Let the testing begin!

Axion is both a technical marvel and a community powerhouse, with nearly 20,000 wallets interacting with the Axion contract since its launch in November 2020. It is important to note how different Axion is from when it started, with new functions, utilities, and improvements added to the original vision over the last few quarters. With all of these developments, the ecosystem has become incredibly complex. Accurately simulating changes to the model becomes difficult, as many variables affect each other in complex ways. In order to propose any changes to the system as a whole, gathering and understanding user behavior becomes incredibly important. Thus, the Axion Testing Initiative was born.

As price drops and consumer sentiment changes, it can be tempting to make knee-jerk reactions to the economic model, working to implement quick fixes that could solve short-term problems but inadvertently create negative long-term impacts. For this reason, the Axion Development Team has pledged to follow a Data-Driven Analysis model. The team will perform analysis on actual user behavior, analyzing and studying the incoming data. Axion takes its investors and their finances seriously, which is why it is imperative to understand if there are any current problems to the economic model that needs to be adjusted to preserve and maintain the integrity and longevity of the entire ecosystem. Due to the complexities of the Axion ecosystem, to properly test potential changes to the economic model, we must break components of the ecosystem down into unique subcategories.

Testing the components to understand the whole

The Axion Testing Initiative will break components of the Axion ecosystem into pieces and perform tweaks to these individual elements in 2-week segments. During these tests, data on user behavior and token health will be collected. At the end of two weeks, the change will be reverted and another segment of the ecosystem will be tested - unless the next segment of the test involves a continuation of the previous test. In this manner, Axion can gather data and understand user behavior without making fundamental and long-lasting changes to the underlying ecosystem. Any negative change will revert at the end of the two-week cycle. Any positive change will now have data to reinforce the change when the findings are presented to the community. In the event that additional data is needed, the 2-week testing period will be extended until the team is confident it has enough data to make an appropriate analysis. 

What will be tested?

Every two weeks, a new testing initiative will be launched via an announcement on Axion’s social communities and here on this webpage. These tweaks come from both the members of the Axion development team and our incredible community who have submitted proposals and suggestions over the last few weeks. Each change has been (and will be) vetted by the Dev and Strategy teams to be possible to test and implement without causing any significant issues within the ecosystem.

What about big changes?

Some changes, however, may be too complex to properly test before implementation. This is where the strength of the Development and Strategy teams come into play. While complex systems may be difficult to model in their entirety, they can be useful to help generate high-level predictions and highlight potential problems. During the Axion Testing Initiative, the Dev and Strategy teams will be running simulations on the entire ecosystem, working to identify and analyze any short or long-term threats to Axion and propose to the community their findings, along with any potential solutions. This way, progress can be developed at a micro and macro level simultaneously.

Why not just change it all at once?

In the best of cases, it can be difficult to understand how a single variable affects an ecosystem. A variable could be a person's presence, or an investor's staking behavior, a specific bonus or incentive, a piece of marketing, the general market sentiment, global factors, etc. With this method, we can try and isolate as many parts as possible to understand and track the effect they have on the whole. If sweeping changes were made in one go, it would be difficult to track what is and is not working. With our Data-Driven Analysis, the data itself will tell the story of what is happening. Once all these tweaks have been properly analyzed, then they can be implemented into the system with confidence in their ability to work as intended.

Initiative 1 Postmortem

This first initiative proved to be an interesting test, and the team is still piling over the data. We nearly completely removed all short-term recycling behavior with the auction system changes. Less than one year volume of stakes went from 19.1% of all bids to just 7.4%. The Max Stake volume went from 71.6% of all bids to 81.1%. This comes in alignment with ideal bidding behavior.

Click on this link to look at the raw data for the Initiative 1 auction.

A surprisingly low amount of ETH entered into the auctions, with some days barely selling at all. It is hard to tell the cause of the reduction in auction participation behavior, but the team has boiled it down to these potential factors:

1. ETH prices are going up, making ETH more valuable and thus people are less incentivized to enter into the auction system. We saw similar behavior in the first weeks of May.
2. Some investors may have waited to buy back into the auction in hopes that the bonuses will return.
3. Gas prices since the London fork have been very expensive, making v2 bids and withdrawals more costly during this 2 week period. (We’re all looking forward to v3!)

The team wants to find a middle ground between reducing bonuses to help prevent recycling (and thus over-inflation of the token itself) while also making the auction system still lucrative for buyers to participate in.  The next testing Initiative will experiment with a temporary percentage discount over Uniswap price to help incentivize auction participation. The team has decided to permanently remove any wBTC cashback from all future auctions.

The amount of wBTC accumulated to be used to buyback Axion and then burn it is $16,529.47 as of August 14th. The final amount along with the burn transaction will be posted here and in the transparent accounting channel when it is sent.

The potential upsides for these changes are:

1. Axion now has a verifiable deflationary model.
2. Potentially higher price movement as circulating supply is being reduced daily. Higher price means more buying power for all wBTC divs which means greater div distribution.
3. Potentially higher consumer sentiment as elements such as “Daily Burn” and “X Amount of AXN removed from supply” statistics can be used as positive incentives to participate in the ecosystem. In essence, bringing in a little of common memecoin tactics as incentives to join Axion.
4. Deflationary measurements are better aligned with Axion’s goals of being a long-term staking project.
5. Better marketing and consumer education by a single auction type. No need to try and research and understand which auction is “better” to participate in.
6. Marketing can now say “daily liquid Bitcoin dividends” instead of “4x weekly Bitcoin dividends” - a confusing statement.
7. No need to create complex “aggregate data” between multiple auction types to understand where the ETH entering into the system is going.

The potential downsides for these changes are:

1. All AXN APY on all stakes will drop as additional AXN buybacks are not being sent to stakers. 8% APY base inflation (still 15x national average) could potentially become the new ‘fixed-rate APY,’ with longer stakes and Max Stakes getting significantly higher base APY.
2. Potentially lower current/OG Axion investor sentiment as stake APYs drop.
3. There will be a small reduction of additional AXN available for purchase in the auction as penalties will no longer be added.

This change will be applied on August 16th during Auction #276.

Important note: All AXN buybacks distributed to stakers thus far are unaffected. This initiative only targets AXN distributions for this testing window.

Note from the team: 

We know that AXN dividends help increase the base APY for all Axion investors, and this has been a hugely appealing part of joining the ecosystem. However, with the advent of the VCA auctions and Bitcoin dividends, it is impossible to maintain higher APYs AND distribute wBTC. Unless we start to drastically reduce the amount of inflation being introduced into our ecosystem, ALL investors will find their shares becoming more and more worthless until eventually there is no value. With this initiative, 8% base APY through standard inflation alongside bitcoin divs could become the future of the ecosystem, with the regular deflation acting as a safeguard and stability for long-term investors. Depending on the auction participation, there could come a day when the only AXN available is AXN that enters into the auction, which would make AXN sold on the market very valuable indeed! The team feels like 8% APY + Bitcoin Divs + Axion Launch + Voting + Additional future events make the Axion ecosystem much more valuable than just potentially higher APYs.