$CVP/xCVP Tokenomics & Rewards

$CVP/xCVP Tokenomics & Rewards

"The token incentives should be so strong that the equity becomes worthless. If you are concerned about getting equity + tokens from a venture rather than accruing all the value to the token, you don't know how crypto works. You might think you do, but you don't!"

The purpose of the PowerPool DAO is to execute a vision to drive maximum long-term value to the CVP/xCVP token pair, in part by deriving management fee income from structuring a Power Universe of thematic, diversified investment pools (and pools of pools) across multiple chains and layers, and in part by managing the xCVP staked token and NAV-linked DAO Treasury to offer a defensive ‘cushion’ for investor portfolios during inevitable periods of declining prices in the market.

Traditional hedge funds keep the majority of their gains on bearish, short positions inside vehicles internal to their private partnerships, which is why the leading hedge fund partners are all so rich (see leading hedge fund listing in References above). Initially, we want to market the CVP token as a defensive-minded ‘hedged’ token, with not only real fee income, but also with downside ‘insurance’ to reduce volatility of xCVP NAV. This adds value to CVP as collateral, for example, where DAO-managed lower CVP price volatility enables CVP holders to borrow against pledged CVP (and staked xCVP?) with much-reduced risk of liquidations. The DAO Treasury would initially hold all these defensive positions centrally and track the NAV accruing to xCVP, which we all hope will rise, driving up the exchange rate CVP/xCVP for investors who wish to un-stake xCVP and sell as CVP.

CVP/xCVP Tokenomics

Currently CVP is openly-traded on CEX (Binance) and DEXs (Uniswap v2). It currently has some vague intrinsic value somehow related to the fees streaming from pooled investment tokens already launched. The purpose of xCVP is primarily to create a claim on a proportional share of the Net Asset Value (NAV) of the PowerPool DAO Treasury. Fees, rewards, gains/losses on sales, opening and closing long/short, synthetic and derivative positions in the DAO Treasury over time will change the DAO NAV and therefore the value of xCVP, a proportional claim on that NAV. Over time, the exchange rate between CVP and xCVP will deviate around an initial 1:1 exchange rate. The DAO should periodically report the NAV/xCVP value to alert the market if the price of CVP deviates too far from the NAV-based value of staked xCVP. This creates opportunities for arbitrageurs to buy CVP, stake for xCVP, wait the 1-week redemption period and redeem for the higher value of the Treasury NAV. It is important to set not only the 1% xCVP staking/redemption fees, but also the xCVP redemption waiting period, low enough and short enough to allow arbitragers to keep the CVP/xCVP peg close, but not so short as to allow flash-loan financing and 'gaming' the DAO by buying and holding xCVP for only a few minutes in order to vote.

History of CVP Issuance & Distribution

Initially, x,xxx,xxx CVP tokens were minted, of which 5% were allocated to the core team with vesting at the end of 2021. Another 15% were allocated to 300 influential 'Testers', who in 3 rounds (alpha, beta and gamma) completed a series of tasks in return for tokens vesting. About 60 of these Testers did not participate meaningfully, and with DAO approval, CVP allocated to them was burned? The remaining 260 Testers are significant stakeholders and a resource the DAO can call upon to help execute the New Vision.


CVP Rewards Strategy

Launch 'Anchor' LP grant rewards: Institutional Investors/VCs/Partners

As the Power Universe expands, market-maker constraints like 'CEX-listed only' pool constituents need to be relaxed, in part because this precludes promising unlisted tokens that will 'pop' when eventually listed. As DEXes on L2 come to dominate, attractive constituents and some of the Power Universe pool tokens may never be listed on a CEX. This means that launching new pools on DEXes will require 'anchor' investors willing to mint and LP the initial tranche of long term liquidity for each new pool launch. BSCDEFI launch on PancakeSwap is a case in point.

As PowerPool begins to market the New Vision DAO platform & protocol to institutional investors, they will expect 'special treatment' given the size of their investments. So as to remain accessible and fair to larger retail investors we also target, we need to respect the rule that CVP is sold at market and xCVP is a proportional share in DAO NAV. Granting discounted CVP would be the same as paying extra rewards to xCVP stakers above a certain size and goes against the fairness principle. Also, any CVP block rewards on new product DEX pools should be available to small LPs as well.

A better pool 'anchor' investor/VC incentive framework would be to structure a special incentive in the form of a CVP grant providing launch pool minting and stable DEX liquidity in new Power Universe tokens. PowerPool should establish 2-tier LP rewards programs for each launch that incentivise 'anchor' Power Universe LPs with a direct CVP grant in addition to the public per-block reward. This implies that PowerPool must develop the capabilities to detect and track Power Universe LP tokens and amounts/durations on all chains where DEXes will be used for Power Universe tokens.

For BSCDEFI, we could structure a VC/Investor package that says...mint and put xx million BSCDEFI/BNB on PancakeSwap, and so long as the liquidity in the pool remains above the minimum threshold, the PowerPool DAO will grant XXX/month in CVP rewards on top of the per-block awards to be (partly) matched in CAKE by PancakeSwap (see proposal to PancakeSwap here). The BSCDEFI tokens in the PancakeSwap BSCDEFI/BNB pool would be generating all the BSC DeFi rewards being harvested by PowerPool. The VC/Investor will also have the option to hedge BSCDEFI and BNB on Linear, so there is no risk for the VC. By continuously staking their CVP rewards as xCVP the can gradually increase their stake in PowerPool and claw-back a portion of the management fees.

PowerPool could create a competitive situation where VCs/Institutions are asked to bid to mint each new pool and provide minimum liquidity for a minimum time, with hedging and CVP staking options at their discretion. The winner of the launch pool minimum liquidity tender/auction would be the one that undertakes to provide the most liquidity for the longest time at the lowest monthly grant reward.

Retail Investors/LPs