$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. There are a number of different dynamics driving value accretion towards the CVP token.

  1. The autonomous, permissionless PowerAgent automation network requires competitive staking of CVP and accrues fees in CVP. Increasing numbers of network nodes across multiple (initially EVM-compatible) chains/layers will create continuing buy pressure for significant numbers of CVP tokens;
  2. All modular vaults and diversified baskets/indices/pools derive management fees which accrue to the DAO Treasury. Buying and staking xCVP entitles the staker to a share of the Treasury value, which can also benefit from capital operations like hedging;
  3. Staking xCVP entitles stakers to influence votes on meta-governance initiatives of other DAOS whose tokens are held in PowerPool baskets/indices
  4. Staking xCVP entitles stakers to influence internal PowerPool product management decisions relating to yield optimising strategies for each token in a basket, the percentage weighting of each token in a basket, the inclusion/exclusion of a token from a given basket, the proportion of a given sub-basket/pool in a higher pool-of-pools, and the decision to launch new thematic pools and pools-of-pools.

As the size/value of the pools under DAO management grows, CVP tokens acquire more and more value due to their meta-governance power over other protocols, as well as their influence over internal value allocations within baskets/pools managed by the DAO. Like veTokens, xCVP will be increasing valuable to other DAOs wishing to influence the yield strategies and token compositions of PowerPool baskets/indices.

Redemption/Locking Periods

Currently there is no locking or minimum redemption period for un-staking xCVP. This will be reviewed by the DAO as part of refining overall tokenomics. A minimal redemption period of about 1 week should be sufficient to preclude abuse of the voting system via flashloans, but not so long as to interfere with the arbitrage necessary to keep free-floating CVP and staked xCVP earning a share of the Treasury aligned in terms of price. The proposed one-week redemption period on xCVP is meant to preserve the governance value of xCVP, while discouraging flash loans and other gaming of the governance voting process.

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 funds listing in References). Eventuially, 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, whereever 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 intrinsic value somehow related to the fees streaming from pooled investment tokens already launched. The purpose of staking 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.