While there are many different aspects that define a Web3-native project as inherently “good” compared to other projects, one of the most important criteria is the ability of the project to reward its community. However, community reward mechanisms are often a multi-faceted complexity as the need for the reward to carry both financial value and participatory incentive arises. Then, it is combined with the token emissions problem, in which a high reward rate could potentially result in over-dilution of the circulating supply in the market, driving down the value of the token itself. In this article, we are showcasing how Carbonstarter effectively resolves this issue with ARBS, veARBS, and xARBS.

The Issue of Token Emission

In order to understand the need for ARBS, veARBS, and xARBS, it is important to understand the problem of token emission. This issue is often overlooked by many Web3 projects and DeFi protocols, and implementing solutions often comes too late. Quite often, it results in the temporary downfall of the token price, or even worse, a complete demise of the token performance.

For example, let’s take an ordinary example of almost any project within Web3. Almost all projects have a staking program, where you stake the native token, and receive the native token back as a reward. There may be various time locks, yet the central idea is identical. In order to attract their token holders to stake the tokens and therefore commit to longer-term holdings, the project offers staking yields in the form of APR/APY. Quite often, these significantly outperform traditional interest rates, with some new projects offering more than 500% APY. The danger starts here. 

The 500% APY only truly maintains its value if the value of the token is maintained. In order for the value to be maintained, there needs to be an increase in token demand or a decrease in circulating token supply. When a person stakes 100 tokens in order to receive 500 additional tokens, this only defers the inevitable token-selling pressure. It temporarily created a demand of 100 tokens, in exchange for a selling pressure of 500 tokens. The speed of the token sales significantly increases as the value of the token decreases, resulting in the failure of the project to continue to reward its community in a tangible manner. 

Creating Demand, Utility, and Value

At Carbonstarter, we aim to stand out, and we aim to be different. After extensive research and numerous brainstorming sessions, we believe that we have found the key to creating sustainable token demand, tying it to direct utility within the Carbonstarter ecosystem, and in the process rewarding our community with confidence and longevity.  

We accomplish this with the introduction of ARBS, veARBS, and xARBS. 

Our Native Token: ARBS

This part is straightforward and easy to understand. Carbonstarter is issuing our own token, ARBS. With a fixed supply, ARBS can be regarded as both the central utility token within the platform, and the value-carrying token within the external trading platforms such as DEXes and CEXes. Built on Arbitrum, ARBS is available to everyone. 

The Voting Token: veARBS

When a user decides to commit the ARBS token holding for its true utility, the user must bring ARBS to the Carbonstarter platform. Then, the user must stake ARBS in order to receive veARBS (vote-escrow ARBS). veARBS has no financial value in itself, as it is simply the token of confirmation that the user has staked ARBS. 

When staking ARBS, a user has a choice of timelock. With a minimum timelock of 1 week to a maximum timelock of 208 weeks, the timelock determines how much of the staked ARBS is reflected in veARBS. Users who have staked ARBS for 208 weeks benefit from having 100% of the ARBS quantity reflected in the veARBS quantity. Those who decide to stake for less time period have only a portion of their staked ARBS be reflected in the veARBS quantity. It can be understood in the following manner: 

Maximum timelock: 208 weeks

Maximum percentage: 100%

Percentage per week: 0.48%

100 ARBS staked for 1 week: 0.48 veARBS

100 ARBS staked for 208 weeks: 100 veARBS

As shown, users who commit to a longer timelock benefit from increased voting power in the form of a larger quantity of veARBS. Since veARBS has no financial value in itself and only carries voting power, this incentivization does not impact the token economy in a negative way.

Importantly, veARBS depreciates in quantity over time. Users who have staked 100 ARBS for 1 week not only receive 0.48 veARBS, but they also witness 0.48 veARBS depreciate in quantity every block during the 1 week. Users who have staked 100 ARBS for 208 weeks not only receive 100 veARBS, they witness quantity depreciation every block during the 208 weeks. 

Therefore, users who have committed to a longer timelock not only benefit from increased voting power but also an increased lifespan of the voting power. 

The Reward Token: xARBS

xARBS follows the x-Token model utilized by top-tier DeFi protocols, in which the x-Token is used as the overall combined reward token so that the users do not have to claim rewards across multiple reward-generating pools. xARBS is the reward token within the Carbonstarter ecosystem, designed to make community rewards seamless. 

Users do not have to participate in additional activities to receive xARBS. By simply obtaining veARBS in their wallet from staking ARBS, they automatically receive xARBS in return. The quantity of xARBS rewarded depends on the quantity of veARBS and the dynamic APR. 

This model truly incentivizes the long-term holders of ARBS who have committed to a longer timelock. By participating in the longer timelock staking of ARBS, these users not only receive more veARBS but benefit from the increased longevity of veARBS in their wallets, which results in receiving more xARBS in quantity and for a longer period of time. 

Upon claiming xARBS, users must convert xARBS back into ARBS, as xARBS also have no inherent financial value in itself. When converting their xARBS back into ARBS, users will face another decision, between express conversion or standard conversion. When users choose express conversion, their xARBS will be converted into ARBS in 14 days. In exchange, users forego 50% of their xARBS back to the xARBS reward pool. When users choose standard conversion, their xARBS will be converted into ARBS in 140 days, and they receive 100% of their xARBS in ARBS at a 1:1 ratio. 

Summary & Case Study

As shown above, the intricate relationship between ARBS, veARBS, and xARBS presents a complex matrix of choice for the token holders. Combined with the benefit of voting with veARBS, Carbonstarter is built to become a platform where users dictate their journeys and reap the benefits accordingly. The best summary can be accomplished by creating a hypothetical case study as the following:

“User A” ARBS balance: 100 ARBS

• Staking duration: 1 week

• veARBS balance: 0.48 veARBS

• Depreciation duration: 1 week

• veARBS balance after 1 week: 0 veARBS

• xARBS reward eligibility duration: 1 week

• veARBS conversion time to ARBS: 14 days

• Reward: 50%

**
**“User B” ARBS balance: 100 ARBS

• Staking duration: 208 weeks

• veARBS balance: 100 veARBS

• Depreciation duration: 208 weeks

• veARBS balance after 1 week: 99.52 veARBS

• xARBS reward eligibility duration: 208 weeks

• veARBS conversion time to ARBS: 140 days

• Reward: 100%

Therefore, users can choose their own ARBS staking duration and xARBS conversion duration to choose between enhanced liquidity or increased rewards rate, bolstered by multiple factors. The result is a complex token ecosystem that effectively solves the token emission problem while giving users the maximum choice and potential. 

We thank you for your support and look forward to welcoming you to the intricate ecosystem within Carbonstarter.