TIP: 0027
Title: A controlled RAM launch on Telos
Author: Jan Smit, Interim RAM Administration Director <email: [email protected]>
Status: Draft
Type: Protocol
Created: 2018-10-29
This tip proposes that the RAM Administration:
- Before launch: Buys or receives such amount of RAM (~5.2GB) that at launch 50% of RAM is reserved
- During hours and days after launch: Sells 4.1GB of RAM slightly above the PGP (Public Guidance Price) to firmly support the PGP
- Maintains an initial RAM reserve of ~10% of all system RAM ( ~1.1GB)
The RAM Administration has 3 instruments to influence the RAM price long term. These are described in the “RAM Administration Position Paper” on Telos Logical.
- Publish a Public Guidance Price (PGP) for RAM every 10 Million blocks (approximately 58 days)
- Call adhoc RAM meetings to increase RAM supply (setram). The automatic RAM growth rate (setramrate) will be set to 0 initially.
- Trade RAM on the basis of a RAM reserve
These 3 instruments will however not avoid the heavy speculation which happened during the launch of EOS and is likely to happen again on Telos in the first hours and days after launch. This is caused by the Bancor RAM pricing mechanism (see graph 2 below) which establishes the RAM price solely on the percentage of RAM reserved until RAM is added (if RAM is added the curve effectively drops). This model makes RAM therefore relatively cheap for those speculators who get to buy first. Table 1 below shows the profits for early RAM buyers assuming they sell at the price corresponding with a 50% RAM reserved situation. During the EOS launch RAM prices and therefore profits went significantly higher as 80% RAM reserved was reached when genuine DApp buyers started to buy after the speculators had purchased the cheapest tranches.
As RAM speculators have developed sophisticated algorithms to trade and buy the first tranches of EOS RAM, the Telos RAM Administration is, without this TIP, also at risk of not being able to buy its RAM reserve (~10% of available RAM) at a competitive price. This reduces the effectiveness of the 3rd instrument mentioned above and will effectively result in an unnecessary transfer of wealth from the RAM Administration to the early speculators.
The above measures allow the RAM administration to set a PGP before launch (e.g. corresponding with a RAM reserved situation between 50 and 55%) and maintain this PGP as it has sufficient RAM to sell if RAM demand causes the RAM price to exceed the PGP by more than a certain margin. It makes it impossible for speculators to buy the cheapest tranches and it also sends a clear message that Telos’ objective is to create a stable RAM price environment conducive to DApps. Finally, we propose that the profits of selling the RAM will be used to provide RAM grants to DApps.
The reason the RAM Administration suggests to launch the Telos chain with 50% of RAM reserved is that during the last 2 months the RAM prices at EOS Mainnet have reached a fairly constant level of ~0.1 EOS per kB (see graph 1). This price level corresponds with around 55 to 60% of RAM being reserved (see shaded area in graph 2).
Graph 1: EOS RAM price over time
As ~0.8 GB will be staked in the creation of the genesis accounts and as the chain will launch with 12GB of RAM, this means that this TIP proposed to allocate 5,2 GB of RAM before launch to the RAM Administration. The RAM Administration will sell most of this RAM in the hours and days after launch to the Bancor contract when the RAM price exceeds the PGP by a certain margin.
Graph 2: Telos RAM price as a function of percentage of RAM reserved
The RAM administration will retain some RAM (order of magnitude 10% of all RAM) as a reserve to discourage speculation in the future. The purchase cost for 5,2 GB is ~320k TLOS. Below table breaks down this purchase in 8 tranches purchased each with 40k TLOS. For each tranch the table below shows the RAM size purchased, the purchase price and profits assuming the tranch was sold at the Purchase Price of the last and most expensive tranch.
Table 1: Potential profit per tranch
Selling the RAM of tranches 3 to 9 (i.e. excluding the first 1.1 GB tranch which we propose to reserve for future trading) will cause a profit of ~160k TLOS. The RAM Administration proposes to use this profit to support DApps through RAM grants.
Once most tranches are sold and the RAM Director is of the view that the RAM price is still too high, he/she will resort to the instruments mentioned above.
With regard to the Telos RAM price, you can see in graph 2 above that at the 50% level the RAM price is around ~0.1 TLOS per kB (the same level as EOS today). However assuming the TLOS-USD rate will be well below the EOS-USD rate, the Telos RAM price will be well below the EOS RAM price in USD terms. Future RAM increases will reduce the RAM price expressed in TLOS (or EOS) as it moves the price curve, shown above, down . At comparable market cap of TLOS and EOS (note that this requires TLOS price to be ~3x the EOS price as EOS has 3x the token supply), at same amount of RAM (max_ram_size) and at a comparable percentage RAM reserved the RAM prices in USD will be similar for both chains.
The following risks, amongst others, need to be prevented:
- $5 Wrench attacks (incl extortion) on the RAM Administration
- Hacking of smart contracts which may be used by RAM Administration to trade RAM
- Fraud
To limit hacking risks we propose to compartmentalise RAM from the start (as it can not be transferred between accounts). We propose the RAM and 1,000 TLOS (for CPU and Bandwidth) are spread equally over 8 accounts. Each account will then hold a market value of approximately 85k TLOS each (=(320k purchase price +240k profit)/8)). Each account will be a multisig account involving TF directors, board members and potentially trusted 3rd parties (e.g. notary). The latter group shouldn’t have sufficient keys to enable transactions independently.
The Telos Blockchain Network Operating Agreement (TBNOA), Clause 22, “Initial Token Allocation” shall be amended to read as follows:
New Telos accounts will be created to fund the Telos Foundation which will receive 6,000,000 TLOS tokens, the Telos Foundation RAM Administration which will receive 5.2GB of RAM (or such amount of RAM which will bring the total reserved RAM amount at 50% at launch) and 1,000 TLOS, which is the equivalent of approximately 321,000 TLOS tokens, the Telos Founders’ Rewards Pool which will receive 6,000,000 TLOS tokens, the Telos Community Rewards Pool which will receive 1,000,000 TLOS tokens, and the Telos Exchange Token Reserve Fund which will receive 140,279,973 TLOS tokens.
(discussion is open)
This document is in the public domain.