The Value Proposition of Aggregating Governance in the DPX Ecosystem
Welcome back to the second part of our Plutus Article Series!
If you missed out on the first piece where we detailed the participants in the Plutus ecosystem, we highly recommend skimming through that before diving into this one. The article series is designed to increase in complexity as we progress further into the series. You can catch up on the first article here.
The purpose of this article is to build on the previous one, taking a more objective look at why aggregating governance in the Dopex ecosystem is attractive not only to DAOs but to individuals as well. To kick things off, we’ll be taking a brief look at the history of similar models — namely CVX and CRV — in order to set the context and a comparison point for the dynamic between Dopex, Jones and Plutus. We’ll then segue towards examining the veDPX and veJones mechanics and through that make the case for Plutus as a governance aggregator. Some of the mechanics that we’ll discuss haven’t had mainstream attention yet, however we feel that these mechanics will ultimately prove to be some of the biggest value drivers to both Dopex and therefore Plutus as well. To close things off, we’ll have some implications, conclusions and a couple of carefully crafted predictions to quench your thirst for some bullish hopium. 😉
A Brief Primer on Curve, Convex and the Curve Wars
One of the simplest ways to really hammer a point home is through comparisons. Plutus has often been referred to as the Convex of the Dopex ecosystem. This is an appropriate comparison as the underlying mechanics and interdependencies between Convex and Curve are very similar to those of Dopex, Jones and Plutus. However, this is the ultra-simplified version and doesn’t do justice to the big picture and vision that we have in mind. That said, let’s walk through the comparison in order to set the stage. 👇
For the uninitiated, Curve is a stableswap AMM that directs large amounts of CRV emissions at its various different pairs. Users can lock their CRV for veCRV, and with that veCRV vote for more emissions on their preferred pair. A very important caveat for later — this is what we call synthetic yield as it is purely inflationary and emissions driven. This is currently the backbone and base layer for sustainable yield in DeFi. In the near future Dopex will throw their hat in this ring with more sustainable and organic yield — more on that later.
The takeaway here is that Curve is a key part of our current DeFi infrastructure. Realizing this, Convex launched in May 2021 with the goal of accumulating as much CRV as possible through people minting cvxCRV — Convex’s tokenized and max-locked version of veCRV. Very quickly people caught on and began accumulating Convex with the realization that one Convex token will control a significant amount of Curve tokens, thus working out to be a more cost efficient way of controlling Curve tokens. To recap — the primary goal behind accumulating CRV is to have voting power over where the CRV emissions go. These emissions are displayed as interest rates in the Curve UI that change based on how much emissions are pointed at a single pool (important to note for later!).
Convex offers a derivative of sorts for this exact purpose. This narrative quickly took off and was aptly titled the “Curve Wars” — where the primary strategy is to accumulate as much Convex as possible in order to incentivize specific pools. Surely you can see how this is attractive to DAOs looking to enhance their yield or more importantly stablecoin providers that absolutely need those emissions to stay viable and competitive in the heated stablecoin environment. Individual Convex holders benefit through this from a bribe system built on top of Convex, where protocols that do not have the resources or are not interested in holding CVX can bribe Convex holders for their governance power for a set amount of time. It’s very important to make a mental note here — the governance power of veCRV is what makes Convex so attractive and desired. There’s a lot to say about the Curve Wars in general — but the above should be sufficient enough to set the stage for the dynamic between Dopex and Plutus. If you’re interested in diving deeper into the Curve Wars, here’s a great article by @knowerofmarkets and the below image is a summary of what’s written above.
The Unique Value of Aggregating Dopex and Jones Governance
We’re on the brink of a Cambrian explosion in veTokens — it seems like they’re popping up everywhere after the marked success of veCRV as a tokenomics model. This is the direction Dopex and Jones are moving as well, with both having tentative veToken launches during Q2. The mechanics of veDPX are better known — although not entirely revealed — at this time, so that’s where the focus is going to be for this piece.
veDPX is the votelocked version of DPX. Similar to CRV, locking periods will vary from 1 week to 4 years. It has a significant amount of attractive properties — veDPX holders will control protocol governance. In addition to this, veDPX holders actually whitelist the pools and determine strikes for interest rate vaults. They choose which pools can be utilized for interest rate vaults and what the strikes for said vaults look like. They’ll also control strikes for SSOVs. If that alone doesn’t sound attractive enough, they also get ALL the fees generated by Dopex’s products, 12.5% of rDPX bonding revenue, access to treasury rDPX from re-LPing and control over the rDPX bonding parameters. veDPX is a cash-flow machine and a governance powerhouse.
One of the best examples from the Dopex ecosystem on why governance power is important comes from Dopex’s upcoming product — interest rate options. Interest rate options (IROs from here on out) will be essential to success in the Curve Wars — in short, they enable buying call/put options on the interest rates (more friendly term — reward APRs) of various Curve pools. This opens up a plethora of options for Curve Wars participants, as they will soon have another vector to work with.
With IROs you’re betting on specific CRV pool APRs (check the image below this paragraph). Think about it — what could a DAO with knowledge that a specific pool is gonna get heavily bribed through CVX do if they could bet on that? What if you’re a smaller protocol, know you might not be competitive in the bribe game but still wanna get competitive rates? Buy puts on IROs and hedge against poor APR on your gauge — effectively acting as a hedge. Opportunities are limitless. There are currently 10+ DAOs playing the Curve Wars — what happens when they realize that veDPX is necessary to get an upper hand?
If you don’t utilize IROs as a Curve Wars participant, you’re fighting with one hand and your eyes blindfolded — and in order to get a ticket to play, you’ll need veDPX. Alternatively, protocols could buy or bribe Plutus, which will control a significant amount of DPX’s circulating supply. This is only a single example from one product vertical of what DPX governance power is capable of. You can find more details on how IROs work here.
Dopex is the Future Base Layer for Organic Yield
We’ve spoken at length about the Curve Wars, but as important to note is Atlantic Options, which will enable organic stables yield that comes from actual product usage as compared to synthetic emissions like CRV. Diving deep into Atlantics is outside the scope of this article, but if you’re interested in doing more research, check out this thread. Atlantic Options will enable usage of collateral normally locked to be simultaneously utilized elsewhere through Dopex managed contracts. This is a zero to one moment for DeFi, and DPX is at the heart of it.
As what comes to veJones — based on current information, veJones will enable holders to direct Jones emissions at specific vaults, boost yield, get a share of protocol fees and also influence governance. More information will be released by the Jones team in the future, but even with the current specs accumulating veJones is extremely valuable. In essence this all flows back to Plutus holders and stakers in our ecosystem, as we’ll be able to offer both max boosted Jones LP vault APRs and Jones vault APRs. This means we will control and maximize yield throughout the entire stack — starting with Plutus, flowing through Jones and finally into Dopex. Pure yield on top of yield on top of yield — all delivered to the end user in an financially optimized way.
Conclusions and Implications for Plutus
The case for Plutus has never been stronger — both veDPX and veJones are still in their infancy and Plutus is in a unique position to front-run the opportunity, as it’s not yet apparent to many. Through acquiring mass amounts of veDPX and veJones, Plutus will effectively be used to control the upcoming organic base layer of yield for all of DeFi, influence interest rate options participants and decide on interest rate options parameters, direct DPX subsidies and affect SSOV strikes. Through veDPX fees and rDPX bonding rewards Plutus will have massive cash flow from the get-go, which will fuel our flywheel from the very beginning. The best part is that with the pace Dopex is shipping at, veDPX will absolutely have numerous use-cases in products that haven’t yet been revealed. This article has explained only some of the current use-cases where controlling governance will be valuable. Excitingly, this is just the tip of the iceberg.
The effect of amassing DPX under Plutus is exponentially more impactful than CVX amassing CRV. This is simply due to the fact that CRV emissions are extremely high, while DPX emissions are a fraction of CRV’s. Once DPX is minted for plsDPX, it is max votelocked forever. This leads to us having an impenetrable moat quickly after launch that will cement us as a key player in the Dopex ecosystem. Our targets are 10–20% of the Dopex circulating supply and significantly more for Jones.
This enables Plutus holders to have massive influence over both protocols — and this exactly is why it’s important that we’re aligned with both Dopex and Jones as aligned ecosystem partners. There’s zero doubt that options volume in DeFi will continue to grow exponentially over time. Our vision for the future is one where Dopex and Jones have matured into industry-leading DeFi options protocols, with Plutus having a significant governance stake and cash flow from both. This value will be redirected to Plutus holders and protocol users in full through several layers of yield, liquidity and bribes. Today options are under-utilized in DeFi, but as Dopex ships new products and DAOs realize the opportunity of utilizing IROs, Atlantics and even SSOVs, we predict demand for DPX will explode. When this happens, Plutus will already control a significant amount of DPX and Jones.
If you recall from earlier in the article, when DAOs and individuals realized that CVX was in fact the play to accumulate CRV governance, both tokens shot up in value with CVX gaining the most. When Dopex delivers on their products — as they remarkably have so far — we predict that the DPX governance power will be even more coveted than CRV’s and lead to a massive supply shock effect. We predict that most DAOs will be outpriced from accumulating Dopex outright — this means that they have to gain that governance power from elsewhere. It’s simple game-theory — what is the most cost efficient way for a DAO to get the influence they need to carry out what they’re looking to do?
The answer is Plutus.
To conclude — if TradFi options volumes are any indication, the DeFi options space is bound for 300x growth over the coming years and we’re extremely hard at work preparing for that scenario. Our vision of creating a governance aggregator for the premier options ecosystem in DeFi is clear and we’re aligned with both the Dopex and Jones team in order to deliver on this vision, with first core pieces of the product set to roll out in a matter of weeks.
We’re grateful to have all of you on for the ride — if you have any questions, please don’t hesitate to jump in our Discord to ask questions, chat and help us build. We’ve recently opened up a policy channel, where we’d love to have you giga-brains chat with us and contribute to the future of Plutus.
Next week in our article series we’ll be taking a deep dive into $PLS tokenomics and from that deriving the ultimate bull case for $PLS. Additionally, we’ll VERY soon be releasing public round and launch details.
Thank you for reading — we hope you’re starting to get as hyped as we are for the big weeks ahead! 🤗