Possum Portals: A Deep Dive

Today, we’re diving deep into the realm of Possum’s inaugural product: Portals.

TL;DR

• When users deposit funds into a Portal, they begin to accrue Portal Energy, which can be thought of as time value
• Portals are publicly funded with PSM — initial funders receive bTokens, which can be redeemed for future PSM inflows
• Future PSM inflows will be supplied by arbitrageurs, who can deposit PSM to receive the entire balance of accrued yield within a Portal

The journey had begun, and the Possums had reached their first destination: a nearby planet long rumored to harbor an advanced civilization — but that was millenia ago. Ever curious, the Possum crew scoured every inch of long-forsaken land for any glimpse into the past. Days came and went, and with just as much consistency, their search continued.

Eventually, they stumbled upon what seemed to be an ancient piece of machinery. Etched into the rusted surface was a message that had withstood the passage of thousands of years; from what they could make of it, these machines had the capacity to bend time! Somewhere between a state of exhilaration and terror, the Possums had their first mission — revive this ancient technology!

We touched on some high-level aspects of Portals last week, but today we’re filling in some more details surrounding the product. As a refresher, users will be able to deposit assets into a Portal, which then invests them in various high-yield strategies on Abitrum, providing upfront yield in return. Every Portal has a specific underlying strategy which cannot be changed, so make sure you check the documentation and understand how the deposited capital is used.

While upfront yield is an interesting feature in itself, the mechanism behind Portals has lots of additional moving parts, ultimately creating a flywheel that rewards users and keeps the protocol functioning.

At the center of this flywheel lies a Portal-specific Liquidity Pool containing PSM tokens as well as a Portals-specific asset called Portal Energy (PE).

You can think of Portal Energy as the total time value accrued by depositors of the Portal.

Even though upfront yield is paid out in PSM, it’s actually accrued in PE. Generally, depositors will receive 1 PE per token staked per year. If you deposit 100 USDC into a Portal, you receive 100 PE. If the APY on the Portal strategy is 20%, that 100 PE can then be sold for $20 worth of PSM, which is then transferred to the depositor’s wallet.

Simply put, when the depositor goes to claim their yield, the Portal sells the PE for PSM and distributes it. By using an internal PE/PSM LP, the Portal is fully self-sufficient and doesn’t require continuous funding. Instead, it’s fully sustainable by PSM deposits via two methods: the initial funding process as well as arbitrage opportunities.

First, let’s go over the initial funding process.

When a Portal is created, a group of volunteers can fund it with PSM until a predetermined limit is reached. In reward for doing so, the funders get “bTokens,” which are receipt tokens that can be redeemed for a percentage of the Portal’s funding pool.

The funding pool leads us perfectly into the topic of arbitrage.

Each Portal will have a set arbitrage opportunity once it’s created. This can be achieved by depositing a certain amount of PSM in exchange for the internal assets of the Portal. For example, let’s say a Portal earns yield completely in USDC, and users can exchange 100 PSM for all of the Portal’s accrued USDC at any point in time. For simplicity’s sake, let’s say the price of PSM stays at $10.

Early on, while the portal is still accruing USDC rewards, this is an intentionally bad deal. The pool value is less than the value required to claim. However, once the Portal accrues more than 1000 USDC, users can deposit 100 PSM ($1,000) and make a profit. This is the second funding mechanism of Portals. It also ties back to the initial funders; 10% of the PSM deposits to capture these arbitrage opportunities go to the funding pool and be claimed by bToken holders.

Overall, the Portals system has a variety of mechanisms put in place to benefit all users involved. When users deposit assets into the Portal, they can get yield upfront rather than wait months or years for a return. Portal Energy serves as an ongoing representation of timevalue within each Portal, and is balanced in price against the value of PSM. As a result, there’s demand for PSM by multiple parties:

• Funders require PSM to prefund new Portals
• Portals collect PSM to increase the reward pool
• Arbitrageurs demand PSM when a Portal’s token balance exceeds the PSM value threshold

Arbitrage opportunities not only lead to potential profit, but also benefit the initial funders of the Portal by providing value to the funding pool. We’re excited to put this system into action soon!

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