In this article, we’ll go over the R U Generous project and the RUG token. R U Generous (RUG) | What is the RUG token?
What exactly is R U Generous?
R U Generous (RUG) is a decentralised reserve currency protocol that may be found on the Avalanche Network under the ticker RUG. RUG is currently backed in the treasury by AVAX and MIM, providing intrinsic value. Through staking and minting, RUG introduces economic and game-theoretic elements into the market.
Our goal is to create a policy-controlled currency system that is local to the AVAX network and in which the RUG token’s activity is controlled at a high level by the DAO.
The rebase incentives are derived from bond sales proceeds and can fluctuate according to the amount of RUG staked in the protocol and the reward rate set by monetary policy.
Staking is a long-term, passive approach. The rise in your RUG stake translates into a steadily lowering cost basis that eventually converges on zero. This means that even if the market price of RUG falls below your initial purchase price if you stake for a long enough period of time, the increase in your staked RUG balance should eventually overtake the price decline.
When you stake, you lock RUG and receive an equal amount of sRUG in exchange. At the end of each epoch, your sRUG balance is automatically rebased. sRUG is a transferrable protocol that can be combined with other DeFi protocols.
When you unstake, you burn sRUG and receive an equivalent number of RUG tokens in return. Unstacking means that the user will miss out on the next rebase payout. It should be noted that the forfeited reward only applies to the amount that was not staked; any remaining staked RUG (if any) will continue to receive rebase benefits.
What exactly is bonding?
Rug’s secondary value accrual strategy is bonding. Users who bond RUG tokens are actually selling their assets in order to purchase a bond from the protocol. Bonding Actions are a hybrid of fixed income security, a futures contract, and an option. The protocol provides the bonder with terms for a future trade.
These terms include the bonder’s predetermined amount of RUG and the period when vesting is complete. The bond becomes redeemable as it vests. In a 5-day period, for example, 40 percent of the benefits can be collected after 2 days.
Bonding is a high-energy, short-term tactic. Bond discounts are more or less unpredictable due to the secondary bond market’s price discovery mechanism. As a result, bonding is regarded as a more active investment method that must be regularly watched in order to be more profitable than staking.
Rug can accumulate liquidity by allowing customers to acquire bonds through Bonding. We refer to our own liquidity as [LIQUIDITY NAME].
More To facilitate market operations and protect token holders, [LIQUIDITY NAME] assures that there is always locked exit liquidity in our trading pools. Since Rug has become its own market, in addition to providing extra confidence for RUG investors, the protocol has accrued an increasing amount of revenue via LP awards, reinforcing our treasury.
ECOSYSTEM
How Do I Get Involved With RUG & The DAO?
Market participants might choose between two strategies: staking and bonding. Stakers stake their RUG tokens in exchange for more RUG tokens, whereas bonders exchange LP tokens [or MIM tokens] for discounted RUG tokens after a predetermined vesting period.
How Can You Profit From RUG & The DAO?
The key advantage for stakeholders is increased supply. The protocol binds new RUG tokens from the treasury, the vast majority of which are distributed to stakeholders. As a result, the benefit for investors will come from their auto-compounding balances, albeit price exposure is still an important concern. Stakers would profit if the increase in token balance outpaced the probable decline in price (because of inflation).
The key advantage for bondholders is price constancy. Bonders commit capital upfront and are promised a fixed return at a predetermined moment in time; that return is delivered in RUG tokens, so the bonder’s profit is determined by the RUG price when the bonded RUG matures.
Taking this into account, bonders gain from a growing or stable RUG token price!
PROTOCOL
The First Network State
Our initial goal is not to find a price that is stable. This may appear to be contrary to our currency’s goals, but we assure you that it is not. A rug can be tuned to optimize for a variety of purposes. The primary tradeoff is between volatility and profitability and stability and consistency. Growth comes with instability and profit, and this is what we want early on.
Rug, with its strict policy and scale, should function well as a stable asset. Pressures should be able to stabilize at a non-intrinsic value.
Rug has the ability to operate as a wealth-generation machine with loose policies, regardless of scale. The token’s market premium measures the game’s positive total; all extrinsic value represents fresh money created.
The Alpha State
The first network has a one-way treasury (no money comes out), a binding contract (via which supply increases and profits are generated, i.e. bonding), and a staking contract (where profits are distributed).
The original policy states are as follows:
BCV – The BCV varies depending on the type of bond. The Policy team tunes it on a regular basis to fulfill the protocol goals.
For example, if the protocol wishes to amass more liquidity in its treasury, it can lower the BCV for allowing users to bond RUG with LP in order to boost bond capacity.
Bond vesting term – For all Bonding Asset categories, it is set to a predetermined number of Avalanche blocks or approximately five days.
RUG distribution – When someone Bonds RUG, the proceeds will be sent to the Rug Treasury. The same quantity of RUG will be bonded and transferred to three parties:
Bonder – The Bonder will receive the amount of RUG bonded in a linear fashion over the vesting term.
The bonder receives the same amount of RUG as the DAO. This is the profit of the DAO.
Stakers – After accounting for the RUG allocated to the bonder and the DAO, the remainder will be distributed to all protocol stakeholders.
Policy
Bonding
When a user Bonds RUG on Rug, he is truly buying a bond. The criteria of these Bonds vary.
The BCV can be used to scale the rate at which bond premiums climb. A higher BCV signifies a lower bonder discount and a higher protocol profit. A lower BCV translates into a larger bonder discount and less protocol profit.
The vesting duration governs how long it takes for bonds to become fully redeemable. Longer time horizons merely reduce inflation and bond demand.
Profit allocations are the only treasury variable. This allows us to select who benefits from the protocol.
Staking: There are no variables in the staking contract. RUG and sRUG are always redeemable 1:1, and earnings are always distributed equally through rebase.
Market Trends
The system contains a number of feedback systems. These are self-reinforcing behaviors; action 1 accelerates action 2, which accelerates action 1. This type of circular mechanics is what drives exponential growth and boom and bust cycles. These processes are enabled by loose policy states, whereas they are suppressed by strict policy states.
Goals by Players
Stakers are mostly concerned about their RUG balance. While price is crucial in defining the value of their RUG and the rate at which it increases, it is not the primary purpose. A wise stakeholder is only concerned with the network’s short and long-term growth possibilities. Through price and balance growth, this growth converts into wealth.
Bonders are mostly concerned with the RUG price. When these users bond RUG by purchasing a bond, they lock in a fixed payout in RUG. As a result, network profitability is only useful in estimating opportunity cost or gain; bonders’ RUG gains are locked in.
The best circumstance for a bonder is for prices to rise; in this instance, the bonder profits from both their RUG discount and the price increase.
Bondholders are nevertheless satisfied if the price remains flat; their profit is the bond’s discount. Bonders, like stakers, earn from inactivity at or around their buy-in by raising their balance.
Bondholders only lose when the bond’s price falls below the bond’s discount. At this stage, bonders will select between the RUG and the LP Token (which will be available soon), based on which is most valuable. Bonders are always able to select the better of the two assets, essentially combining the best aspects of both assets’ risk-reward characteristics.
Market Trends
The network’s default state is intrinsic value. Price will always revert to this level after an extended period of inactivity.
Contractions may be induced only by short-term liquidity shortages. Because RUG holders have an assurance that the price will eventually rise above intrinsic value, the only selling below should be those who need a quick exit and are ready to suffer the extra loss.
An increase in staking or bonding can cause expansions.
In most cases, a spike in staking is preceded by market buying. This raises the price, allowing the protocol to sell at a greater price and increasing the yield for stakeholders. This should draw in more stakeholders and keep the cycle going.
Meanwhile, rising prices raise the bond discount and provide capacity for new bonds. These are preceded by new liquidity, which improves the protocol’s ability to execute sales and expands available exit liquidity.
This positive price-liquidity feedback loop should contribute to the creation of long-term expansionary periods.
They do, however, work in both directions. Falling demand reduces staking rewards and bond capacity, which causes demand to decline even further. This is an inevitable characteristic of such systems; even the greatest (such as Bitcoin) are not immune to big losses following periods of expansion.
However, we can endeavor to reduce the number of busts. This is when the protocol’s reserves come in to save the day and catch the market if velocity falls too much to the downside.
It achieves so by forwarding guidance (the fact that the protocol would buy decreases risk the lower we go, which can mean we don’t have to buy) and by buying forever below intrinsic value. The treasury ensures that, while bad markets and contractions can and will occur, the protocol will never die.
Total Supply: 6,121 RUG tokens
How and where can I get a RUG token?
RUG has been listed on a number of crypto exchanges, but unlike other major cryptocurrencies, it cannot be purchased directly with fiat money.
However, you may still easily purchase this coin by first purchasing Bitcoin, ETH, USDT, or BNB from any significant exchange and then transferring to an exchange that trades this coin.
