Introduction

We’ve encountered an issue with the SANSHU liquidity pool being affected by the amount of rewards distributed through single-side staking. Our goal has always been to maintain a free market with minimal restrictions. However, recent events have shown us the importance of implementing protective measures to better secure our investors’ interests.

Table of Contents

• Introduction

• Problem Identification

• Immediate Action: Rescuing and Staking SANSHU Tokens

• Compensation and Emission Reduction Plan

• Why 50,000 SANSHU Rewards Per Day?

• Beyond APY: Managing Emissions for Long-Term Success

• How will we raise liquidity?

• The Importance of Dynamic Emission Adjustments and the Adjustment Ratio

• Balancing Emissions and Operational Costs

• Conclusion

• Links to Proposals and Further Reading

Problem Identification

Initially, we set rewards at a fixed rate of 8.96% of the supply, but this approach didn’t consider the size of the liquidity pool, leading to an imbalance. Because the rewards are immutable and can only be increased, we recognised the need for a mechanism to adjust them downward if necessary.

Immediate Action: Rescuing and Staking SANSHU Tokens

To address this, the team took decisive action by invoking the ‘RescueTokens’ function from the migration contract, reclaiming 297 million SANSHU. These tokens were then staked in the single-side staking pool to assess how low we could reduce the emissions. The goal was to gather all necessary information and reach a consensus with the community on the new emission rates, with 7605 SANSHU ($11.46 at $1.55m market cap) being the lowest we could get the daily emissions down to.

Compensation and Emission Reduction Plan

Our strategy will begin by compensating the community with extra rewards for the missed rewards during this test period. If the proposal is passed, and once compensation is completed, we will implement a weekly reduction of emissions by approximately 44.2% until we reach our target within 30 days for single-side staking (10,000 SANSHU per day).

From that point, emissions will grow proportionally to the liquidity pool until we achieve a sustainable target of 10% liquidity (100M SANSHU pooled) or until the staking pool concludes (Mar 2026). The rewards will be updated weekly.

Beyond APY: Managing Emissions for Long-Term Success

In the context of SANSHU's current growth stage, where the full utility of the token is still being developed, relying solely on APY (Annual Percentage Yield) as a metric can be misleading. High APY can often indicate high inflation, which, without sufficient demand, can devalue the token over time.

Instead, focusing on supply and demand dynamics is crucial, especially when the token’s utility is on the horizon. By managing emissions carefully and aligning them with the project's growth and upcoming utility, we can ensure that each token gains in value rather than being diluted by excessive inflation.

This approach is more sustainable and better suited to supporting long-term value creation, particularly as we prepare to roll out new features and utilities that will drive demand for SANSHU.

How will we raise liquidity?

To effectively raise liquidity and ensure a stable trading environment, our next proposal will focus on setting up a SANSHU/ETH reward pool. In this structure, we plan to allocate 80% of the daily dynamic rewards—targeting 40,000 SANSHU per day—to liquidity providers (LPs), with the remaining 20% dedicated to single-side stakers—10,000 SANSHU daily.

This 80:20 ratio highlights the critical role that LPs play in maintaining liquidity and market stability, drawing inspiration from successful models like Illuvium’s. By offering these incentives, we aim to attract more liquidity while also ensuring that single-side stakers remain engaged and rewarded.

These adjustments will be detailed in a separate proposal, ‘Implementing a SANSHU/ETH LP reward pool draft proposal’. This will reduce the process's complexity and will be enacted following the approval of the 'Sustainable Emissions Proposal'.

The Importance of Dynamic Emission Adjustments and the Adjustment Ratio

Maintaining a healthy balance between token emissions and ecosystem growth is crucial for the long-term success of any project.

To achieve this balance, Dynamic Emission Adjustments and the Adjustment Ratio are two powerful mechanisms that allow us to tie token emissions directly to the key growth metrics of our ecosystem. By aligning emissions with liquidity, market cap, and holder growth, we can maintain a balanced supply-demand dynamic that helps sustain SANSHU’s value and avoid excessive inflation.

What Are Dynamic Emission Adjustments?

Dynamic Emission Adjustments are flexible mechanisms that adjust the number of SANSHU tokens emitted daily based on specific key metrics. Unlike a static emission model, this approach ensures that token emissions respond to the actual growth and health of the SANSHU ecosystem.

The three primary metrics used in these adjustments are:

• Liquidity: The amount of SANSHU paired with another asset (like ETH) in liquidity pools. High liquidity suggests a stable market capable of absorbing higher emissions without price destabilisation.

• Holder Growth: The number of unique SANSHU holders. As the holder base grows, it reflects wider adoption and distribution, justifying potential increases in emissions.

• Market Cap: The total value of all circulating SANSHU tokens. A growing market cap usually indicates increasing demand and a healthier ecosystem.

Understanding the Adjustment Ratio

The Adjustment Ratio is a key multiplier in this system. It dictates how sensitive SANSHU’s emissions are to changes in the ecosystem's key metrics. This ratio ensures that emissions scale up or down proportionally to the ecosystem’s growth, keeping inflation in check.

How the Adjustment Ratio Works:

• Base Emission Rate: The starting point is 50,000 SANSHU/day.

• Adjustment Ratio: The multiplier that adjusts the emission rate based on the performance of key metrics.

Formula:

Example Calculation:

• Liquidity Growth: 10%

• Holder Growth: 15%

• Market Cap Growth: 20%

• Adjustment Ratio: 0.0001

• Base Daily Emissions: 50,000 SANSHU/day

1.      Calculate Average Growth:

To determine the average growth, we add the growth percentages of Market Cap, Holders, and Liquidity, then divide by 3.

2.      Calculate Emission Increase:

Next, we calculate the emission increase by multiplying the Average Growth by the Adjustment Ratio and the Base Daily Emission.

3.      Calculate New Daily Emissions:

Finally, we add the emission increase to the base daily emission to determine the new daily emissions.

Empowering the Community Through DAO Voting

The DAO can play a critical role in setting the Adjustment Ratio. This empowers SANSHU holders to influence the token’s emission rate and, consequently, its inflation rate.

How DAO Voting Could Work:

• Adjustment Ratio Range: The community could vote on setting the Adjustment Ratio within a range (e.g., 0.0001 to 0.01), each reflecting different levels of emission sensitivity.

• Impact Analysis: Before voting, simulations showing how different ratios affect emissions as a percentage of the circulating supply can be provided, allowing informed decision-making.

Considerations:

• Market Conditions: A higher Adjustment Ratio might be favoured during bullish markets to capitalise on growth, whereas a lower ratio might be preferred during bearish markets to avoid oversupply.

• Ecosystem Goals: A higher ratio might support rapid expansion, while a lower ratio could prioritise stability and long-term value preservation.

By implementing Dynamic Emission Adjustments and utilising the Adjustment Ratio, we can achieve a balanced and sustainable emission strategy. This system ensures that emissions grow in tandem with the ecosystem while preserving token value.

Data for holders, liquidity, and market cap will be taken every Monday at 00:00:00 UTC, and the corresponding rewards updates will be applied on the same day.

Staking Emissions Data & Visuals

Impact of 40k SANSHU daily emissions (LP Rewards)

Impact of 10k SANSHU daily emissions (Unlocked Single Side Staking)

In managing emissions and maintaining a balanced token economy, it's crucial to account for operational costs, which create a baseline pressure on the token supply. The team has structured operations into tiers: the minimum needed to keep the project afloat, a lean operation for strategic growth, and a full-scale approach that supports all growth initiatives. These tiers, with costs ranging from $7,000 to $20,000 per month, help us understand the financial commitment required to sustain the ecosystem. When divided by our 615 holders, the cost per user becomes more manageable i.e. $7000 = $11.38 per user per month and $20,000 = $32.50 per user per month.

Our goal is to become self-sufficient, as soon as possible. Ensuring optimal buy pressure on the token and enabling significant buybacks and burns as the project matures. By hiring competitively-priced experts to develop valuable products, the team plans to share proceeds through a mix of buybacks and burns, staking, and providing additional liquidity to enhance the token's health and stability.

We are committed to transparency and will continue to empower our community by allowing votes on strategic priorities. So far, funds from previous proposals have been utilized responsibly, and we remain open to feedback on resource allocation to build a sustainable and thriving ecosystem together.

Explore the full details of our 'Sustainable Emissions Proposal' and see how we're shaping the future of SANSHU. Get involved and share your thoughts by clicking here.

Conclusion

We understand that the road so far has been far from smooth, and we acknowledge the concerns that have arisen due to the differences between our initial proposals whilst migrating and current performance.

However, our commitment to transparency and our dedication to improving the situation are unwavering. We have taken immediate steps to address the issues at hand, particularly concerning liquidity and reward distribution, and we are actively working on improving our communication to ensure that you, our valued community, are kept fully informed.

As we move forward, we are focused on balancing rewards, liquidity, and token supply to create a sustainable environment where long-term holders are rewarded and inflation is kept in check. Through strategic buybacks, burns, and controlled emissions, we aim to ensure the long-term success of the SANSHU project.

We appreciate your continued support and look forward to sharing more detailed updates in our upcoming investor meeting.

Thank you for your trust and patience as we navigate through these challenges together.