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How does the Skyward Treasury work?

How does the Skyward Treasury work?

Example of sale #1: $SKYWARD Sales

Let’s use the 25% $SKYWARD sale as an example. Imagine there was 1 Million NEAR added; thus, 1 million NEAR is a demand and 250,000 $SKYWARD is a supply. For simplicity, we will keep the demand fixed in this example.

Once sale is over, and 250,000 $SKYWARD is sold for 1,000,000 $NEAR, all 1,000,000 NEAR is being deposited to the treasury. This means that every 1 $SKYWARD token is backed by 4 $NEAR tokens after the sale.

What can you do with it?

Now you have 2 options:

  1. Add $SKYWARD to Ref Finance and expect a higher price due to expected increased size of the treasury in the future (since every sale on Skyward Finance has a 1% fee on the token that is being sold and 1% on a token that’s being to purchase offered token). Thus, Skyward Treasury will continuously increase.
  2. Redeem $SKYWARD. If you redeem 1 $SKYWARD, you receive 4 $NEAR from the Skyward Treasury and the 1 $SKYWARD is burned (removing it from the circulation forever). This operation doesn’t affect the rate of $SKYWARD.

Example of sale #2: MOON (non-$SKYWARD sale)

Someone wants to sell 500,000 $MOON tokens for $nUSDT. Let’s imagine that there were 2,000,000 $nUSDT deposited (for simplicity, let’s keep it fixed).

This means that 5,000 $MOON (1% from 500,000 $MOON) tokens and 20,000 $nUSDT (1% of 2,000,000 $nUSDT) were added to the Skyward Treasury. So right now Skyward Treasury has:

  • 1,000,000 $NEAR
  • 20,000 $nUSDT
  • 5,000 $MOON

This means that the incremental value of 1 $SKYWARD token increased by 0.08 $nUSDT (20,000 $nUSDT / 250,000 $SKYWARD) and by 0.02 $MOON (5,000 $MOON / 250,000 $SKYWARD).

Thus, all non-$SKYWARD sales after 25% sale #1 of $SKYWARD are going to accumulate value until the $SKYWARD sale #2.

What happens at $SKYWARD sale #2?

At this stage, we anticipate that $SKYWARD will be traded on Ref Finance. Since Skyward Finance platform does not have an ability to set the price, it means that sale #2 can potentially create arbitrage opportunities.

Example 1: The expected rate of $SKYWARD on the sale #2 is lower than the price from the sale #1 - thus, it’s an arbitrage opportunity. You can enter the sale #2 and receive cheaper $SKYWARD (than the first sale) and then redeem the $SKYWARD token to Treasury or sell $SKYWARD on Ref to receive an additional value. Skyward Treasury is tied to a Circulating supply; thus, in this scenario, all participants of the first sale are being diluted, while new entrants can receive an instant profit.

In this case, the $SKYWARD can be either redeemed from the Treasury or traded on Ref Finance. Redeeming $SKYWARD gives you a nominal value that’s backed by Skyward Treasury. Ref Finance in theory should have a different value attached to $SKYWARD that will be based on the future expectations for the size of the Skyward Treasury and Circulating Supply.

Example #2: The expected rate of $SKYWARD on the sale #2 is higher than  the price from the sale #1. In this scenario, existing holders of $SKYWARD will benefit from the sale #2, because the Treasury backed price will be increased.

Do people who entered the sale earlier get a better price?

Prior to the sale, the rate history is displayed for the informational purposes only. Everyone will get the same rate once the sale starts, but different amount of $SKYWARD based on their amount of $NEAR.

For example, this is the rate history prior to the $SKYWARD sale #1

More questions? https://skyward.finance/faq/