Pangolin Tokenomics Improvement Proposal

Overview

This proposal is to improve the underlying tokenomics of the PNG token. Some of the reasoning behind the proposal:

  • 28 years token emission schedule is excessive for a DeFi protocol
  • No foundation allocation puts the sustainability of Pangolin’s future at risk
  • Improve our PNG rewards distribution to be more dynamic and competitive

We hope to achieve this by doing the following:

  • Moving to a (retroactive) four year emissions schedule for PNG
  • Allocate a percent of the supply to a Foundation

Goals:

  1. Gradually reducing emission schedule
  2. Fund the treasury to reach 30M PNG
  3. Provide attractive APRs in the first year to stay competitive
  4. Deflationary measures (burns)

If we look at the current supply and allocation of 538 million:

We will move to 230 million PNG (a 57% reduction in PNG tokens):

New Max Supply: 230M
Treasury Goal: 30M (13% of max supply), with 6M of the 30M set aside for the Team Fund

Duration: 4 years

How do we propose to achieve this?

Our proposed Emissions Schedule will look similar to the below:

Month Monthly Reduction PNG/day emitted PNG/day diverted Total Emitted Total Diverted Total In Treasury Total Burned Total Supply
1 0 175,000 0 5,250,000 0 14,000,000 0 25,250,000
2 0 175,000 0 10,500,000 0 14,000,000 0 30,500,000
3 0 175,000 0 15,750,000 0 14,000,000 0 35,750,000
4 0 175,000 0 21,000,000 0 14,000,000 0 41,000,000
5 0 175,000 0 26,250,000 0 14,000,000 0 46,250,000
6 0 175,000 0 31,500,000 0 14,000,000 0 51,500,000
7 0 175,000 0 36,750,000 0 14,000,000 0 56,750,000
8 1000 174,000 1,000 41,970,000 30,000 14,030,000 0 62,000,000
9 1000 173,000 2,000 47,160,000 90,000 14,090,000 0 67,250,000
10 1000 172,000 3,000 52,320,000 180,000 14,180,000 0 72,500,000
11 1000 171,000 4,000 57,450,000 300,000 14,300,000 0 77,750,000
12 1000 170,000 5,000 62,550,000 450,000 14,450,000 0 83,000,000
13 1000 169,000 6,000 67,620,000 630,000 14,630,000 0 88,250,000
14 1000 168,000 7,000 72,660,000 840,000 14,840,000 0 93,500,000
15 1000 167,000 8,000 77,670,000 1,080,000 15,080,000 0 98,750,000
16 2000 165,000 10,000 82,620,000 1,380,000 15,380,000 0 104,000,000
17 2000 163,000 12,000 87,510,000 1,740,000 15,740,000 0 109,250,000
18 2000 161,000 14,000 92,340,000 2,160,000 16,160,000 0 114,500,000
19 2000 159,000 16,000 97,110,000 2,640,000 16,640,000 0 119,750,000
20 2000 157,000 18,000 101,820,000 3,180,000 17,180,000 0 125,000,000
21 2000 155,000 20,000 106,470,000 3,780,000 17,780,000 0 130,250,000
22 2000 153,000 22,000 111,060,000 4,440,000 18,440,000 0 135,500,000
23 2000 151,000 24,000 115,590,000 5,160,000 19,160,000 0 140,750,000
24 3000 148,000 27,000 120,030,000 5,970,000 19,970,000 0 146,000,000
25 3000 145,000 30,000 124,380,000 6,870,000 20,870,000 0 151,250,000
26 3000 142,000 33,000 128,640,000 7,860,000 21,860,000 0 156,500,000
27 3000 139,000 36,000 132,810,000 8,940,000 22,940,000 0 161,750,000
28 3000 136,000 39,000 136,890,000 10,110,000 24,110,000 0 167,000,000
29 3000 133,000 42,000 140,880,000 11,370,000 25,370,000 0 172,250,000
30 3000 130,000 45,000 144,780,000 12,720,000 26,720,000 0 177,500,000
31 3000 127,000 48,000 148,590,000 14,160,000 28,160,000 0 182,750,000
32 4000 123,000 52,000 152,280,000 15,720,000 29,720,000 0 188,000,000
33 4000 119,000 56,000 155,850,000 17,400,000 30,000,000 1,400,000 193,250,000
34 4000 115,000 60,000 159,300,000 19,200,000 30,000,000 3,200,000 195,300,000
35 4000 111,000 64,000 162,630,000 21,120,000 30,000,000 5,120,000 198,630,000
36 4000 107,000 68,000 165,840,000 23,160,000 30,000,000 7,160,000 201,840,000
37 4000 103,000 72,000 168,930,000 25,320,000 30,000,000 9,320,000 204,930,000
38 4000 99,000 76,000 171,900,000 27,600,000 30,000,000 11,600,000 207,900,000
39 4000 95,000 80,000 174,750,000 30,000,000 30,000,000 14,000,000 210,750,000
40 4000 91,000 84,000 177,480,000 32,520,000 30,000,000 16,520,000 213,480,000
41 4000 87,000 88,000 180,090,000 35,160,000 30,000,000 19,160,000 216,090,000
42 5000 82,000 93,000 182,550,000 37,950,000 30,000,000 21,950,000 218,550,000
43 5000 77,000 98,000 184,860,000 40,890,000 30,000,000 24,890,000 220,860,000
44 5000 72,000 103,000 187,020,000 43,980,000 30,000,000 27,980,000 223,020,000
45 5000 67,000 108,000 189,030,000 47,220,000 30,000,000 31,220,000 225,030,000
46 6000 61,000 114,000 190,860,000 50,640,000 30,000,000 34,640,000 226,860,000
47 6000 55,000 120,000 192,510,000 54,240,000 30,000,000 38,240,000 228,510,000
48 6000 49,000 126,000 193,980,000 58,020,000 30,000,000 42,000,000 230,000,000



How will this occur?

I’ll summarise the key milestones for non technical people and then from there expand into some of the details:

  • An on chain governance proposal will be loaded (tentatively scheduled for 11th October 2021)
  • If the on chain proposal passes, then the emissions schedule as proposed above will be implemented
  • New universal guidelines for the new PNG distribution will be loaded

The way we do this can get a little technical, but for full transparency I think it’s important we provide an overview here:

  • We will code a Proxy contract. Our current Vesting contract will then push all PNG emissions to this Proxy contract
  • The Proxy contract will then divert some PNG to the Foundation and the rest of the PNG to a new LiquidityPool contract. All PNG emitted after the 4 years elapses will be burnt.
  • We haven’t finalised the design of the new LiquidityPool contract, but are currently investigating whether a variant of MasterChef or a new contract will make more sense logistically
  • These contracts will then be audited by Halborn

As always, would love feedback and any questions…

15 Likes

Hi,

Can you open up a bit how will the move to 230 million PNG ( a 57% reduction in PNG tokens ): happen ??

2 Likes

Instead of emitting 538 million tokens over 28 years, we will emit 230 million tokens over 4 years. This is around the number of tokens that would have been emitted after 4 years on the old schedule

4 Likes

Hi hariseldon2. :raised_hands: :grinning: Appreciate your hard work. I personally believe that PNG staking with AVAX rewards is a very good idea in order to defend PNG against AVAX. But the dynamic APR may be has a bit negative impact for PNG holders. May be we have to find the ways to keep the APR stable. Then it will be very profitable to hodl PNG in Pangolin environment than to transfer it to markets. I think that in order to keep it stable for 4 (four) years the Treasury needs AVAX. May be we have to talk to Avalanche Foundation for exchange of tokens. They also can offer AVAX / PNG staking on Avalanche Wallet. Let PNG holders earn AVAX, and AVAX holders earn PNG. Is it possible ? AVAX has no hodling problem. But PNG has. And it is the AVAX that puts pressure on PNG. MHO. :thinking:

2 Likes

Man, this is going to burst PNG price. And its not going to be stable.

I believe people also want a stable growth when compared to AVAX. The problem with the tokenomics is that it is un stable against AVAX. People are loosing money because of it. If the price is going burst then AVAX/PNG investors are going to loss AVAX’s this time which cause less liquidty.

I think this plan is too harsh and needs to be softened.

2 Likes

I think you will begin a big big fire, not only the PNG, you’re gonna burn the space :star_struck:
Waw this is big !!

Hi,
This does make sense. Maybe Avalanche Foundation can have a program to buy back some of the tokens through the DEX, kind of like Fed buying the gov bonds through quantitative easing.

I believe that we did find the solution for PNG with PNG-AVAX staking. I use DEXs of Ethereum, BSC, Solana. Pangolin is far more better than other DEXs. We just need to make it more attractive than other dexs. ( I mean although Pangolin app is better than its rivals, the token doesnt show that performance.) First thing that attracts users is the token. To make a token attractive it needs a stable growth. We just need a profitable balance of hodling PNG against AVAX. When I buy PNG I always worry if I did a right choice. Why to buy PNG if there is AVAX. What should I do with PNG if it is not profitable for me to hodl PNG ?!?!?!? Ethereum sits above 3000, but Uniswap at 20-30. The same can happen to AVAX and PNG also if we dont make PNG attractive for investors. Currently if you sell 100 AVAX and buy PNG and stake it for AVAX, after a day your PNG will gain 0.17 AVAX but loose 0.5 AVAX. This must be solved. MHO

3 Likes

@Leo_Pangolin
I have couple of questions;

What’s going to incentive liqudity providers to risk their assets in pools, if there would be no incentive after 4 years?

Is this tokenomics goes parallel with AVAX? I mean if someone from AVAX talked with you guys?

Is market maker hired? If hired who’s s/he?

Thanks in advance

2 Likes

Here is an idea to improve tokenomics and incentives not only for Pangolin but all currency related tokens in the ecosystem such as:

-PNG
-SHERPA CASH
-TEDDY & TUSD (not sure if you guys are synergizing with this one, from what I understand from Github repos you do and it makes sense)

What if these services allowed favorable operations for the holders of any of these tokens at a pre-determined amount, this can be announced on each platform on a header page such as "VIP: or “Privileges”.

In the page it would say: (Arbitrary numbers)

If your wallet have held for last 7 days:
-10000 PNGs
-7500 SHERPAs
-100.000 TEDDYs

You can transfer without paying Relayer fees (Sherpa)
You can borrow at a -1% discounted rate (Teddy)
You can trade paying 50% off discounted liquidity fees (Pangolin)

Large holdings can make sense to target big players or there can be another tier for smaller holdings as well. Kind of like IDO Pads do but from currency perspectives with synergies between currency dApps in the ecosystem.

2 Likes

I’ve been asked to add a section on what the Foundation will entail. So the Foundation is PNG set aside for the continuing support and development of Pangolin. Since Pangolin does not have VC funding, there is a need for us to ensure the financial sustainability of the protocol. So the Foundation will cover the following areas:

  • Support the ongoing development of the platform
  • Fund market activities such as market makers, CEX listings etc
  • Cover day to day operating expenses, these include (but are not limited to) marketing, advertising, infrastructure costs (nodes, backends, servers etc), community moderators, legal fees and business registration fees
  • Pay salaries for core team members
  • Provide incentive schemes for core team members

It can really be thought of as a Treasury allocation that is used to pay for Pangolin to keep operating indefinitely.

1 Like

Why will it burst the PNG price? The tokenomics improvmenents above make PNG more scarce, which should in theory increase the value of PNG.

Right now PNG is very inflationary, we are emitting a constant 175k per day for 4 years, which might be a reason why compared to AVAX, PNG is losing value. So with the improved model of gradually reducing emissions, combined with reducing max supply, we make PNG a more scarce asset, and therefore a more valuable asset.

3 Likes

Our market maker is https://acherontrading.com/. They are also used by other major projects on Avalanche as their market maker.

4 years is a long time for emissions. SushiSwap has 2 years. Trader Joe has 2.5 years. Snowball has 2 years. Uniswap doesn’t even have emissions and they are the biggest DEX. A big part of incentivizing LP providers is swap fees.

Lets take a look at the revenue for LP generated by swap fees. If you look at the AVAX-USDT.e pair, it generates over 100% APR on swap fees alone, even without PNG rewards. If we can get Pangolin to a point where volume is high enough, swap fees will be sufficient to incentivize liquidity. This is Uniswaps model. Also if we still need rewards after 4 years, we can move to a buy-back and distribute model where we buy-back PNG off the market with revenue and distribute as rewards to LP providers.
Screen Shot 2021-09-14 at 4.09.58 PM

6 Likes

So right now there are already 538M PNG minted and 474M is waiting in a TreasuryVester contract to distributed each day as liquidity mining rewards.

Here is the contract
https://cchain.explorer.avax.network/address/0x6747AC215dAFfeE03a42F49FebB6ab448E12acEe/read-contract

Since the tokens have already been minted, in order to reduce the max supply from 538M to 330M, we will be routing the excess PNG after 4 years to a burn address, therefore “burning” the excess and reducing the max supply.

3 Likes
  • reduce the max supply from 538M to 230M
1 Like

I forget to say that I fully support the proposal. Just want to add that maybe it would be more stable growth if we can change the half of the PNG to AVAX. If not then we have to make Pangolin a new Binance of DEXes in order to be competent with other conservative communities and DEXes. MHO.

PS. I am never sure of my ideas. I just say what I feel. :raised_hands: :star_struck:

How is the community considering the following:

  • What does competitive mean? Equivalent to expected market returns for LPs, 10% higher,…?
  • Competitive for all market pairs? Is there specific market share or verticals the community wants to target?
  • How will the elasticity of LPs change as Avalanche evolves (read:stabilizes)?
  • What is the objective function? Trading volume? LP returns? Liquidity by pair?
  • How does LP user experience play into consideration?
  • Would there be a floor, ceiling, emissions step size, and max WoW target change per pair?
3 Likes

I fully support improving PNG’s tokenomics by reducing the inflation. I can’t even wait to see the on-chain proposal. Let’s do it as quick as possible.

3 Likes

Great questions:

So in some calculations we’ve done internally, Trader Joe is emitting over 2 million USD worth of JOE tokens daily. While personally I believe that’s unsustainable, it does mean they can attract a lot of the mercenary capital. Pangolin as a point of comparison emits close to half a million USD a day. While this is a lot more sustainable, it does represent a risk of losing TVL.

So when we talk about being competitive, it’s about offering good APR’s to our Liquidity Providers in a sustainable and attractive way.

We obviously can’t and won’t be competitive for all market pairs. I’d prefer us to focus on blue chips and our universal guidelines already implicitly shows this strategy by requiring a token to be well established to qualify for PNG rewards.

In terms of our objective, I can only comment on myself and for me, it’s about Pangolin being a cornerstone of DeFi on Avalanche in the medium (2 - 4 years) and long term (4 years plus). To do that we have to be self sufficient. We’re a community project, so we need to be able to cover our operating expenditure and then earn a lot of revenue which we can divert back to our token holders. To do this we need to maximise revenue, while also diversifying revenue streams. So swap fee’s are a huge revenue source. We will also get a revenue source from our working capital used for our CEX listings. This is a very healthy start. However we still have a lot of work to do to improve this.

LP User experience is critical. We currently have a new UI being worked on and is one of the key focuses. Here’s a very early draft

In terms of emissions, we’re still going through the technical possibilities/limitations. So as soon as we know more we’ll share that more broadly with the community

5 Likes

What are the current revenue sources of APR for PNG/AVAX staking ? Can anyone give me some idea please ? :pray: