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.
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.
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.
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.
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.
The target of the first initiative is the bonus system built into the Auction Manager contract, as this is currently a lucrative opportunity for recyclers. In a Regular Auction, the contract mints an additional 10% in AXN, adding it to the principal winnings. In the VCA Auction, the contract gives 10% back in wBTC to the bidder. For this Initiative, these bonuses will be removed and the impacts of the removal tested. The staking bonuses will not be adjusted in this initiative. The adjustment will be as follows:
The potential upsides for these changes are:
The potential downsides for these changes are:
This Initiative will also serve as an initial testbed for a unified auction type. To the bidder, there is now no specific incentive to enter into one auction vs. the other, though of course the function of each auction still differs. We will track this behavior to understand if consumer sentiment changes at all with no clear differentiating incentive.
At the end of this Initiative, the data collected and the team analysis will be presented to the community.
This Initiative will start on Auction #262, August 2nd 2021
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:
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 second Initiative will again be focused on the Auction System. When Axion was first launched, its sole purpose was to offer massively large APY as an incentive for investors to stake. Over time, further utility was added to Axion making it lucrative for stakers to participate in the ecosystem, such as liquid Bitcoin dividends (through the VCA auctions) and Axion Launch. With the addition of these extra benefits, high APYs are no longer the sole reason to participate in Axion.
After an extensive study on current token data, as well as future predictive models designed to simulate the effects of different influences on the token itself, the team has confirmed their suspicions that Axion’s inflation is at dangerously high levels, and its buyback system is severely hampered by the VCA auctions. Without significant deflationary measures put in place in the near future to combat the inflation that happens with the VCA auctions, AXN will rapidly continue to inflate.
The team decided to use buybacks as a way to introduce a new deflationary measurement that will be running daily. But there has to be a tweak to the Auction buyback system in order for this to work. Regular buy pressure through the current (non Testing) auction system is not occurring with only 18.46% of all ETH entering into the auction going towards purchasing AXN. Compare this to 80% of all ETH being used to buy AXN at the launch of the token. The below image showcases the current system's allocation, based on the aggregate data of the two auctions.
Merely buying back AXN and distributing it to stakers does not provide deflationary measures, however. To combat this, and help provide a more sustainable long-term tokenomic model, this next testing initiative will implement a significant change to the way that the auction economy works.
The changes to the system are showcased in the graphic below.
The potential upsides for these changes are:
The potential downsides for these changes are:
This change will be applied on August 16th during Auction #276.
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.
Axion’s auction system was an innovative way to power an entire ecosystem. From the beginning of Axion, the auction system offered ways for investors to buy AXN at a discount, with a portion of the ETH used to buy and distribute AXN to all staked shareholders, generating additional APY. The Auction system evolved with the addition of the VCA, adding in distributed Bitcoin dividends to all investors. And with recent Testing Initiatives, the auctions now buy and automatically burn AXN tokens.
The Auction system, although the foundation of the Axion ecosystem, are not without their faults. First and foremost, they operate under complex code that has been modified over time to incorporate different functionalities. These functions make running the Auction Smart Contract inherently expensive, meaning all auction bids cost significantly more gas.
The auctions are also complex for new investors, who may struggle with the concept of auctions selling out and becoming unavailable for that day, they required understanding what multiple auction types do, how they needed to return to ‘withdraw their earnings,’ and even doing basic education as to what the word ‘auction’ means and how it differs from what users might typically think an auction does. For new users unaccustomed to an auction system, it can be a huge deterrent.
It’s time for the evolution of the Axion auction system. It’s time to upgrade the auctions with a new system that fits into the ethos of Axion.
It’s time… for the Axion Accelerator.
The Accelerator is Axion’s newest product and will supersede the original Auction system. The Accelerator operates under a whole new paradigm, taking the best of the Auction system but making it cheaper, faster, and far more simple to explain.
The Accelerator allows you to:
The Axion Accelerator is launching as a part of the Axion Testing Initiative 3, and will be trialed over the next 2 weeks with performance data being captured and various tweaks being performed.
This will be the last Testing Initiative for this quarter. Stay tuned for future Initiatives as they come!