Price Floor Theory

## Formula

When protocol owns its liquidity, the price floor can be assured by the total value of the collateral tokens in the treasury divided by the number of original tokens in circulation.
$PriceFloor = \frac{TreasuryValue}{TokenInCirculation}$

## 4 Price Controllers​

In the equation above, there are 2 variables that move the price floor, which make up only 4 possible price controllers.

### Price controllers to raise the price floor

• Treasury Increase
• Circulation Decrease

### Price controllers to lower the price floor

• Treasury Decrease
• Circulation Increase
We can assume that when the protocol guarantees the price floor, the tokenomics cannot break.

## 4 Principles for Unbreakable Tokenomics

### 1. The protocol must have all 4 price controllers, otherwise, the variable goes extreme

The Asteroid protocol has all 4 controllers.
+Treasury - Tipping Fee, Astar Dapp Staking Yields
-Circulation - Community Staking, Posting Fee, sROID Conversion
+Circulation - Creator Rewards, Vesting
-Treasury - ROID Redeem

### 2. There has to be at least one bonding variable to auto-adjust 4 controllers based on the protocol states

The Posting Fee varies to auto-adjust the protocol states.

### 3. The protocol should be a positive-sum game to increase the treasury value

The Asteroid protocol is a gamification of the gift economy of tipping in return for voting powers.

### 4. Limit the token emission into circulation in accordance with the treasury value to guarantee the price floor

The ROID emission into circulation is limited by the treasury value using a bezier curve.

## Mitigating the Risk of collateral token volatility

The aforementioned theory only holds true if the collateral tokens are all stablecoins. Otherwise, there is a risk of lowering the price floor due to the price volatility of non-stablecoins.
To mitigate this risk, we can borrow some concepts from fractional algorithmic stablecoins such as Frax. Asteroid generates sROID token for the loss of the treasury value. See Protocol Design page.