What If….Call Options as Rewards
Aaaaaannnd now for the preview of the next major feature from Step. Something genuinely new but with inspiration from Andre’s post months ago on how it could be achieved with a Step themed twist.
As announced previously, Step no longer emits tokens for LPs, we think this is wasteful and unproductive as a customer acquisition cost and detrimental to token holders through dilution and mercenary farm and dumps. The question is then, if there will no longer be LP emissions, what will happen to the existing supply of STEP in the community pool? Enter: Reward Options.
Reward Options is a working name (subject to change) of what we are calling the airdropping of STEP Call options on Swappers on the Step AMM. They’re slightly different to a real Call Option as they have no ‘price’ and are non-transferrable so we are calling them ‘Reward Options’ for now but the premise is fairly straightforward:
- If you use Step’s AMM and pay fees this is a productive action for the protocol
- For paying fees and using Step, we will airdrop Reward Options on you pro-rata to your share of all the fees paid by everyone in the last week who swapped on the AMM.
- We will also be weighting this on a curve so the bottom 75% get a larger share of the dropped options than they would otherwise based on their %
- These Options have a 15 day expiry, are issued every 5 days and a strike price x% above the current spot price of STEP (weighted avg) so will be issued OTM.
- If Step reaches the strike price before expiry then you can exercise the option by paying USDC for STEP at the strike in the amount of your Option.
- You now have STEP and the Treasury has the USDC which can be used to set a floor price on STEP or buyback STEP to be sent to xSTEP stakers.
- If STEP doesn’t reach the strike before expiry then the option will expire and be worth nothing. Reward Options are non-transferrable.
- There will be no auto-exercising of Reward Options, you must initiate this action on the Step Dash.
This is a huge Step forward and something that aims to achieve these goals:
- If you pay fees to Step you are being productive to the protocol and we are rewarding that behaviour
- This promotes more swapping on Step AMM which increases APYs to LPs and makes it more attractive for more TVL which reduces slippage and increases Swap fee volume which increases APYs- positive feedback loop.
- If STEP pumps then you can exercise for STEP in a batch no slippage or potentially at a discount if Strike<Market price.
- Coins are only emitted to circulating supply after paying fees, this is a much better model than paying LPs coins who then take coins and dump them and move on regardless of if they even use the product.
- In a bear market Reward Options are likely to expire OTM (out of the money) and therefore no new coins are issued, resulting in no dilution to holders.
- The treasury actually gets USDC for paying people rewards, unlike getting nothing with standard airdrop on LP models. This USDC can then be used to set floor pricing, buyback coins for xSTEP stakers etc.
- Much like how our treasury farms other protocols and then issues their coins into some yield farms on Step, we could expand this to issue options on these farmed coins from other projects payable in STEP. This is similar to a no-slippage OTC buy of other coins except needing STEP creates additional buy pressure of STEP.
As you can see this new dynamic adds a lot of amazing new game theory and benefits to AMM swappers, STEP token holders, LPs and the community at large. We haven’t seen this model being deployed anywhere else and we are excited to bring it to market soon!
But ser wen launch?
Soon ;) we are still in the final stages of testing the contracts and building the UI we hope to have this done before end of year.
Some details are set to change and we will adjust them prior to release!