PIP-XX: Tokenomics 2.0 - Emission budget

TL-DR: Define a budget for the Vote Flywheel over the next 3 years

With PIP-14 passing, Mithras Labs has started developing the Vote Flywheel with the hope of pushing out this major update before the end of year.

Before the deployment of these new tokenomics, we still need to iron-out four important parameters and processes that will define its success:

We are requesting a 3 year budget for the Vote Flywheel, as stakeholders will be able to lock as long as for 2 years and we need to provide them the guarantee that they will know what they get into for the full duration of their lock. In one year, we will be able to review the program and decide whether or not we want to continue / modify or cancel it. The DAO will be able to stop and recover the budget in case of an emergency.

We’ve been simulating the amounts needed for this program and have come up with a recommendation of 50,000 PAL per week. This results in a 2.6M PAL yearly budget and a total budget of 7.8M PAL over the next 3 years.

In order to justify this budget, we have simulated various data points we believe are key to understanding how efficient the tokenomics will be (data up to date on 15/09/23).

  • First we looked at the amount of emissions controlled both in $ amount and PAL.

Here we see that a max locker will control his principal’s equivalent in 54 weeks of emissions at the current number of lockers. This is an important onboarding metrics for news users as the opportunity needs to be high enough for the lock to be worthwhile.

Comparing this with more mature veTokens enables a good heuristic into how strong the onboarding incentive will be early on:

*Do note that these projects have all been doing emissions for 18-36 months, and began with similar efficiency metrics

  • We then looked at the inflation that this system would create:

This is to be combined with the liquidity program done in parallel (currently 35,000 PAL / week).

Considering Paladin has only emitted ~40% of the supply, we need to be able to decentralize further the project without diluting stakeholders too fast.

The vote flywheel will reward aligned stakeholders by giving them access to yield higher than the dilution, thus making the operation a net positive for those who are participating in making the protocol greater.

  • The budget was then compared to the total PAL left in the DAO treasury in order to gauge its sustainability

In short, this program could last more than 10 years with such a budget.

  • Last but not least, we checked the maximum price pressure the incentives could create on the price of PAL and how much price pressure was needed to cancel it out. We found it would have a maximum impact of -3.2% per week if there were no buying pressure. With 4000$ of buys, this would be entirely negated. Considering that a significant amount of the emissions will go to aligned stakeholders and that the emissions will likely have a vesting period, the risk seems heavily minimized.


  • 7,800,000 PAL over 3 years

Next steps:

  • Finish development of the system;
  • Vote on the three other proposals needed before deployment;

Voting options:
For / Against / Abstain

  • For
  • Rework
  • Abstain
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