alternative

I would counter all of the above points with the following:

A) This project is still in its very early stages. Any short term price impact now is quite frankly irrelevant to someone who is looking to stick around
B) There is a cap on the volume of rUMB released every day. As such, the team have factored in how many rUMB they expect will be in circulation come the end of rUMB1 and it is a known part of the token structure. Whether rUMB is tradable on a DEX or not is irrelevant to the long term tokenomics of UMB. There is still the same planned amount of rUMB that can/will be converted to UMB
C) If people do choose to convert their rUMB into UMB and immediately sell that is their right to do so. As per point A, this is an early stage project. Investors both short and long will come and go over the next few years. To a long the short-midterm price action is frankly irrelevant. If anything it’s an opportunity.

There are already issues being raised in the community relating to gas fees and the cost of staking and moving UMB tokens around. Adding another 20% to this I think just adds an unnecessary barrier to entry.

I am also very uncomfortable with the short deadline being proposed for something which in actuality is very important and has an impact on all present and future UMB holders. This is something where an emotional decision could be made by a very small number of people that could have very negative consequences for the token moving forward.

Conclusion

While there are clearly pros and cons on both sides I feel that this is a decision that cannot be taken in haste by a small sample size of the community on a topic that likely has a lot of emotional feeling that may cloud overall judgement. As such, I propose that this conversation is left open and revisited well ahead of rUMB3 to allow enough members of the community time to review and consider whether this is the right direction for us to go in.

4 Likes

The simple way to disable rUMB2 selling is to remove the claim button from the staking pool until conversion time happens. This means that all rUMB2 will be stored on the contract.

What we don’t want to happen is remove the rUMB token and replace it with UMB because that means we lose the option to burn left over rUMB to bring down the max supply.

2 Likes

I’m pretty half and half on this. The thing about crypto is that the ethos allows it to form a free decentralized market and by restricting the rUMB market we are going up against that. I wonder how much impact this has on the UMB market overall… if the impact is not that bad then this vote may not mean that much.

The thing with markets is if there is high demand then the price will go up. There were times when 6000 rUMB would give you over 5000 UMB on a swap. In those cases you were better off buying UMB direct and staking it.

Also, some people like to have the option to offload rUMB because of tax reasons… they can control what they sell for and manage their tax. What we don’t want to see happen is where people that have tax laws in their country that tax you on income from staking pools, where the day they convert their rUMB and UMB could be trading at a good price point… then it crashes by 50%… that tax still has to be payed. By allowing investors to sell rUMB they are very much in control of the tax aspects.

1 Like

Re: tax issue, signs pointing to some potential good news at least in the U.S. for the PoS tokens like UMB …In Win For Crypto Stakers, IRS Offers Refund on Untraded Token Rewards - Blockworks

I agree with this in totality. The focus should be UMB, rumb was only meant as a rewards option for future conversion to UMB

3 Likes

I agree to disable trading rUMB2. A reward should not be buyable.

1 Like

This will be a decision in haste. Selling / buying rumb is not an issue causing the price movement on UMB, it is the tokenomics / coin inflation, current state of the market and UMB token utilization which is the primary issue.

Let’s not try to fix a disease with a pain killer here

Banning buying/selling of Rumb in haste with 50 ppl voting is a step in the wrong direction for this project along with it being a draconian measure which is against what crypto stands for which is decentralization and autonomy of decision making of the holder

1 Like

This is why I’m 50/50 on this. Most people that buy UMB are not interested in the governance… you only have to look at the last vote on snapshot to see that there were no big wallets that voted. A lot of large holders, into the millions of UMB, make a good income offloading rUMB onto the market.

As pointed out large wallets into the millions did not vote… and yet those are the people that offload rUMB. By hastily voting on this could upset those people that have the most UMB that will probably never vote because they are not involved in the community.

I think the best form of action is to let this discussion go on for awhile and try and get investors interested in governance voting, especially the ones with large wallets, Even if this discussion goes on for a few months and we do find that most people want to kill the rUMB market, then it can be done pretty easily by disabling the claim button.

1 Like

I cannot vote on this because snapshot cannot get my votes from the Ether staking pool…

Also again, I noticed no big wallets voting as of yet on this. This vote is happening too soon and may have a big fallout for investors that have UMB into the millions that have no interest in the governance side but sell rUMB for income or tax reasons.

This proposal is now locked as the proposal voting on Snapshot has concluded:
https://snapshot.org/#/umbnetwork.eth/proposal/0xa200ffccf864fece5b51049eb22cfde5bff84d9f58b00038e2fa8e0ad526caa0