HOW THE BBS NETWORK PROTECTS ITSELF AGAINST BEAR MARKETS

Jul 6, 2022

Engagement mining depends on multiple variables, as i already explained in my last post.

The variables are (in short) the remaining BBS tokens allocated for the engagement mining, the daily rewards but also the price of the BBS token. In this post i will elaborate the impact of the price of the bbs token for the project. You can dive in deeper here:

As we all know, engagement mining is essential for the bbs network, as it boosts the cpm (and thus the money we earn through impressions by the factor 150x). But when are the funds who subsidize the engagement mining exhausted?Some of you might be wondering what engagement mining is. So here is a short explanation from the bbs whitepaper: In order to bootstrap the BBS network, 50% of the BBS tokens will be distributed over multiple years to the BBS network boards, as ad revenues, based on the user-engagement they generate relative to the rest of the network on each day. On boards where active ad campaigns are running, engagement mining would subsidize the advertisers. This is done to bootstrap the utility of the BBS token for running ad campaigns across the network. (https://docs.google.com/document/d/1I2xYp0EKvVvNqtzngFy1k-l_B05g7wLJS5VSGL2dDcU/edit#)But what even is a bootstrap? Growing a network tends to require subsidizing one side of the network. For example, Airbnb and Uber subsidized the “supply side” of their marketplaces by providing homes and cars to their users at a discount. This is often called “bootstrapping” the network. (https://wakara.org/what-is-bootstrap-the-blockchain/)When applying the same logic to the bbs network, the bootstrap is done with the cpm boost. With the higher revenue per impression, earnings through impressions are boosted (currently on metabbs with the factor 150x) and thus posting becomes more attractive.You can calculate the remaining days of the engament mining with the following relatively simple equations:Remaining supply used for engagement mining * Price = BBS tokens in $ which can still be used for engagement miningBBS token in $ / Daily Rewards = Lasting Days of Engagement MiningNow let’s do the math: I looked up the adress on etherscan holding 50% of the supply which will be used for the engagement mining. you can see here (https://etherscan.io/token/0xFe459828c90c0BA4bC8b42F5C5D44F316700B430#balances) that this adress currently holds 496.499.000 bbs tokens.In a next step i looked up the daily rewards which are generated through impression of the bbs network (https://bbs.market/METABBS/rewards). There are currently roughly 4250$ of daily rewards (average from the last couple of days).Then i transferred the 496.499.000 bbs tokens from the adress, which pays for the engagement mining, in dollars with the current price of 0.029$ of a bbs token. This adress currently holds 14.398.471 worth of $ in bbs tokens at the current price. Then i divided this number by the daily rewards for the lasting days of the engagement mining (= untill the amount of bbs tokens held by this adress is zero). By using this equation, 3387 days (or 9.2 years) are left untill the engagement mining runs out.However, in the future an increase in activity is expected, and thus the daily rewards increase and the funds used to subsidize the engagement mining are exhausted faster. If we estimate the users base and engagement to 10X from this day that would cause the mining allotment to drain 10X faster. Now the mining will last only 3387/10 = 339 days. To combat this, the CPM would be dropped from 150 to (150/3) 50 which will extend this from 339 days to 339 x 3 = 1017 days (Almost 3 years). Also, with higher activity the daily rewards do increase. But with an increase in activity also an increase of the price of the bbs token is probable. So then the adress which pays for engagement mining is holding more dollars worth of bbs tokens and thus can compensate for the higher daily rewards.To conclude, it is fair to say that we still have some time left to enjoy the cpm boost, and that this mechanism is rather flexibel and can be adapted to for example a steep increase in activity on the bbs network.What really remains unanswered is what happens when the funds subsidizing the engagement mining run out? Will it still be attractive to post without the cpm boost? How to compensate for this lack of money earned through impressions?Thanks to @vi5hall who helped me with the research.

bbs.marketANALYSIS OF ENGAGEMENT MINING - When will the cpm boost run out?As we all know, engagement mining is essential for the bbs network, as it boosts the cpm (and thus the money we earn through impressions by the factor 150x). But when are the funds who subsidize the engagement mining exhausted?Some of you might be wondering what engagement mining is. So here is a short explanation from the bbs whitepaper: In order to bootstrap the BBS network, 50% of the BBS tokens will be distributed over multiple years to the BBS network boards, as ad revenues, based on the user-engagement they generate relative to the rest of the network on each day. On boards where active ad campaigns are running, engagement mining would subsidize the advertisers. This is done to bootstrap the utility of the BBS token for running ad campaigns across the network. (https://docs.google.com/document/d/1I2xYp0EKvVvNqtzngFy1k-l_B05g7wLJS5VSGL2dDcU/edit#)But what even is a bootstrap? Growing a network tends to require subsidizing one side of the network. For example, Airbnb and Uber subsidized the “supply side” of their marketplaces by providing homes and cars to their users at a discount. This is often called “bootstrapping” the network. (https://wakara.org/what-is-bootstrap-the-blockchain/)When applying the same logic to the bbs network, the bootstrap is done with the cpm boost. With the higher revenue per impression, earnings through impressions are boosted (currently on metabbs with the factor 150x) and thus posting becomes more attractive.You can calculate the remaining days of the engament mining with the following relatively simple equations:Remaining supply used for engagement mining * Price = BBS tokens in $ which can still be used for engagement miningBBS token in $ / Daily Rewards = Lasting Days of Engagement MiningNow let’s do the math: I looked up the adress on etherscan holding 50% of the supply which will be used for the engagement mining. you can see here (https://etherscan.io/token/0xFe459828c90c0BA4bC8b42F5C5D44F316700B430#balances) that this adress currently holds 496.499.000 bbs tokens.In a next step i looked up the daily rewards which are generated through impression of the bbs network (https://bbs.market/METABBS/rewards). There are currently roughly 4250$ of daily rewards (average from the last couple of days).Then i transferred the 496.499.000 bbs tokens from the adress, which pays for the engagement mining, in dollars with the current price of 0.029$ of a bbs token. This adress currently holds 14.398.471 worth of $ in bbs tokens at the current price. Then i divided this number by the daily rewards for the lasting days of the engagement mining (= untill the amount of bbs tokens held by this adress is zero). By using this equation, 3387 days (or 9.2 years) are left untill the engagement mining runs out.However, in the future an increase in activity is expected, and thus the daily rewards increase and the funds used to subsidize the engagement mining are exhausted faster. If we estimate the users base and engagement to 10X from this day that would cause the mining allotment to drain 10X faster. Now the mining will last only 3387/10 = 339 days. To combat this, the CPM would be dropped from 150 to (150/3) 50 which will extend this from 339 days to 339 x 3 = 1017 days (Almost 3 years). Also, with higher activity the daily rewards do increase. But with an increase in activity also an increase of the price of the bbs token is probable. So then the adress which pays for engagement mining is holding more dollars worth of bbs tokens and thus can compensate for the higher daily rewards.To conclude, it is fair to say that we still have some time left to enjoy the cpm boost, and that this mechanism is rather flexibel and can be adapted to for example a steep increase in activity on the bbs network.What really remains unanswered is what happens when the funds subsidizing the engagement mining run out? Will it still be attractive to post without the cpm boost? How to compensate for this lack of money earned through impressions?Thanks to @vi5hall who helped me with the research.

When trying to calculate the daily diluted supply, one also needs to consider the price of the bbs token. when price is low, more bbs tokens need to be distributed through the engagement mining program to reach 1 cashable. So when bbs token price is low, daily supply is higher in comparison to when price is high (assumption: all other variables stay the same). Makes sense, right?

We now need to distribute 1 / 0.022 (current price of bbs token in USD) = 45.45 token per cashable. When the token launched at a price of ca. 0.16 USD there were only 1 / 0.16 = 6.25 tokens needed to equal one cashable. Engagement mining (limited to 50% of the total supply or 500,000,000 tokens) thus runs out faster at the current pace because the funds allocated for engagement mining are exhausted faster.

So when the price of the BBS token drops, the project is in danger to loose the ability to bootstrap communities with the CPM boost, accordingly the BBS project is REALLY vulnerable to bear markets.

So what are possible solutions to this? Well, why not measure the CPM boost in BBS tokens? CPM is currently measured in dollars, not in BBS tokens. Measuring in BBS tokens would make the project a lot less vulnerable to bear markets, because then the necessity to freshly mint more new bbs tokens (in comparison to when token price was higher) to equal 1 cashable would be gone. Then engagement mining would be more resistant against bear markets.

However, the purpose of using USD is to make sure that earning is done at a stable rate. $20 earned will end up being $20 in BBS tokens when withdrawn no matter the token price so long as the board has sufficient liquidity.

A lot of the mechanics around BBS are designed in a way where you don't need to understand crypto to understand the platform, this would be tough to maintain if all earnings were shown in BBS tokens only.

The CPM the Engagement Mining program uses is adjustable so it can be adjusted as needed to ensure tokens are able to be distributed over a long period. This will actually be automatic at some point with the CPM/daily token distribution adjusting itself as needed. When price drops, CPM will be lowered and vice versa, to ensure the longevity of the engagement mining. Pretty cool.

So, to conclude Eyal and the team came up with a really beautiful technical solution to hedge against unfavorable market conditions.

Thanks to @Oxreclamation who gave me valuable input.