Pangonomics v2: moving beyond the white paper

Let’s get real, we are all here to make cash money/maximize a particular coin, but unless you only want to maximize Pangolin, you are in for disappointment. Right now, Pangolin liquidity pools are impermanent loss machines: 175k PNG are minted every day, and ironically, most of those PNG go to people who don’t have any interest in holding PNG. Non-PNG pools receive the same amount of rewards as Pangolin pools, and few people are interested in buying PNG (governance is nice and all that, but we need something spicier), so the poor souls stuck in PNG pools are in a constant loop of IL since nobody else wants to join those pools nor buy from them. In other words, PNG pools are PNG dumpsters, as ugly as that sounds.

Let’s analyze the current issues with the initial Pangonomics model and how to strengthen and improve PNG in the process:

1. What is Pangolin?

I know this may sound silly and obvious. We are a DEX, of course. What are DEXes? They are places where people come together to provide liquidity in exchange for rewards (usually transaction fees, and anything else is just the cherry on top of the cake), and then offer their pairs to buyers who proceed to make a fair exchange according to the AMM algorithm.

Here we can identify two types of actors: the liquidity providers and the buyers. These are the basic actors of any DEX. In order to attract buyers, the liquidity providers require to have, well, liquidity, in order to have a big range of products to offer to the buyers, and they have to have them in big amounts to offer the littlest amount of slippage as possible.

2. What is PNG?

We all know it is a governance token. It’s like a non-dividend giving share in any traditional stock. Its price is driven by speculation, or how much is it worth to have a say in what is done with the platform. A basic DEX doesn’t need governance, it just needs a few smart contracts put in place, so I assume Pangolin is aiming for much more. Indeed, we should, because other DEXes are already rapidly popping up in the Avalanche network and competition will be fierce.

3. Why PNG?

The issue is you don’t necessarily need PNG to make a change, just a good idea and/or development knowledge. Nobody will say no to an objectively positive pull request, and if an idea posted in this forum is good enough, some person with enough delegated PNG will be able to copy it and propose it. We would be basically adding extra steps to every no-brainer addition. However, PNG is much more useful for those “grey” proposals where different parties may have different interests, like the 0.05% fee switch or what to do with the Treasury funds. Still, PNG is a token designed to have a say on how will Pangolin make you money (and I use the word “money” liberally, since you could be an AVAX maxi like me) in the future.

Now, let’s get real: all these “governance tokens” are actually a way to compensate LP for being exposed to IL (the 0.3% fee just doesn’t cut it for anything but stablecoin pairs). They are rewarded for taking risks with what’s essentially a boy scout medal that somehow has value. Mind you, I am not criticizing the idea of governance, since I think it can be used for some great things, but there is no incentive to holding PNG, so it is just going to get sold until it has more utility than playing pretend that the devs can’t improve the platform by taking decisions unilaterally (which would be a “benevolent dictatorship”).

4. The naive Pangolin economics

I guess the idea was to make the project as vanilla as possible at the beginning, but if we analyze the way the rewards distribution was designed, it is clear why our token price/TVL ratio is so low: there is no point in holding Pangolin. A fixed amount of PNG is minted every day, which means the first few days PNG will be very scarce, as time advances, the ratio of tokens minted every day and circulating supply will become smaller and smaller. I think this was designed this way to make it fair for everyone at the beginning, and it makes plenty of sense if we think of Pangolin as a 100% community driven project, but two things were not contemplated in this model:

  1. There is absolutely no reason to buy PNG unless you want to join a PNG LP (and you probably don’t want to do that due to the crazy IL built into the early inflation of the circ. supply). You can get the same amount of PNG by providing AVAX/ETH liquidity since the rewards are distributed equally among all the pools. I think this is the biggest mistake with current Pangonomics.
  2. The hypothetical existence of a selfish or potentially malicious whale using their equally distributed PNG rewards for providing liquidity to something non-PNG related to dump on PNG holders for tokens they are more interested in (essentially giving more money to people who don’t believe in the project and are not taking one for the team while draining money from people who do believe in the project).
  3. The hypothetical existence of a definitely malicious whale farming PNG or buying cheap PNG en masse (and then dumping it immediately afterwards) to sabotage the project by voting on bad decisions in order to ruin the platform for everyone and pave way for their competitor projects.

People are under the assumption that all whales are friends and we should be grateful to them for providing so much liquidity to the project, but in the Wild West of crypto, being a cutthroat millionaire who wouldn’t mind losing a bit of money in order to ruin a few small fishes to pump his other bags is not a remote possibility.

5. On The Whale Question

Do we just get rid of whales somehow? Of course not. As said before, whales are an integral part of the ecosystem: they are the biggest liquidity providers and the people exposing themselves to the largest risk of IL, so it is normal that they get rewarded proportionally. However, the current Pangonomics are designed under the impression that they are providing liquidity to cooperate with the small fishes in making the platform better for everyone, so they and everyone else can benefit from a better platform. Some are not: they are here just to dump their literally freshly printed money on people who do believe in the project. In a way, non-PNG LP whales are disproportionately rewarded for receiving the same rewards as everyone else while providing nothing to the PNG token itself, which, in its infancy, will suffer from absurd amounts of inflation (and therefore devaluation and IL). The only way to offset this is by rewarding PNG holders over PNG dumpers: if whales want to benefit from Pangolin, they have to provide to Pangolin and its userbase.

6. Hate the game, not the player

I can’t blame whales for taking advantage of the way the system was set up. Tokenomics were designed under the assumption that the market would regulate itself, and well, it is doing exactly that: the market has decided PNG is only useful for dumping (which is true, since there are no incentives to buy or even hold PNG right now, as you can just buy in later at a much cheaper price once it starts hinting at having some utility). Whales didn’t become whales for being charities, so if they decide accumulating AVAX is more useful than accumulating PNG, they will do so. They are helping the platform, yes, but not helping the Pangolin project at all, since Pangolin supporters are actually being punished for being treated exactly as the rest.

7. The real question: how do we fix this?

Almost all other DEXes with platform token farms (say, Pancakeswap, Bakery, DodoEx etc) give disproportionately big rewards to their token holders in order to incentivize holding. Pancakeswap, for example, has a x30 reward for being a BNB/CAKE LP provider. Most DEXes incentivize their NetworkCoin/PlatformToken LP pair to reward their users for making access to their token easier for new users, as well as giving an incentive to hold and/or compound your gains in that pool instead of just spending your platform token in something else. In a way, these tokens are “artificially” more valuable even if they are also governance tokens, since the economy of the project rewards people for holding onto their rewards or using them to provide further value to the platform. New people looking to get in will also buy from that pair due to its high liquidity in order to become a LP too, so as it turns out, the “native LP” will have a big volume and buying incentive. So the most obvious solution to this problem is to push whales to play the Pangolin game by rewarding them for compounding their PNG gains into more PNG liquidity. But wait, there is more.


A DEX is nothing without liquidity. Users come to a DEX to exchange coins: if the offers in that DEX are not attractive, users will not be attracted, simple as that. This is the reason Uniswap is still #1 despite having premium gas fees: they have almost every token you can imagine. Here, we have a grand total of 34 tokens and only 8 pairs have liquidity above $10m (and, out of those, only one of them is a PNG pair). In addition, PNG farming is offered to pairs with little to no liquidity (PNG-YFI?). Since the rewards for those low liq. pairs is proportional to the TVL of the platform, nobody has any incentives to add liquidity to such pairs.

9. Issues digest

  1. Without a proper governance tokenomics model, a malicious whale could essentially perform a governance Sybil attack by controlling most of the liquidity in the platform (or buying then dumping PNG) and choose to sabotage every vote. While people think a whale would never do that because it is idiotic to waste money to sabotage a project, it wouldn’t be unheard of competitors doing this kind of stuff to boost their own platforms,
  2. There are no incentives to hold PNG. Ironically, you are better off mining PNG from the AVAX/SUSHI pool and then dumping it on the AVAX/PNG guys to get more AVAX. Look at the AVAX/PNG pair stats and see how most transactions are PNG sales and not buy-ins. It is depressing.
  3. LP mining is a mechanism used to incentivize providing liquidity in certain pools. As shown by how many PNG pools have near to no liquidity, people mining PNG aren’t being motivated enough to provide liquidity to low liq. pairs.

10. Some possible solutions

a. No one man should have all that power

Quadratic voting power has been proposed as a possible solution, but such a system actually rewards people who can afford to burn thousands in network fees to make a lot of low PNG accounts and essentially zerging a vote. Taking inspiration from DODO’s Dodonomics v2 and their non-transferrable vDODO token, a possible solution would be to ask for a Proof of Commitment: in order to be able to vote, you need to get a “voting license” by minting a gPNG (the g would be for “governance”) of a flat amount X of, say, 50 PNG. The PNG used to mint a gPNG go straight to the Treasury, and would then be burned, partially burned or timelocked (with exit penalty fees or whatever). Every gPNG holder would then have the right to vote with a base voting power of Y (let’s say 25), plus some quadratically-calculated Z extra voting power from each PNG they hold. Since kidding ourselves and pretending an omegawhale wouldn’t still try to get more voting power by multi-accounting, minting of additional gPNG could be allowed, which would allow the holder to set back their “quadratic tax” one step lower (essentially the same as multiaccounting, but without extra steps). Honest whales are still rewarded for their service, average users can participate in the governance (as it should be if we are to be truly community-driven) and malicious whales would have to waste insane amounts of PNG to sabotage the platform.

b. PNG as more than a governance token

Pancakeswap allows for cross-promotions with other projects by allowing people to stake their CAKE to get other tokens. We definitely want this, as it provides incentives for projects to be advertised in the platform as well as rewarding PNG holders. It could be a good idea to boost the value of PNG to also allow projects to launch their LP in Pangolin by letting the community crowdfund the PNG part of the initial liquidity pool in Pangolin (thus making PNG liquidity pairs much more important by giving PNG holders the opportunity to kickstart these projects and using PNG as the main quoted asset for new projects launching on the platform).

b.2 Harmony through discord

gPNG was only one idea of “PNG compaction”. DODO’s vDODO has a cute little feature that basically mints more vDODO to vDODO holders and also rewards long term holders by redirecting part of the platform fees as well as vDODO exit fees to the rest of holders. If we get imaginative, we could make different derivative tokens that could lock up PNG in the Treasury:

  1. gPNG: already explained above
  2. fPNG: enable the fee switch, then distribute most of the fees to fPNG holders. fPNG don’t count towards voting power, but they give you dividends on all the transactions made through the platform. Staking these fPNG could allow you to give you shares of all the collected treasury and use them to either collect dust and automatically diversify your portfolio or be able to claim the fees via some AMM-like mechanism depending on each coin’s availability (high demand coins would require a lot of shares to claim, whereas low demand coins wouldn’t). fPNG don’t count towards voting power, and have a high exit fee.
  3. mPNG: enable the fee switch, then separate the PNG fees into a different pool of the Treasury apart from the fPNG pool. mPNG stakers then get shares of the PNG collected through the fee switch. mPNG count towards voting power, but proportionally less than liquid PNG (since you are already getting liquid PNG from holding this). fPNG exit fees are distributed to mPNG holders.

Selfish whales could transform their PNG into fPNG, but then they could miss on potential Treasury governance proposals that could adjust fee rates in the future, so they may still want to keep some gPNG and PNG for voting. Pangolin maxis could stake their PNG as mPNG to achieve more PNG for whatever purpose they desire. A perfect balance between non-transferable PNG derivatives with different voting powers and functions could add a little bit of gamification and strategy to the platform, as well as forcing people to decide whether they want to use their PNG for having a say or just making money. Very greedy whales could get punished by missing on votes that could potentially work against them, so they are forced to balance their risk/gain ratio.

c. Liquidity bounty hunting

We need more tokens, we need more liquidity. We need AEB to make it easier to get some tokens whitelisted for import into Avalanche (maybe through PNG governance proposals/bounties?), then give LPers of people who have brought those tokens through the AEB neat rewards (namely, more Pangolin). In addition, PNL mining for PNG-rewarded pools should be proportionally bigger for small liq. pools than for big liq. pools due to the increased risk of slippage. Doing so would allow Pangolin maxis to arbitrage between low. liq pools daily to get more Pangolins to stabilize liquidity between different pairs, which in turn would generate volume, which in turn would please LPrs, fPNG and mPNG holders.

d. Pain and gain

AVAX/ETH or AVAX/WBTC LPers have been pretty comfy mining Pangolin since they have not suffered as much IL as people providing to Pangolin pairs. Pangolin has devaluated a lot (as expected) due to early days inflation. However, they got the same compensation as people that were more exposed to risk. Would you really reward an USDT/DAI pair the same way you would reward more volatile pairs? No, it makes no sense to give people playing it safe the same rewards than people taking one for the team and exposing themselves to risk. I propose to modify the way PNG LP rewards are calculated to weigh in the IL they have suffered in the last 7 days. One of the main attractives of liquidity mining is that it offsets the pain suffered from IL, and right now, the only ones suffering are PNG LPers.


I like the idea of promoting more coin pairs. The PNG community might want to vote to include other potential high volume pairs into the PNG reward system.
At first, I’m thinking of high marketcap ERC20 compatible tokens like DOT, BNT and BNB. So, we might want to think about adding PNG rewards to AVAX/DOT, AVAX/BNT and AVAX/BNB liquidity providers. This will also help in spreading PNG rewards more widely and reduce selling pressure.

I don’t like the idea of adding more sub coins or adding complicated voting weights. It makes something simple less transparent for no good reason.

As for tokenomics, I think it’s fine as it is and estimate it will stabilize when voting gets going and when more PNG tokens are in the system. There are always price shocks with a new token when it’s still in low supply, and PNG is no different. Sometimes traders get lucky when the price was a bit too low, and sometimes traders get unlucky when the price was a bit too high. We still don’t know were it will stabilize and it might go back up to new highs when the dex grows.

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I am god damn sure that DEV’ s dont think about the situation more than this!!!

Thank you very much for critics and proposals. I agree PNG long term holders and PNG pair liquidity providers have to get more rewards than others. As soon as voting/governance becomes active we need to put rewarding system for png holders and PNG pair LPs on top agenda. That would be great start!

I also agree that before making any votings we might need to review governance mechanism to make sure it is democratic enough.

Looking forward to voting!


Dear Neirenoir

How are PNG minted daily ? What is mathematics of this minting ?
How are PNG burned daily ? What is mathematics of this burning ?

Dr. Engin YILMAZ

Well thought and well spoken. But looking from a perspective of an average user, adding sub-tokens like gPNG, fPNG and what not could potentially confuse new users. As DeFi
space grows exponentially, capturing new users is ‘a must’ objective. Simplicity, transparency and low transaction costs will IMO be huge if not deciding factor when it comes to adoption by masses. For example, compare Uniswap to SNX. Both great platforms in their own ways with one fundamental difference. Anyone can learn how to use Uni in minutes, for SNX you need to dig in and stay with it but payout is unreal and not many people have time and resources to follow up. Average Joe entering Defi for the first time will just go to uni and buy some random shitcoin in hope of making 100x in two days.

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Yeah. The trading in the AVAX-PNG pool is one way. People swapping PNG for AVAX. That situation somehow needs to be fixed. Either AVAX-PNG pool gives AVAX rewards or the rewards in PNG have to be much higher than other pools.

Firstly, thank you @neirenoir for pulling your argument together. I don’t agree with some of your conclusions (mainly because I have some problems with the assumptions, as I’ll explain), but at least you put a case together and a damn good one at that.

Regarding the above, you can already see how the market has responded with a massive CAKE/BNB pool sitting on Pancake as people take advantage of the multipliers. How does that help the exchange itself? The fact is that it doesn’t. It only helps LPs contributing to a pool that no one uses.

Trading volume is about $38m for that pair on Pancake swap. By last count, there is about $460m of capital locked up in that pool alone. You don’t need $460m in liquidity to support $38m of daily swaps. That’s just dead weight for any exchange. Capital needs to be used and allocated efficiently and I see nothing efficient there.

You could say “but it’s good for the governance token!” I’m not convinced it is given the amount of speculation in this market and what good is a highly priced PNG to an end user who comes here looking to swap AVAX-ETH, AVAX-SUSHI or countless other tokens we’ll need to provide liquidity for?

Let’s dig a bit further into CAKE since we’re there. How is the price of CAKE doing? If you ask me, it’s doing crap. 50% off its ATH. How is that possible with their “buying incentive”? Sorry, this is putting the cart before the horse for the simple reason they are flooding the market with very, very, very cheap CAKE. In fact, CAKE is only really “worth” 1/30th of whatever the real price should be because you can earn 30X from every dollar of liquidity invested.

Those multipliers look good on paper but they send price signals to the market that ultimately get reflected in the price. Pancake Swap have not solved the puzzle with their multiplier idea, nor have any of the other DEXs. You can game it all you like, eventually, the market finds a new equilibrium and you are back to where you started.

I don’t see any evidence of whales stockpiling PNG to dump it “en masse”. The biggest whale seems to be selling regularly. If whales were stockpiling PNG, you’d see the price appreciate significantly which would increase buying pressure so any dump would be absorbed or arbitraged out. I’ve said elsewhere that we need sophisticated tools borrowed from the derivatives market to deal with this problem.

No DEX has solved that problem. No CEX has solved that problem either! If people trade in those shallow pools, they have to accept the risk of extreme volatility and slippage. Furthermore, the devs made a decision to prioritise pools that would bring in the most trading activity. The other pools can build up over time.

If you have a look at my attempt to calculate that cost in that thread, you’ll see that it would be massively expensive (as in 7-figure costs) to do this for each and every vote. And that person would need to do it again and again to fight off any counter-attacks from the community or other whales. It starts getting expensive very quickly.

This risk is actually a huge red herring at this stage of development. If you look at voting behaviour on other big DEXs, you’ll notice the usual pattern - low voter turn-out everywhere you look. That’s the big reason whales win again and again - they don’t need sybil attacks when only 5-7% of wallets actually vote. The remedy is actually much more mundane. Get people engaged enough to vote.

I think the bigger risk that has to be solved is not vote hoarding but vote buying: On-Chain Vote Buying and the Rise of Dark DAOs

Interestingly, the solution to both is using what has been applied for centuries in corporate governance - introduce humans into the picture. We need a board of active, trusted (sorry, had to say this) users from across the spectrum prepared to vet, qualify and approve proposals voted on by the community. That will slow down obvious attempts to manipulate voting and ensure proposals remain in the best interest of all stakeholders and Pangolin. Luckily, this is in train.

I’ll know we’re close to achieving a healthy state when I hear users discuss issues like “brand damage”, and “user experience”. These are things, even for decentralised platforms.

I really like this idea - I don’t know if we need more minting but others have raised the possibility of factoring in “commitment” when calculating voting rights.

I think the cause-effect in the highlighted section are back-to-front. We need to generate volume - users swapping on Pangolin is the volume. It’s not enough to entice LPs with more and more rewards.

We need to entice traders as well and maybe that has to include prizes, competitions, “bonus” PNG for volume trading etc etc. Have a look at Binance - it looks more like a casino than a serious exchange. Same with Pancake Swap. The team at Binance know how to attract traders (even if they haven’t got their DEX right) and we could learn a few things from them. :wink:


I should have added one of the key insights provided in the conclusion to Ari’s paper I referenced in my reply:

The space for designing mechanisms that enable new forms of abuse with lower-than-ever coordination costs supports the position that votes should be used for signals not decisions, and that a wide variety of voting mechanisms should fill such roles. Without such safeguards, it remains possible that all on-chain voting systems degenerate into plutocracy through direct vote and participation buying and even vote tokenization.

Great proposal, totally agree in this initial stage of life for PNG the pair for platform(avax)/dex(pgn) should be rewarded much better than other pairs.

We should promote the adoption and risk, so more people get interest. For sure once they start using it and see how fast and well it works will stay here.

Also as other people have sugested in order to have a good dex we need more pairs, so it is also importart to have more bridges in the future, would be nice to have wTokens from other platforms like ETH, DOT, BNB.

There are many areas to improve but totally agree that we should start by giving better reward to initial adopters as much in economical as in vote power.


It is basically positive when people take the initiative and want to do something good for the community, for the project.

I would like to list some points below to structure the whole need for action.

  1. The organization under consideration is the decentralized exchange (DEX) ‘Pangolin’

  2. Understand the organization and its context
    a) What is the context of the organization?
    Answer: Purpose of the organization, vision, strategy, etc. The organization must understand the topics relevant to its purpose. What does that mean in concrete terms: Pangolin is a decentralized exchange in which a wide variety of coins can be traded / exchanged for certain fees. Furthermore, money can be deposited in pools at Pangolin in order to get a return.

Question to the community:
What is the Pangolin Decentralized Exchange for you, what are the relevant topics for you?

  1. Understand the expectations of interested parties
    a) Who are the interested parties?
    b) What are their expectations?
    Answer a): Anyone who wants to use pangolin to trade or provide money.
    Answer b): The groups who want to exchange want to carry out their exchange at low fees. The people who make money available want as high a return as possible. Furthermore, the process should, among other things, be quick and easy to carry out.

Question to the community:
Who are you an investor, a user? What are your expectations of the decentralized exchange?

  1. Pangolin and its processes
    a) Which processes are taking place?
    Answer: Technical process, i.e. programming. Communication content such as email etc.

Question to the community:
What do you think are the processes in the organization. Which are important from your point of view?

  1. Leadership of the organization
    a) Who is the lead?
    Answer: Pangolin is managed decentrally, i.e. the people, groups who own the Pangolin Coin PNG. Everyone who owns a PNG Coin is part of the comunity. With the amount of PNG per person, the group decides on the weighting of the vote.

Question to the community:
what do you think the leadership should be like in the organization?

  1. Roles, responsibilities and authorities in the organization
    a) What roles and responsibilities are there in the organization?
    Answer: The organization, i.e. the pangolin community, determines the necessary roles. This also applies to responsibility and authority. One role is the PNG community. Another could be the social media coordinator or the person responsible for public relations etc.

Question to the community:
What roles does the organization need? What responsibilities and authorities should the people in each role be given?

  1. Objectives of the organization
    a) What are the goals of the organization?
    Answer: Be sustainable, i.e. be profitable, be accessible to everyone, be the best decentralized exchange (DEX).

Question to the community:
what goals should the organization have in the short term, long term?

  1. Support, Resources
    a) What resources does the organization need, what support does it need?
    Answer: it needs investors, i.e. capital providers. Furthermore users of the decentralized exchange. The organization also needs partnerships with various developers, projects that provide interfaces to other organizations.

Question to the Community:
Which partnerships would you suggest?

  1. Evaluation of performance
    a) How efficiently does the organization work?
    Answer. Key figures must be defined, which is already given with the Pangolin Analytics tool. But it also needs key figures for the roles and responsibilities in the organization. How effectively did the people, groups work, how much benefit did the people, groups bring to the organization, etc.

Question to the community:
Which key figures are you interested in, which are important to you?

  1. Continuous improvement
    a) what needs to be done for the organization to achieve its goals?
    b) How do the organizations deal with problems and undesirable developments?
    Answer a): The roles and responsibilities in the organization are responsible for this, see also point 6.
    Answer b) be resolved immediately in the interests of the organization and ensure that they do not arise again

There should be no overregulation and there should not be too much formalism. Rules are necessary according to the principle ‘as much as necessary as little as possible’.

Who are we, what is the goal, how do I reach the goal.

Today Pangolin is a decentralized exchange, but what it will be in 2 or 5 or 10 years, what can develop from the decentralized exchange (DEX), what partnerships there will be, we do not know now. But it is in the hands of the organizatio.

It will be exciting !!!

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YES! Binance is not great let face it. Food association, color scheme soft on the eyes. All these factors implicitly give a sense of safety. Another thing Binance does well is their CEX training and academy resources. I no longer use Binance, however, I learned everything I know about farming, etc through their platform. Ease of access was another good feature. PNG credit card Apple Google pay feature is a very strong advantage, I like that. Also, in my experience PNG is the smoothest app I have used on Avalanch and I trust it. Hopefully, a KYC off-ramp is implemented in the future. TBH I have tried out many apps and now i just want something that has start to finish features. Tokenomics all that stuff is fairly relative they may start higher etc but essentially end up similar. So, PNG is where ill stay. This forum is nice too. Socials are becoming I little unbearable, what do people honestly expect. they are certainly not very diplomatic its fine to raise concerns from both sides that’s how things improve, it is unacceptable to insult and degrade ppl, tho. Unfortunately, i am seeing a lot of this. Cheers!


If by your argument the biggest whale is selling then what does that tell you?