Thesis: Liquidity Abstraction
Abstracting LP into an intrinsic 'meta mechanic', which deepens liquidity as the network scales
Short-Term Objective: Gamifying Liquidity
The hardest part of Proof of Imagination is achieving the critical mass necessary for an invented universe to possess gravity.
Gravity here, like true gravity, tethers the universe and holds it together by the edges. The gravity of a metaverse is simply consensus that it exists. Without this consensus, the world cannot be said to exist, and none of the assets in this world could gain the monetary premium needed for secondary economic structures to develop. (The longer the chain, the sturdier the architecture).
The task for the DAO is figuring out how to keep liquidity incentivized long-term. This goal can be accomplished by framing liquidity as one of the core objectives of the game.
Instead of using MAGIC as the ecosystem’s core token, the project could transition to using LP tokens as the power source. Ideally, the user wouldn’t even know that they’re using a LP token because it’s called a crystal or a chalice or some other item related to the metaverse.
Developing this concept would solve the impermanent loss problem. Impermanent loss can be reduced to the idea that financial yield does not compensate for the losses incurred by LPing (either real losses or opportunity costs). But the yield in game worlds we are talking about is qualitative — joy! The value of a great gaming experience goes beyond money. It unlocks joy through experiencing, collecting, collective brainstorming, collective experiencing, and so on… Outcomes that DeFi would never in a million years achieve without NFTs.
Framing liquidity as the game’s core objective could take the form of **** three metaphor: liquidity as weather, liquidity as time, and liquidity as a measure of spatial reach.
Liquidity as Weather
We have not prescribed a single genesis story for the Legions to create room for other storytellers.
One such story could be that Legions are settlers on a new world, which is full of peril and imbalance that they must learn to manage (like any civilization).
Low liquidity is akin to extremely bad weather. Volatile, cruel, literally an existential threat to the protocol (or civilization). LPing a shitcoin is like riding a tiny boat through a huge storm, knowing at any moment your boat could flip and drown you.
Growth in liquidity could thematically correspond with stronger structures to protect the Legions against the natural world. Or, an even more fantastical version of this idea would be that as liquidity grows, the Legions are increasing their power to control the weather and use it for their advantage.
Liquidity as Time
Growth in liquidity could result in time shifts in the metaverse. New time periods would unlock whenever liquidity reached a certain depth.
You could even design a world where time has frozen, and the solution is for the game players to collectively grow liquidity to re-start time. (The MAGIC-Treasure design is rooted in a similar idea. Productivity of Treasures, and output from the mine, is kickstarted by MAGIC staking.)
Liquidity as Measure of Spatial Reach
Extending on the idea of LP tokens as keys to unlock adventures, liquidity could also be the key to unlocking new realms. As liquidity grows, the world expands outward. This design would create a very fun collective gaming experience and more importantly, begin to heal the extremely damaging mentality borne out of DeFi that LPing is a PVP sport.
We should think of providing liquidity as a means to improve the world and explore its limits. This attitude seems much healthier than what DeFi 1.0 manifested.
Medium-Term: MAGIC as a Natural Resource
In Treasure, the role of smart contract developers can completely invert compared to the status quo. Today’s developers use smart contracts to tame the chaos of the existing world. Treasure builders could instead use smart contracts to create chaotic worlds that require taming. The game would be to restore harmony to the imperfect world that the developer deviously birthed, with imperfections taking the form of weather, time distortions, and so on.
The exciting part about this design is that we might discover the mechanisms needed to solve problems for which DeFi offered no solutions. Imagine a world built by developers that mimics the cruelty of our own world. Some environments are resource-rich, while others are starved of resources. Blight, tornado, and other natural disasters compound this injustice.
What good would this serve? Well, players would probably figure out how to make an insurance protocol that actually works! DeFi 1.0, steeped in a weirdly perverse worship of deception and sociopathic behavior, wasn’t exactly fertile ground for these kinds of experiments.
The insurance industry, done correctly, is an inherently humanitarian industry. It is a collective exercise in overcoming the principal cruelty of the natural world — unequal distribution of tragedy. We believe that game designers might be the first group in crypto to crack the nut of decentralized insurance.
At the end of the day, trustlessness is a bad framework for thinking about crypto. Treasure should lean into narratives that are trust-deepening and pro-social. We want game worlds to be not only experiences of joy, but also genuine attempts at making better, fairer systems that require community and coordination to assemble.
So, in short, MAGIC should become a natural resource that is unfairly and unpredictably distributed around the Treasure metaverse. The TreasureDAO should attempt the paradoxical: using governance to slowly disempower the DAO and make it less and less able to hold any sway over the natural world. The ideal outcome is that MAGIC ceases to be a governance token. Governance tokens don’t even exist! Instead, avatar NFTs function as governance tokens.
They indicate the tribe to which the speaker belongs. Each tribe lobbies the DAO (whose actual power has waned significantly) to enact policies that they support. The NFT is the governance token.
In a nutshell: DeFi governance was about ramping up decentralization and strengthening governance’s control over the protocol. NFT-DeFi might be about introducing game elements that makes governance progressively more difficult. Opposite approach, but it could yield better solutions to the original set of problems.
Representative democracies are probably inevitable in game worlds. Take, for example, the group-mode for realm conquest. This mechanism results in the natural fragmentation of users into groups. Users break off to work in little groups to build settlements with implicit insider/outsider boundaries. Some sort of political system for that tribe is inevitable.
NFTs as governance tokens are probably also inevitable. Given that the basic conditions for political formation (group identity, shibboleths, etc.) are integral to crypto culture, we might as well embrace it.
We think a council comprised of NFT-community tribes, each choosing how to represent themselves before the council, would be an extremely fun experiment for NFTs — and could easily become the new norm for intra-DeFi governance.
Long-term: Cross-Chain Treasures
The move to Arbitrum is in no way short-term or medium-term. Hopefully Treasure becomes a staple of Arbitrum for the foreseeable future.
But the most ambitious vision for this project should see Arbitrum as a pit stop on the larger journey.
Treasure should consider one day creating its own app-specific chain with the Cosmos SDK, with Legions and Treasures acting as validator bonds. The majority of MAGIC liquidity would then reside off-world, on an AMM-specific chain connected to the Treasure chain through IBC.
Here is the metaphor for how this would work: Legions are an interstellar civilization in search of the kindest possible environment for their life-form. Their civilization bounces between planets every few generations, moving onto an even-greener world when it presents itself, each time becoming better at the onboarding process so settlement is smooth and painless.
After a few terraforming attempts, they discovered ways to power satellite civilizations with a remote planet, on which no life lives. The only thing on this planet is the power source, which is routinely carted off-world by driverless barges.
Because of this, things move easily between worlds, but no world is over-crowded nor are specific worlds forced to live under universal rule. Moreover, the power-planet exists safely as a separate part of the universe, free from political turmoil on the colonized planets.
It would be thrilling to see games build their own chains. If NFTs function as better proxies for governance than most tokens, then in the case of game worlds, it is even more true.
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