Summary:
The post aims to discuss a potential new token economics for the Parallel protocol.
Context:
Introduced in 2021 with the launch of the Parallel protocol, the MIMO governance token and its token economics have enabled the beginning of protocol decentralization in an attempt to align the interests of users, MIMO token holders and the protocol. However, after more than 3 years in use, the model is showing its limitations. We are therefore opening a discussion on a new tokenomics.
Disclaimer: The proposed new tokenomics outlined in this post is subject to change. The current post aims to involve DAO members in the process. The comments in this document are made in relation to the currently proposed tokenomics. Therefore the information provided is only relevant given the current circumstances of the protocol and may become outdated.
Note: For coherence purposes we assume the MIMO token migration to PRL token discussion has been approved by the DAO (which is not the case right now).
Rationale:
I. Overview:
(detailed diagram available here)
The new Parallel protocol tokenomics is a complete overhaul of the way PRL is involved in the economic and social operations of the protocol, with the aim of aligning the short-term and long-term interests of PRL users, holders and the protocol.
The biggest changes introduced are PRL staking; Parallel Boost (Paraboost), a new incentive model to reward positive externalities that benefit the protocol; and the distribution of revenues generated by the protocol to PRL stakers.
II. Epoch Concept:
The epoch will serve as the central unit of time in the new tokenomics. An epoch consists of a number of X days (determined by the DAO in the formal proposal). It will be used to determine the ParaBoost calculation period, the duration of the cooldown during unstaking sPRL1 and sPRL2 and to manage the distribution of fees to sPRL1 and sPRL2 holders.
III. Staking Mechanisms:
We propose to give PRL holders the option of staking their tokens in 2 different forms: sPRL1, single PRL staking; and sPRL2, PRL/wETH 80/20 BPT staking. Each option allows holders to choose the risk they are willing to take.
sPRL1 & sPRL2 will be represented in form of tokens and will be freely transferable, however in case of transfer, the accumulated Paraboost will be lost (more details about Paraboost later in the post).
The PRL staking module can be deployed on several blockchains at once; we propose to deploy it on both Ethereum & Polygon PoS, the two blockchains where the Parallel protocol is currently deployed.
It will be possible for sPRL1 and sPRL2 to initiate unstaking at any time, against a cooldown period of N epochs (duration to be determined in the formal proposal). However, they will be able to bypass the vesting period by paying a penalty fee (see diagram below). The penalty fee will be taken from the amount of SPRL1 or sPRL2 being unstaked and will be sent to the DAO Treasury.
- sPRL1: Single PRL Staking
A basic single-sided staking for users who do not want to take an impermanent loss from tokens in liquidity pools. Each PRL staked as sPRL1 will count as x1 voting power. The unstaking cooldown will be determined in the formal proposal.
- sPRL2: Liquidity Pool Staking
A PRL/wETH 80/20 Balancer Pool Token staking for users who want to get the maximum voting power. The staked LP as sPRL2 will itself be staked on Aura under the hood, with rewards in $BAL and $AURA automatically sent to the DAO treasury.
As these stakers help Parallel increase the PRL liquidity a x2.5 boost on the equivalent value of PRL tokens staked is applied. This boost will be applied for ParaBoost.
IV. PRL Emissions:
Currently, 95% of MIMO token issuance (PRL tokens) is sent to the DAO treasury, while 5% is distributed to vMIMO holders. With vMIMO being discontinued, we propose to distribute 100% of the remaining inflation to the DAO treasury.
This will reduce net PRL inflation to 0%, reducing selling pressure to 0. The sPRL1 and sPRL2 will receive fees based on the revenues generated by the protocol (see below in the proposal).
V. ParaBoost:
Parallel Boost (ParaBoost) is a concept that distributes fees to PRL stakers who generate the most positive externalities that benefit the protocol.
This new concept aligns the short and long-term interests of both the protocol, by encouraging more use of it; PRL holders, by encouraging them to stake their tokens and interact with it; and ordinary users, encouraged to buy and stake PRL tokens to obtain additional benefits.
The ParaBoost will be computed offchain by Cooper Labs at the end of an epoch and a merkle root is sent to the sPRLDistributor contract. To allow anyone to permissionlessly verify and ensure that the ParaBoost system functions properly, while minimizing the risk of hacking or failures, each merkle root pushed is followed by a dispute period of 72 hours. During this period anyone can re-compute the merkle root and dispute the original merkle root. If a dispute is triggered, the merkle root of the sPRLDistributor contract is frozen to its last valid version. Disputes are then evaluated for validity: if a dispute is considered valid, the disputed merkle root is revoked; if invalid, the dispute period restarts, leaving the disputed tree still unvalidated.
Note: The compute formula will be detailed in the formal proposal.
- Borrowing:
Borrowing is the main revenue generator for the protocol. That’s why we’re proposing to make it one of the most important boosters, which can also be seen as a kind of discount on borrowing rates. Borrowed paUSD and PAR will be included in the boost calculations.
The amount of tokens minted will be computed on a daily basis and averaged at the end of the epoch to determine the boost.
- Liquidity Providing:
Available liquidity is one of the most important indicators of confidence in stablecoins and tokens. It both generates more revenue as more stablecoins are minted, and guarantees a better liquidity depth. This is why we propose to make it one of the most important boosters. This will include paUSD, PAR and PRL tokens in pools. The pools included in the liquidity providing boost will be determined in the formal proposal.
The amount of liquidity provided will be computed on a daily basis and averaged at the end of the epoch to determine the boost.
- Token Holding:
To encourage people to keep some tokens in their wallet, we propose adding a slight boost for holders of PAR, paUSD and PRL. The amount of tokens held will be computed on a daily basis and averaged at the end of the epoch to determine the boost.
- Voting:
To encourage involvement and participation in the protocol DAO, we propose to incentivize the PRL stakers voting for the proposals. The boost will be calculated based on the number of proposals posted and closed during the epoch.
- Pooling:
In addition to receiving boosted ParaBoost we propose to encourage long and stable user liquidity providing without forcing very long-term locking of the assets. We propose the following boosters for the amount of time sPRL2 is kept without requesting an unstaking. For any sPRL2 unstaking request, whatever the amount, the boost will be automatically reset to 0.
VI. Fee Distribution:
Currently, 80% of the fees generated by the protocol are distributed to the DAO treasury, and 20% are distributed to the parallel insurance fund. One of the major innovations we’re proposing with this new tokenomics is the redistribution of a portion of the fees generated by the protocol to PRL stakers.
Fees accumulated during an epoch will be automatically converted to a token determined by the DAO (to be determined in the formal proposal) on each chain where the protocol generates fees via an auctioneer module, and then automatically bridged to the fee distribution chain. A portion of these fees (percentage determined in the formal proposal) will then be distributed to PRL stakers according to their ParaBoost. The fees distributed to the PRL stakers will be distributed on the same chain (to be determined in the formal proposal, preferably a low-cost chain like Polygon PoS), regardless of the chain where the PRL tokens are staked.
Stakers will be able to claim their tokens during N epochs (to be determined in the formal proposal), after which the tokens will be automatically returned to the DAO treasury.
VII. Governance:
As explained in the post proposing MIMO → PRL token migration, the vMIMO would be unlocked to enable migration. Keeping the vMIMO as a voting token for future governance votes would therefore be impossible.
We propose to allow sPRL1 and sPRL2 holders to have voting power in the future, calculated via the ParaBoost of the previous epoch. In addition, we also propose to adjust the quorums for each type of proposal, with amounts that we judge to be low for the time being, due to the unknown effects of the new tokenomics. They may however be adjusted in the future via a new proposal:
- Parallel Integration Request: 100,000 sPRL (ParaBoost)
- Parallel Governance Proposal: 200,000 sPRL (ParaBoost)
- Parallel Improvement Proposal: 300,000 sPRL (ParaBoost)
The amount of sPRL (ParaBoost) required to publish a proposal on Snapshot would also be reduced to 10,000 sPRL (ParaBoost).
VIII. Parameters to be Determined in the Formal Proposal:
We invite everyone to comment on the proposal and ask any questions they may have.
In addition, there are still many parameters to be discussed, which will then be voted on in the formal proposal, including:
- Duration of an Epoch:
- 28 days?
- sPRL1 & sPRL2:
- Chains deployed:
- Ethereum ?
- Polygon PoS ?
- Unstaking Cooldown Epoch:
- 1 Epoch ?
- Chains deployed:
- PRL Emissions:
- 100% to the DAO Treasury ?
- Paraboosts:
- Borrowing:
- Amount
- Boosts percentage
- Liquidity Providing:
- Pools included
- Amount
- Boosts percentage
- Token Holding:
- Tokens
- Amount
- Boosts percentage
- Voting:
- Amount
- Boosts percentage
- Pooling:
- Duration
- Boosts percentage
- Borrowing:
- Fee Distribution:
- Chain to distribute
- Token to distribute
- Percentage to distribute to PRL stakers
- Claim Period:
- 6 Epochs?
- Governance:
- Tokens allowed to vote:
- sPRL1?
- sPRL2?
- Quorums:
- Parallel Integration Request: 100,000 sPRL (ParaBoost) ?
- Parallel Governance Proposal: 200,000 sPRL (ParaBoost) ?
- Parallel Improvement Proposal: 300,000 sPRL (ParaBoost) ?
- Amount to publish a proposal on Snapshot:
- 10,000 sPRL (ParaBoost) ?
- Tokens allowed to vote:
Note: The development of the PRL tokenomics as presented above is currently under active development, with development scheduled for completion in December 2024.
Means:
- Human Resources: This will be discussed in an upcoming formal proposal.
- Treasury Resources: This will be discussed in an upcoming formal proposal.
Technical implementation:
The technical implementation will be discussed in an upcoming formal proposal.
Author(s): Cooper Labs
Sentiment poll:
- For the new tokenomics
- Against/Rework the post
- Abstain
