FAQ
Why do we need Goblins?
Dollar-pegged stablecoins have become an essential part of crypto due to their lack of volatility as compared to tokens such as Bitcoin and Ether. Users are comfortable with transacting using stablecoins knowing that they hold the same amount of purchasing power today vs. tomorrow. But this is a fallacy. The dollar is controlled by the US government and the Federal Reserve. This means a depreciation of dollar also means a depreciation of these stablecoins.
Goblins aims to solve this by creating a decentralized reserve and revenue protocol, GOB, that is backed by a basket of assets. By focusing on supply growth rather than price appreciation, Goblins hopes that GOB can function as a currency that is able to hold its purchasing power regardless of market volatility.
Is GOB a stable coin?
No, GOB is not a stable coin. Rather, GOB aspires to become a decentralized reserve and revenue protocol backed by other decentralized assets. Similar to the idea of the gold standard, GOB provides free floating value its users can always fall back on, simply because of the fractional treasury reserves from which GOB draws its intrinsic value.
Is GOB Pegged?
Each GOB is backed by 1 flexUSD, not pegged to it. Because the treasury backs every GOB with at least 1 flexUSD, the protocol would buy back and burn GOB when it trades below 1 flexUSD. This has the effect of pushing the GOB price back up to 1 flexUSD. GOB could always trade above 1, because there is no upper limit imposed by the protocol. Think pegged == 1, while backed >= 1.
You might say that the GOB floor price or intrinsic value is 1 flexUSD . We believe that the actual price will always be 1 flexUSD + premium, but in the end that is up to the market to decide.
How does Goblins Work?
At a high level, Goblins consists of its protocol managed treasury, protocol owned liquidity (POL), bond mechanism, and staking rewards that are designed to control supply expansion.
Bond sales generate profit for the protocol, and the treasury uses the profit to mint GOB and distribute them to stakers. With liquidity bonds, the protocol is able to accumulate its own liquidity. Check out the entry below on the importance of POL.
What is (3,3) and (1,1)?
(3,3) is the idea that, if everyone cooperated in Goblins, it would generate the greatest gain for everyone (from a game theory standpoint). Currently, there are three actions a user can take:
Staking (+2)
Bonding (+1)
Selling (-2)
Staking and bonding are considered beneficial to the protocol, while selling is considered detrimental. Staking and selling will also cause a price move, while bonding does not (we consider buying GOB from the market as a prerequisite of staking, thus causing a price move). If both actions are beneficial, the actor who moves price also gets half of the benefit (+1). If both actions are contradictory, the bad actor who moves price gets half of the benefit (+1), while the good actor who moves price gets half of the downside (-1). If both actions are detrimental, which implies both actors are selling, they both get half of the downside (-1).
Thus, given two actors, all scenarios of what they could do and the effect on the protocol are shown here:
If we both stake (3, 3), it is the best thing for both of us and the protocol (3 + 3 = 6).
If one of us stakes and the other one bonds, it is also great because staking takes GOB off the market and puts it into the protocol, while bonding provides liquidity and reserves for the treasury (3 + 1 = 4).
When one of us sells, it diminishes the effort of the other one who stakes or bonds (1 - 1 = 0).
When we both sell, it creates the worst outcome for both of us and the protocol (-3 - 3 = -6).
Why is PCV important?
Protocol Controlled Value - As the protocol controls the funds in its treasury, GOB can only be minted or burned by the protocol. This also guarantees that the protocol can always back 1 GOB with 1 flexUSD. You can easily define the risk of your investment, because you can be confident that the protocol will indefinitely buy GOB below 1 flexUSD with the treasury assets until no one is left to sell.
As the protocol accumulates more PCV, more runway is guaranteed for the stakers. This means the stakers can be confident that the current staking APY can be sustained for a longer term, because more funds are available in the treasury.
Why is POL important?
Goblins does not have to pay out high farming rewards to incentivize liquidity
providers a.k.a renting liquidity.
Goblins guarantees the market that the liquidity is always there to facilitate sell and buy transactions.
By being a LP (liquidity provider), it earns most of the LP fees, which
represents another source of income to the treasury.
All POL can be used to back GOB. The LP tokens are marked down to their RFV for this purpose.
What is a Rebase?
A Rebase is a mechanism by which your staked GOB balance increases automatically. When new GOB are minted by the protocol, a large portion of it goes to the stakers. Because stakers only see their staked GOB balance instead of GOB, the protocol utilizes the rebase mechanism to increase the staked GOB balance so that 1 staked GOB is always redeemable for 1 GOB.
What is Reward Yield?
Reward yield is the percentage by which your staked GOB balance increases on the next epoch. It is also known as rebase rate. You can find this number on the Goblins staking page.
What is APY?
APY stands for annual percentage yield. It measures the real rate of return on your principal by taking into account the effect of compounding interest. In the case of Goblins, your staked GOB represents your principal, and the compound interest is added periodically on every epoch (28,800 seconds) thanks to the rebase mechanism.
One interesting fact about APY is that your balance will grow not linearly but exponentially over time! Assuming a daily compound interest of 2%, if you start with a balance of 1 GOB on day 1, after a year, your balance will grow to about 1377.
How is APY calculated?
The APY is calculated from the reward yield (a.k.a rebase rate) using the following equation:
It raises to the power of 1095, because a rebase happens 3 times daily. Consider there are 365 days in a year, this would give a rebase frequency of 365 * 3 = 1095.
Reward yield is determined by the following equation:
The number of GOB distributed to the staking contract is calculated from the GOB total supply using the following equation:
Note: The reward rate is subject to change by the protocol.
Why does the price of GOB become irrelevant in the long term?
As illustrated above, your GOB balance will grow exponentially over time thanks to the power of compounding. Let's say you buy a GOB for $400 now and the market decides that in 1 year's time, the intrinsic value of GOB will be $2. Assuming a daily compound interest rate of 2%, your balance would grow to about 1,377 GOBs by the end of the year, which is worth around $2,754. That is a $2,354 profit! By now, you should understand that you are paying a premium for GOB now in exchange for a long-term benefit. Thus, you should have a long time horizon ("HODLing") to allow your GOB balance to grow exponentially and make this a worthwhile investment.
What will be GOB's intrinsic value in the future?
There is no clear answer for this, but the intrinsic value can be determined by the treasury performance. For example, if the treasury could guarantee to back every GOB with 100 flexUSD, the intrinsic value will be 100 flexUSD. It can also be decided by the future DAO. For example, if the DAO decides to raise the price floor of GOB, its intrinsic value will rise accordingly.
How does the protocol manage to maintain the high staking APY?
Let’s say the protocol targets an APY of 100,000%. This would translate to a rebase rate of about 0.6328%, or a daily growth rate of about 2%. Please refer to the equation above to learn how APY is calculated from the rebase rate.
If there are 100,000 GOB tokens staked right now, the protocol would need to mint an additional 2,000 GOB to achieve this daily growth. This is achievable if the protocol can bring in at least 2,000 flexUSD daily from bond sales. If the protocol fails to achieve this, the APY of 100,000% cannot be guaranteed.
Do I have to unstake and stake GOB on every epoch to get my rebase rewards?
No, once you have staked GOB with Goblins, your staked GOB balance will auto-compound on every epoch. That increase in balance represents your rebase rewards.
How do I track my rebase rewards?
You can track your rebase rewards by calculating the increase in your staked GOB balance.
Record the Current Index value on the staking page when you first stake your GOB. Let's call this the Start Index.
After staking for some time, if you want to determine how much your balance has increased, check the Current Index value again. Let's call this the End Index.
By dividing the End Index by Start Index, you would get the ratio by which your staked GOB balance has increased.
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