Bootstrap Economics
How to allocate investor WBTC when launching the OD protocol — what goes into the reserve, what goes into liquidity, and what investors get back.
Three Buckets
Investor WBTC is split across three purposes:
| Bucket | Destination | Purpose |
|---|---|---|
| Reserve | ODReserve contract (via seedReserve) | Backs OD liabilities, generates ORC equity |
| Liquidity | MotoSwap WBTC/OD pool | Enables trading and powers the TWAP oracle |
| ORC | Distributed to investors | Equity tokens — the investment instrument |
Recommended Split
~85–90% reserve, ~10–15% liquidity. All preminted OD goes into the pool. All ORC goes to investors.
Worked Example
10 WBTC raised from investors at $100k/BTC = $1M total.
| Allocation | Amount | Value |
|---|---|---|
| Reserve (seedReserve) | 9 WBTC | $900k |
| Liquidity (MotoSwap pool) | 1 WBTC | $100k |
| Premint OD (paired with liquidity WBTC) | 100,000 OD | $100k |
| Starting reserve ratio | 900% | |
| Equity (ORC value) | $800k |
The 1.5% fee applies to the ORC seed mint, so depositing 9 WBTC yields ORC worth ~$886.5k after fees. The fee stays in the reserve, further strengthening collateralisation.
Why All OD Goes Into the Pool
OD is a stablecoin pegged to $1. Distributing it to investors doesn't make sense:
- It's not an investment. Holding OD is holding dollars — there's no upside.
- It creates sell pressure. Investors who receive OD they don't need will sell it, pushing the price below peg before the protocol has organic demand.
- The pool needs it. The TWAP oracle reads prices from the MotoSwap WBTC/OD pool. Without sufficient OD liquidity, the oracle is thin and easier to manipulate.
Premint exactly enough OD to pair with the liquidity WBTC at $1 peg, then deposit both into the pool.
Why ORC Is the Right Instrument for Investors
ORC is equity in the WBTC reserve. It's the token that captures value:
- Fee capture. Every mint and burn (OD or ORC) charges 1.5%. These fees accumulate in the reserve, increasing the WBTC backing per ORC.
- BTC upside. ORC absorbs the volatility that OD holders are protected from. If BTC goes up, ORC goes up.
- Protocol growth. As more users mint OD, more WBTC enters the reserve. ORC holders benefit from the growing collateral pool.
Investors receive ORC pro-rata to their WBTC contribution.
Why a High Starting Ratio Is Fine
A 900% starting ratio is well above the 800% ORC-mint cap. This means post-launch ORC minting is temporarily blocked — and that's by design:
- Strong collateralisation at launch. OD is backed 9:1 from day one, making early redemptions completely safe.
- Natural convergence. As users mint OD, each mint adds WBTC to the reserve but increases OD liabilities. The ratio gradually falls toward the 400–800% operating band.
- Once the ratio drops below 800%, new ORC can be minted on the open market, diluting equity — but by then the protocol has proven traction.
- Early investors benefit from being the only ORC holders during the high-ratio period, capturing all fees with no dilution.
LP Tokens
The LP tokens from adding WBTC + OD to MotoSwap should remain with the protocol. They are infrastructure, not investment:
- Withdrawing liquidity would reduce pool depth and weaken the TWAP oracle.
- The LP tokens can be held by the deployer (pre-PERMAFROST) or governed by the multisig (post-transfer).
- Burning the LP tokens is also an option — it makes the liquidity permanent and irrevocable.
Summary
| What | Goes where |
|---|---|
| ~85–90% of raised WBTC | Reserve (seedReserve) |
| ~10–15% of raised WBTC | MotoSwap pool (paired with OD) |
| All preminted OD | MotoSwap pool (paired with WBTC) |
| All ORC | Investors (pro-rata) |
| LP tokens | Protocol (held or burned) |
The result: investors hold ORC (equity with fee yield and BTC upside), the pool has enough depth for reliable TWAP pricing, and OD launches with a wide collateralisation margin.