Price Curve

The price curve serves as a non-custodial way to allow anyone to independently mint $THEO. It uses two linear relationships to increase the price of minting: time and total supply. The per token cost to mint is determined by the time since the market was opened, and the total supply at the time of minting. The cost is determined by the following formula:

Price ratio: 90-day VWAP / Total Supply Supply ratio: (Total Supply + Amount to purchase) / Total Supply Time Factor: 2% per year, or 1 + (0.02 * # years) New Supply: Total Supply + Amount to Purchase

Price ratio * Supply ratio * Time factor * New Supply = Mint Price Total Cost = Mint price * Amount to Purchase

An average price is used to allow for price discovery to occur naturally while also smoothing out volatility, and limiting price manipulation attacks. Each price observation comes from an 8-hour TWAP using the Uniswap V3 oracle of the largest THEO pool. This observation is added to the list of the last 3 months of collected prices to form a 3-month** sample average.

To use a price curve without a means of outside price discovery is to unsustainably decouple supply from demand. However, together, they create a predictable relationship between market forces and changes in supply. It acts like a soft cap on dilution, in that demand for new and current tokens must be exceeded in order for dilution to occur, and the marginal rate of dilution decreases as supply rises.

By linearly increasing the cost function over time, this has the advantage of creating deflationary pressure which assures that the buybacks are balanced between fewer and fewer tokens. In other words, before accounting for changes in price, THEO is taken out of circulation approximately in the order that it is created. This ensures a predictable decrease in dilution over time.

Since properties & citizens reduces the supply through conversion to YIMBY, this has the knock-on effect of decreasing the cost of minting when this occurs. Demand for the housing network carries through buybacks and is therefore reflected in the rate of inflation.

In summary, $THEO uses a combination of inflationary and deflationary factors with which to balance the cost of minting with demand for the token and for housing. It uses an elastic supply to adapt to changes in demand. The price curve expresses the quantitative relationship between the value of the protocol and the token.

** Sample average length to be determined from modeling results and may be changed, see: Price Based Security Vectors