Unrefined Fuel System for I:Zero

[forest lynx]

It recently was discussed how manipulation of the fuel contract/pool could cause havoc on the whole economy in ILV.

My idea is to have I:zero be extractors of unrefined fuel so it’s connection to the economy has one regulated step in between.

Unrefined fuel idea
New tokens for unrefined fuel.

Basically 5% of all fuel sales go into pools of unrefined fuel and eth.

Land provides liquidity for unrefined fuels.

OW players provide liquidity for eth.

Secondary market outside control of illuvium for unrefined fuels could exist.

*the current system diagram is hidden behind spoiler

@ornate laurel would love your input since you have thought deeply on this subject

[brave stirrup]

Can you point me where I can read about this manipulation you mention? Thanks.

[forest lynx]

Might have overstated. 😆 it was one question and me answering them #💬〕general message. But it did get me 🤔

[brave stirrup]

I fail to see how the unrefined fuel improves the current situation. Aren't we swapping 1 smart contract risk for another? People can manipulate unrefined fuel now.

[forest lynx]

My thoughts are it’s simpler then this. And easier to regulate

Also love the idea of real minting of tokens that can be sold on secondary market from I:zero and not some complicated regulated contract every time you want to sell fuel to the pool

@timber sail also had an idea of refinery ecosystem. Thought that could be a way to get I:zero T0 into the mix at some point.

[brave stirrup]

Having fuel as an erc20 makes sense. It can be added to multiple defi protocols. I'm not sure if it's not too different. Only 5% of the token hold the value of the whole supply. I cannot make up my mind at this stage.

[forest lynx]

Another thing I dislike about fuel system now is fuel will be a erc20 AFAIK but you will not be minting them in I:zero just exposed to them.

[brazen copper]

The original concern seems to be around the need to ensure blockchain integration with all products is bulletproof, which is still the case with an unrefined fuel system. Economic exploits are REALLY bad no matter what Fuel system you use.

To be clear on the idea - Unrefined Fuel is a meta fuel that can be (somehow) turned into any of the other fuel types?

[forest lynx]

No I was thinking 3 unrefined fuel tokens also 3 pools.

[brazen copper]

Isn't the only fundamental difference in that case that you have 3 pools with only 2 assets in each, instead of 1 pool with 4 assets (ETH + 3 Fuel types)?

It seems like it's just more expensive to create depth in the LPs that way

[forest lynx]

I guess it could still be one pool and 4 assets. Just seems you would have less control of price that way? I might not have a full grasp on how multi token pools work. I think the more important thing is 3 separate unrefined fuel tokens.

[brazen copper]

I think a multi-token pool is fine - It's more complex certainly, but not impossible by any means.

I think I'm missing what the goal of this is, and the diagram is a bit confusing.

Currently, ALL Fuel passes through the ETH/Fuel pool. Land owners sell into it, the DAO sells into it. Players buy Fuel out of it.

The diagram indicates that the DAO sells to players, who (somehow) split their spending between Fuel from Land and Fuel from the DAO. If player spending is still all going through a multi-asset pool (or multiple dual asset pools), that still works out the same.

Is the important part of this to have unrefined fuel tokens exist as tokens before they are sold into the pool?

[forest lynx]

That and I think it can also solve the issue of the need to regulate how the %5 gets distributed. The need for increasing fuel generation from land would not be necessary… we could say the refinery process gets better and unrefined fuel is now worth more since more refined fuel can be generated from unrefined tokens.

[brazen copper]

The 5% doesn't get distributed though. Every time a land owner sells 1 Fuel, the DAO tap sells 19 Fuel into the pool. That's inherently the 5%, it arises from a 1:19 ratio of Fuel being sold into the pool. It also only rewards land owners based on their Fuel production, so someone optimizing for Fuel would realize more returns from Fuel than someone focused on Blueprints.

I don't see a fundamental difference between increasing Fuel production from land by making the plot generate more, as compared to having it generate the same that turns into more. It's kind of just moving the increase one step downstream, which is still an option without unrefined Fuel. You could say something like:

When a land owner sells 1 Fuel, it actually adds 2 Fuel, or 5 Fuel, or 10 Fuel, into the pool, and the DAO would sell 19x that amount into the pool as well.

It's mostly not super relevant at what point that multiplication happens. It's a bit awkward if it happens directly on the plots, because the Fuel costs of buildings would scale as well (and storage etc.), but the scaling can just as easily be done downstream if a numerically higher amount of Fuel production is the goal.

Keeping in mind that Fuel is only minted when it gets sold into the pool - My understanding is that Fuel generated on land and kept on land is not yet minted. You get into issues if you're minting Fuel tokens every time a single unit of Fuel is generated.

[forest lynx]

So what I think an unrefined fuel system could do is isolate concerns. Say something goes haywire with I:Z. It can be more easily shut off or mitigated if it is less tangled with the actual fuel pools.

[brave stirrup]

I must disagree here. I think the unrefined fuel has the exact exposure risk as the current system.

[slow perch]

So what you're saying is that this system you're proposing is adding a multiplier effect to the fuel generated from land, and that multiplier effect can be adjusted to increase/decrease the fuel sent into the pool even though the lands produce the same amount of fuel.

Before:
Land makes 100 fuel. DAO makes 1900 fuel. Total fuel 2000.
Fuel demand is extra high so we increase DAO production from 19x to 20x (from 1900 to 2000 fuel).
Land - 100 Fuel
DAO - 1900 Fuel
Multiplier on DAO - 100 Fuel
Total 2100

Now:
Land makes 100 unrefined fuel. DAO makes 1900 fuel. Total fuel 2000.
Fuel demand is extra high so we increase the multiplier on land fuels to 2x from (100 fuel to 200 fuel).
Land - 100 Fuel
DAO - 1900 Fuel
Multiplier on Land - 100 Fuel
Total 2100

I don't see a difference.

[fickle pewter]

It looks like this new unrefined fuel system could make transactions more complicated for fuel buyers (i.e. most players). It also looks like it could be making transactions a little less complicated for land owners. If there needs to be increased complexity to understand and to process this system then that complexity ought to be on the land owner side. It’s the land owners that have made significant commitment to making the fuel in order to extract that fuel’s value. They ought to be able to handle and understand a little more complexity. It has to be as simple as possible for players to buy fuel.

A multi asset pool is more complicated than a pair.
However, it would hold maybe 3x the depth of liquidity. Deeper liquidity means more expensive to manipulate. It also means it will automatically move other fuel prices when one fuel price is drastically changed, this will then incentivize the land owners to rebalance the pool more in their favor (ie most individual land owners will not be selling all of the fuels in equal amounts, but will sell the fuel that reaps them the highest return). But 3 separate pool means there are 3 distinct and much shallower pools.

Aaron shared a link about balancer asset pools.
#🎮〕illuvium-zero message

[forest lynx]

I believe there are several compelling reasons to separate the two distinct systems we have: gamified staking and fuel purchase to play the game, into separate modules with different levels of linkage.

Firstly, separating the fuel purchasing system from the staking rewards system would lead to enhanced code maintainability. Combining both functionalities in the same module would make it difficult to modify one without affecting the other. By separating them into distinct modules, each system can be modified and updated independently, making it easier to maintain the code.

Secondly, separation of concerns can improve the security of the system. Combining the fuel purchasing and staking rewards functionalities in the same module could make the system more vulnerable to security breaches. Separating the two systems reduces the attack surface of each module, making it harder for attackers to gain access to both systems at once.

Thirdly, separation of concerns can improve the scalability of the system. Combining both functionalities in the same module could make scaling one system affect the other. By separating them into distinct modules, each system can be scaled independently, making the entire system more scalable.

Lastly, separating concerns can enhance the testability of the system. Combining both functionalities in the same module could make testing more complicated and less efficient. Separating them into distinct modules makes it easier to test each system separately, leading to more reliable and efficient testing.

Overall, separating concerns for the fuel purchasing and staking rewards systems would lead to improved code maintainability, security, scalability, and testability. This would result in a better user experience for players and a more successful game.

-with help from chatGPT

-And now chatGPT's taking the other side...

While there are many benefits to separating concerns, there are also some potential disadvantages to consider:

Increased complexity: Separating concerns can make the overall system more complex. It may require additional interfaces or protocols to communicate between different modules, which can make the system more difficult to understand and maintain.

Higher development costs: Separating concerns can increase development costs, particularly if the system needs to be designed from scratch to accommodate the separation. Developing multiple modules instead of one integrated system requires additional time and resources.

Increased testing complexity: Separating concerns can increase the complexity of testing. Testing each module separately requires additional resources and time, and it may be more difficult to ensure that the modules work together seamlessly.

Reduced performance: Separating concerns can reduce performance if the communication between different modules adds overhead to the system. For example, if two modules need to exchange large amounts of data, the additional processing required can slow down the system.

Greater risk of miscommunication: Separating concerns can create a risk of miscommunication between different modules. If the interfaces between the modules are not well-defined or not standardized, it can lead to errors or misunderstandings.

In summary, separating concerns can have some disadvantages, including increased complexity, higher development costs, increased testing complexity, reduced performance, and greater risk of miscommunication. It's important to carefully consider the pros and cons before deciding whether or not to separate concerns in a particular system.

[fickle pewter]

I’m not certain the Land Holders sending DAO fuel to the DAO vault is still part of the plan. If it was still part of the plan then the land owners would technically be producing all of the fuel but would pay a 95% tax to the DAO. I feel like I remember that being changed to just having the land produce less fuel and having the DAO mint the other 95%.

[it seems discord mobile wants this to be a spoiler, I’m not sure why I can’t change that]

[forest lynx]

I personally have issues with fuel dynamically changing. like what will happen to your storage? But I am also ok with making life harder for the landowners if it is the best way to keep things simple for the ow players. Perhaps can come up with a better solution.

[fickle pewter]

One of the things brought up regarding fuel pricing is that if the pool is full of fuel and eth then the usd price of fuel is closely tied to the value of eth, much like how the price of ILV is tied to ETH.

But if, say, 10fuel tokens is supposed to maintain 25%+- of $1 then maintaining that with a purely crypton/Solon/Hyperion/eth mix would add further complexity.

[forest lynx]

This complexity is kind of what I think could be avoided, if you separate out how fuel works for players and how land owners get compensated. You can make the player to dao transaction and contracts more simple, a pool might not even be needed (the price is going to be so manipulated anyway with the rails). You would just need to set the variable based on what is going on in the unrefined pools.

[fickle pewter]

So would the amount of unrefined fuel in the pool just increase over time or would unrefined fuel be drained and burnt when players purchased refined fuel?

[forest lynx]

I definitely didn't capture that in the diagram. But it would be burned as fuel is used right.

My main goal would be to simplify fuel to player. So it is more secure and easier to maintain, and bolt on new games to. If the complexity involved with land owners can be contained and only influence price.

[fickle pewter]

I definitely feel that the fuel system is pretty complicated. It is definitely doable today with L1 technology. But I have been wondering how progress on IMX versions of ANY swap LP is going, let alone a balancer style pool.

[forest lynx]

Right do we even need to on chain everything? If unrefined fuel can be minted when you do a withdrawel from I:Z that would be a net benefit and could lead to simplification I believe.

[fickle pewter]

With IMX in its current state there are two options that I see. Fuel as NFT. Or fuel on L1. Both have certainly been talked about but I’ve not heard much beyond that.

[ornate laurel]

Just read/skimmed through this idea and conversation. Trying to wrap my head around it.
Initially it actually seems more complex to be and I think simplicity is the best approach.
I do have concerns with the current model so I’m not saying that’s any better 😂
I still think having fuel on the free market and pegging the in-game purchases to a USD value is an ideal approach for both IZ and OW players.

[timber sail]

To me, there is a lot of speculation and concern around how the fuel system will operate. We haven’t seen the full plan from the core contributors on this, so I’m hesitant to recommend significant changes or dictate how the system needs to operate when experts in the multi-asset pool technology are already evaluating this. If they need help, I’m certain they will reach out to the community, or seek external consultants.
In my opinion, the key community role is to help define what is a requirement, and what is a “nice to have.” There are inherent complexities and challenges that need to be overcome, such as having a fixed number of lands to generate fuel and a potentially infinite number of users of the fuel. At the same time, my bias is to ensure we avoid as much complexity and confusion on the Overworld player side, while also ensuring these players have a positive experience with buying fuel, and understanding how fuel is converted into a certain amount of play time/benefit. However, we can’t fix too many points, or there is zero ability to operate – e.g. if fuel quantity generated by lands can’t be adjusted, fuel units for actions in the OW can’t change over time, price per fuel can’t vary by more than 25%, and 5% of revenue from fuel sales must flow to land owners. That list of fixed elements leads to no possible solutions, so if one (or more) of those need to change, which one and why is that beneficial?
As additional ideas are proposed, it needs to be clear what specific issue they are trying to solve, with an acknowledgement on impact of other elements.
Challenges that must be overcome
• How does a fixed number of lands provide fuel for an infinite number of OW players without causing the OW player experience to change appreciably?
• How does the DAO maintain the balance of 5% of revenue with land holders (Blickter highlighted the 1 to 19 contributions as a simple way to do so)
• How to accomplish all of this with minimal confusion or complexity on either the IZ or OW player to avoid opt-out moments?
• Within the limitations of the technology, particularly on IMX to avoid significant transaction costs, how can this be enabled?

The last one is actually the potential greatest issue, and one that I personally don’t feel comfortable commenting on. I know the team is looking at this, and if this were my project to lead, the question would be phrased “within the limitations and capabilities of IMX, how do we enable the inter-game fuel system to operate within the challenges listed above.” “If additional technology needs to be developed within the IMX system to enable such a system, how do we engage the appropriate experts to build the back end for this system to ensure minimal transaction fees and a positive player experience.”

My starting point would more be the technology than the economics side of things, though having ideas on how to address the disparity in scaling factor (finite land vs infinite OW player base) is critical within identifying solutions.
Without an examination of technology impact and limitations, it’s difficult to comment on proposals such as this whether they are better at overcoming the challenges or not. Maybe that's what this is trying to address, but it's unclear to me based on the system limitations.