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Flame Token Economics

Token Info

NAME: Flame
TYPE: ERC-20 (Ethereum-based token) SYMBOL: FLAM CONTRACT ADDRESS: TBD DECIMALS: 18

Utility

  • Transaction security: Being the native currency of Flambu, ensuring security and trust, users are required to lock FLAM tokens in escrow for engaging in P2P transactions.
  • Incentives: Users will be rewarded by $FLAM for their contributions to the Flambu network
  • Governance: $FLAM holders will have voting rights for future changes with the voting weight directly correlated to $FLAM staked
  • Conversion: $FLAM tokens can be easily converted to $FBX, and vice versa.

Flame Metrics

Continuous Token Model

Flame tokens follow a continuous token model based on a bonding curve. A bonding curve sets the underlying function that lets the creation of a token continuously and the demand for the token determines its price at any given point based on this function. Simply put, the token is minted every time there is a demand to buy it from the algorithm, and as the circulating supply of the token goes up, the price goes up based on the underlying function. As an example, the graphic below shows a simple bonding curve function where
currentPrice=tokenSupply2currentPrice = tokenSupply^2
.
Example Exponential Bonding Curve Chart
The technical details of bonding curves can go very deep, therefore we advise the interested reader to check available resources online. We believe the below list of reads is a good start:
Many blockchain-based applications especially in the DeFi space utilize bonding curves in different forms. For example, Uniswap's AMM algorithm utilizes a simple form of the bonding curve model. Another example is used in the newly emerging social network Bitclout built on top of the DeSo blockchain. On Bitclout, every user has their own token (see What are Social Tokens? (aka Creator Coins)) and the users can buy other users' tokens. The more a token is bought the higher the price goes and the more it is sold the lower its price becomes.
A very interesting outcome of using bonding curves for continuous token supply is that it rewards early adopters, supporters, believers of a project, person, or anything else that the token's value is tied to.
Another interesting and very useful mechanism that can be built with the bonding curves for a community-centric platform like Flambu is, it can be used as a means for the community to invest in the project in a continuous way and where there is always liquidity. By also creating a spread between the buy and sell prices (for example by creating two bonding curves with slightly different slopes), the organization that creates the platform initially can use the funds to develop the project and use some of the funds for operations and in return, when the organization starts to generate revenues it can purchase or burn tokens so that the price will go further up as the project succeeds.
As an example, let's say that Flambu starts the bonding curves with the simple parameters for the buying curve being
buyingPrice=tokenSupplybuyingPrice=tokenSupply
​ and the selling curve being
sellingPrice=0.5tokenSupplysellingPrice = 0.5*tokenSupply
. This means that once people start to buy the token, they will be able to buy according to the price determined by the buying curve and if they want to sell, they will be able to sell according to the selling curve. The proceeds that are between the buying and selling curves are the funds that the organization can use to develop the project, so people that buy the tokens are investing in the long-term success of the project and the earlier they buy the cheaper the price. Of course, if someone wants to buy and sell right away, they will lose most of their investment since the selling curve is significantly lower than the buying curve, but when the token is opened to the secondary markets they will also be able to sell for a better price than the price offered by the bonding curve. The below chart visualizes the buying and selling curves mentioned in the above example.
Example Buy and Sell Bonding Curves
Further examining the above example, note that the areas below the buying and selling curves represent the total funding amount and the cash reserve for liquidity, respectively. In this specific example, this means that, when 1,000 tokens were minted in total, the price in the buying curve reached $1,000 as well, and for total funding of
, out of which
is secured under the selling curve for continuous liquidity, and
is sent to Flambu to be used for development and operations of the project. In Flambu's case, the cash reserve funds under the selling curve will be staked in high yield generating DeFi protocols, and the interest generated will be reinvested to buy or burn Flames from the bonding curve, pushing both the price of Flames and the slope of selling curve higher. In addition to the interest generated by the DeFi protocols, part of Flambu's revenues will also be reinvested in buying or burning Flames from the bonding curve, which will further increase Flames' price and increase the slope of the selling curve. The reason the selling curve's slope increases is because when Flambu reinvests to buy or burn Flames, all of the funds go below the selling curve as it will not make sense for Flambu to fund itself (meaning for the funds invested by Flambu to go to the area between the buying and selling curves that represents Flambu's reserves).

Community-Driven Insurance

As explained above, part of the funds that buy Flames from the bonding curve goes to Flambu's reserve to fund the development and operations of the project. An important part of the operations of Flambu is to provide insurance for the possible loss and damages to the products being shared. For that reason, at any given point in time, 30% of the funds in Flambu's reserve will be dedicated to insurance. In the case of the above example, when Flambu holds $250K in its reserve, $75K will be dedicated to insurance, and some of the funds will also be dedicated to the customer support operations which can review claims.
Note that, when users pay to buy Flames for insurance purposes during the transactions within the platform when they don't have sufficient Flame tokens, the purchase of new Flame tokens from the bonding curve will further push the price of Flames upwards. This means that the more demand will be to the rentals on Flambu, the higher Flame price will go and the more early buyers will benefit from the price increase.
In the future, Flambu and the community can decide together to donate any excess funds in the insurance reserve to charities or other organizations that have social and/or environmental impacts.

Flame Seed Token Sale and Genesis Token Supply

Before the bonding curve is activated, an initial seed token sale will take place with a fixed price per token. The Genesis Token Supply including seed token sale metrics are provided below:
Pool Name
Token Amount
Conditions
Seed Token Sale
2M
100% at the TGE
Foundation Reserve
1.25M
3 months cliff & 10% released quarterly
Team
750K
3 months cliff & 10% released quarterly
Advisors & Partners
250K
3 months cliff & 10% released quarterly
Ambassadors & Influencers
250K
3 months cliff & 10% released quarterly
User Rewards Pool
500K
%100 at the TGE
Total
5M

Flame Bonding Curve Parameters

When the Genesis Token Generation Event and the Seed Token Sale are finalized, the bonding curves will be activated with the following initial parameters.
The Seed Token Sale will offer 2M Flame tokens for $1/Flame with a target funding goal of $2 Million.
Flame Bonding Curves Chart Following Initial Token Sale
Note that, after the initial token sale, the price for the buying curve starts from $2 and for the selling curve starts from $0.8 with the given slope parameters below:
  • Buy Curve Slope: 0.000001
  • Sell Curve Slope: 0.0000004
In order to find the starting price values for the two bonding curves, we can simply use the below formula:
price=slopetokenSupplyprice = slope * tokenSupply
So at the point of the finalization of the initial token sale we get:
​The initiation of the sell slope from a lower price than the initial token sale's price is a positive outcome since it incentivizes the initial token investors to hold their investments until there is progress in the project and more investors come in to buy tokens via the bonding curve.
Another important point to notice is that at the point that the bonding curves are activated, out of $2M of funds, $800K directly go to liquidity under the selling curve, so at any point, the initial investors can take back their investments (initially for a loss of 20%). The remaining $1.2M goes to fund Flambu's development and operations, and within those funds, 30% ($360K) will be dedicated for insurance to cover any damages or losses that may occur during the P2P rentals.
It's important to also note that, these amounts are not fixed and are expected
Flame Token Bonding Curves

Simulation

As an example scenario, consider the following case to simulate the money flow to and from the bonding curves in time:
Initially, a private sale of Flame tokens takes place, and initial investors invest a total of $2M to the project and buy a total of 2M Flames for $1/Flame.
During Genesis, Flambu will also hold a total of 3M Flame tokens for several purposes with different lockup and vesting periods.
When the initial token sale is finalized, the bonding curves will be initialized and the price at the beginning of the buying and selling curves will be $2/Flame and $0.8/Flame, respectively.
$1.2M will be held in Flambu's reserve and $800K will be secured under the selling curve for continuous liquidity as a cash reserve. The buyers of Flame tokens can at any time sell their tokens through the selling curve, but if they do it early on, they will sell their tokens for a loss. Of course, it is well expected that Flame tokens will be open for exchange in secondary markets (CEXs and/or DEXs), and in these markets, people (mostly arbitrageurs) can buy Flames for better prices than offered by the buying curve and sell for more attractive prices than offered by the selling curve. This means that once Flame tokens are available on the secondary markets, the buying and selling curves will mostly act as lower and upper bounds for the price discovery in the secondary markets.
To continue our simulation, out of $1.2M, $360K will be reserved for insurance within Flambu's reserve, and those funds in addition to the cash reserve of $800K will be staked on DeFi protocols such as Compound. Let's say on average a 5% APY can be generated and a total of $1.16M will yield an interest of $58K per year (of course there are protocols that return better interest rates and other cryptocurrencies can return even better interest rates, but for simplicity, we keep 5% in this example). In the case that Flambu buys Flames from the bonding curve and without burning saves them in a rewards pool to be redistributed to the Flame holders as interest, a $58K reinvestment will push the price on the buying curve from $2 to $2.03 and a total of 28,792.74 new tokens will be minted to be redistributed.
Since the total number of Flames in circulation increased from 2,000,000 to 2,028,792.74, the selling price also increased, but since all of the proceeds from the interest go under the selling curve, it will also push the selling curve's slope upwards, specifically from 0.0000004 to 0.00000041691. This puts the price on the selling curve at $0.846 which was previously $0.8. It is worth noting again that a higher interest will push all these numbers higher, and if newly minted Flames are burnt instead of redistributed, the selling curve's slope will go even higher, but in this case the buying price will remain the same since the total circulating supply of Flames will remain unchanged.
To continue our simulation, let's say in its first 3 years with a good growth of user base in several countries and a high number of transactions, the revenues of Flambu reach a total of $10,000,000. A dedication of 20% of yearly revenues to buy and burn Flames will result in the following:
  • Flambu will buy and burn Flames worth $2M.
  • Since the newly minted Flames are burnt right away, it will not increase the circulating supply, but it will only increase the cash reserve under the selling curve
  • For simplicity, assuming that the price and circulating supply remained the same as before (i.e. the price on the buying curve was $2.03 and the price on the selling curve was $0.846), the price on the buying curve will remain the same as the circulating supply did not change, but the selling curve's slope will shift up to 0.0000013887 from 0.00000041691.
  • Note that, now the selling curve's slope is higher than the buying curve's slope, meaning that all of the Flame holders can sell their Flames for a profit, if they sell in the same order they bought in. This may raise an issue as the new buyers will have an opportunity to always immediately sell for a profit. In order to mitigate this issue, we can simply either set an upper limit to the selling curve's slope (say 10% less than the buying curve's slope), so that not all the newly bought tokens will be burnt, or we can simply update the buying curve's slope to be at least 10% higher than the selling slope.
Yellow Line Shows When the Selling Curve's Slope Exceeds the One of the Buying Curve

Conclusion

Bonding curves offer many advantages, especially in Flambu's case, including but not limited to:
  • Continuous supply of Flame tokens with an automatic price-setting algorithm so that the believers and supporters of the project can always invest in the project's future and own a stake
  • Separate buying and selling curves with a spread between them ensure that there is always a certain amount of liquidity on the one hand, and on the other hand investors through the bonding curve are always incentivized to keep their tokens for the long term
  • The continuous fund flow can finance the project's development and operations including the specific need for a decentralized insurance solution in Flambu's use case
  • The bonding curves are not price-setters, but merely upper and lower bounds for the price discovery on the secondary markets, so that it will ensure the prices on the secondary markets are fair all the time
  • Through the bonding curves, Flambu can continuously redistribute revenues to the Flame holders as a means of dividends, by generally represented as a price increase of Flame tokens
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Last modified 19d ago