As Excalibur evolves, so too must GRAIL. The purpose, use case and distribution of GRAIL has rightly come under increased scrutiny as curiosity has piqued over the past few weeks. There has also been particular interest in GRAIL’s current illiquid nature. Below, we’ll forensically go through all of these topics.
The Future of GRAIL
GRAIL is the shareholder token of Excalibur, imbued with additional power thanks to its governance rights. Currently, GRAIL earns platform dividends (the shareholder aspect) and can be redeemed, if a user so chooses, for EXC tokens. GRAIL is currently illiquid, which means that it does not fetch a market price and cannot be traded, outside of the EXC based redemption mechanism. As part of our medium to long term vision for GRAIL, it’s now time to make some adjustments. More details below.
There are two main areas for us to cover — GRAIL bonds and our thoughts on making GRAIL liquid.
To begin with, if you are unfamiliar with bonding, you can run through the basics here.
Offering GRAIL bonds allows us to create more opportunities to distribute GRAIL, something we’ve noted above has been challenging in the current model. Additionally, as GRAIL currently acts as a reserve supply for EXC, offering EXC to GRAIL bonds allows us to have better control over rebalancing supplies of both tokens, as well as a route to counteract EXC emissions, if we feel that inflation is too high. It will also allow Excalibur to acquire more POL (protocol owned liquidity).
So how do users get their hands on GRAIL bonds?
Bond Auctions and First Come First Serve
There will be two, separate ways for users to pick up GRAIL bonds. Whenever we deploy a new bonding contract, the bonds will then be available either via Bond Auctions, or on a first come, first serve basis.
Let’s dissect the GRAIL Bond Auction. These Bond Auctions will follow a similar model to our innovative fair launch approach — more detail on that, here. Bond Auctions have two key parts.
- In the auction round, a limited number of GRAIL will be minted. The initial ratio for these bonds will start at 1:1 — (Bond Token $ value to GRAIL (EXC) token $ value). In the event that not enough bonds are raised (users do not choose to purchase all of the bonds in total, for whatever reason) then the ratio will be kept at 1:1, but the outstanding GRAIL that were not bonded will not be minted. However, if there is a great deal of interest and more bond tokens are raised than the GRAIL being offered, then the average buying price for GRAIL with be adjusted to match
- Once the auction has ended, users must go through the bond phase, during which they need to synchronize their auction participation with the actual bonding contract. Once done, they will in return start receiving vested GRAIL, over time.
Secondly, users can get access to GRAIL on a “first come, first serve basis” — there will be a limited amount of GRAIL vested over time against both single assets and LPs, with a fixed ratio. These unique opportunities will be detailed properly in the future.
But What About the Idea of Liquid GRAIL?
We also need to address the concept of GRAIL potentially becoming liquid. At some point, we may need to offer an even easier access route for new users to gain access to GRAIL.
Creating a true market price for GRAIL (instead of it being artificially kept at 1:1 with EXC) seems like a natural way to do this and would come with additional potential use-cases for the token, particularly because of its yield-bearing properties.
Making GRAIL liquid does have positive potential — it solves some of our current token challenges and would give it additional value, as priced by the market. However — at this point in time, it simply is not a viable strategy, for a few reasons. Firstly, not enough GRAIL has been minted. Secondly, GRAIL emissions are currently too high. Therefore, in the current model, there is a high chance that liquid GRAIL could back-fire dramatically:
- Current GRAIL holders would be immediately incentivized to sell their GRAIL for instant profit, instead of committing to taking part in Excalibur governance over the long term
- Liquid GRAIL would be potentially enticing for mercenary capital and liquidity locusts; whilst driving liquidity to the platform is important, it would also open up the door to large amounts of sell-pressure on GRAIL, thus diminishing its value
- Being able to redeem to EXC would create a 1:1 guarantee, which could then drive users to use existing pairs instead, creating more additional sell pressure and mitigating/unbalancing other emission control features that have been put in place
So, for now, liquid GRAIL needs to be benched. Once emissions are significantly lower and a higher amount of the total GRAIL supply has been minted, this conversation will absolutely be worth revisiting. We wanted to make sure that it was clear why we have not taken this route now and instead are pursuing bonding, as mentioned above.
As an additional note, all of the above infers that an EXC/GRAIL pair could be a shrewd move for the protocol, as it will allow us to apply custom swap fees (likely higher), which would result in a higher burn pressure on supply and give us another tool to manage the economic model of GRAIL.
Onwards and Upwards
With the addition of bonding and the thoughts laid out above, we have sought to cultivate and incentivize longer term commitment from current and potential users alike, by beefing up the potential perceived value of GRAIL, particularly its governance power and the associated opportunities that power presents.
Once bonding is officially released, next steps will be focused on our unique implementation of bribes and on-chain gauges through GRAIL, so stay tuned!