Actually, it’s useful to look at tradfi for examples where there is incentivisation for long term price, but without short term value extraction. There is a long history of grappling with this exact problem.
I’ll tell one story, and then I’ll talk about what this might look like for ENS.
When Warren Buffett first took over the textile company Berkshire Hathaway, he had to deal with old shareholders that were motivated by regular dividends.
This was problematic because Buffett didn’t want to issue dividends. He wanted to reinvest the cash generated by the company on further growth (through acquisitions of other companies, etc). To align shareholder interests with his goals, he offered shareholders a swap in 1967: anyone who wanted an income-producing security could have a 7.5% debenture (a debenture is like a bond — think: yield!) in exchange for Berkshire stock. A total of 32,000 shares were turned in. As a result of the move, Buffett washed out of his shareholders those who wanted short term income, ensuring that the rest were more likely to care about long term per-share price growth. He also stopped issuing dividends.
I use this as an example because this is alignment on long term price appreciation. Just because one incentivises price does not mean that we will get short-term value extraction. The trick is to think about how you incentivise price.
What might this look like for ENS? Well let’s say that delegated ENS is rewarded under some formula built around the rate of growth of name registrations (or some other long term aligned outcome). That puts a floor under ENS’s price because the token is now a productive asset. You also incentivise delegation.
But the key thing is that delegated yield is tied to a long term outcome — that is, it is hard to influence the rate of growth of name registrations without doing long-term things: e.g. grow the ecosystem around ENS, ensure ENS is integrated into as many apps as possible; make sure ENS is top-of-mind as crypto grows. And even if there is a temporary bump, say because the DAO does something short term like a new partnership that doesn’t bring in long-term ENS users (they buy once but don’t renew) — the returns from that one-time boost won’t last, and will pale in comparison to the long-term price appreciation of the token as a reflection of the overall success of the protocol.
Obviously this is a terrible solution and I don’t expect you to take it seriously; I can see all sorts of problems with it. I’m just using this to illustrate a point: price incentivisation does not necessarily have to be short-term oriented.
To reiterate, the principles are:
- We want to increase token price + increase % of tokens delegated.
- We can pick, as a delegation incentive, a hard-to-game long term outcome. (For this specific discussion, I am skipping over how to solve the incentive leakage problem, though I’ve mentioned we can have that be a separate mechanism + happy to have a separate discussion on that).