Explaining Monarch Tokenomics
$MNRC
Monarch Finance’s token, $MNRC, is a governance token. MNRC can be locked as vlMNRC for 16 week intervals, enabling the holder of vlMNRC to manage the Monarch DAO treasury by participating in governance and receiving a percentage of the protocol’s generated yield.
Holders of vlMNRC are the Knights of Monarch, who play a critical role in Monarch DAO.
Monarch Treasury and Backing
MNRC is backed by a basket of targeted, yield-bearing governance tokens, which empower Knights with two key benefits.
First, is the governance power over key DEXes on select blockchains, which enables the Knights to use that accumulated governance power to direct liquidity incentives to key trading pairs relevant to Vassal DAOs. Specifically, Knights direct governance power towards maintaining the peg for the Vassal DAO’s liquid wrapped derivative. These incentives attract additional liquidity to these trading pair by increasing yields to liquidity providers, creating additional demand for the Vassal DAO tokens.
The second key benefit is the diversified yield generated by these governance tokens. This basket of targeted governance tokens benefit from trading fees and/or liquidity bribes. All initially targeted external governance tokens are generating at least 25% APY, and most generate significantly more than that. Of course, as scions of the regal realm, Knights seek to swell their coffers and accumulate additional treasures, and these treasury assets will ensure as much.
The Relationship Between Monarch DAO and Vassal DAOs
Vassal DAOs provide significant utility to their partner ve- and ve3,3 protocols, primarily in the form of a liquid wrapper for their max-locked ve-tokens. But that utility is greatly reduced when there is slippage trading out of that liquid derivative. And most existing liquid derivatives have some slippage, if not significant slippage.
The original liquid ve-wrapper in DeFi was Convex’s cvxCRV. And as of 4/18/24, there was~10% slippage on a $10,000 trade of cvxCRV back to the naked CRV governance token, per the above Tweet from Crypto Peg Bot. Many liquid wrapped derivatives suffer from much worse slippage. Below, you can see that some FXS liquid wrappers have ~25%-40% slippage, effectively eliminating their utility, as of the same timeframe.
Vassal DAOs pay a tax to the Knights of Monarch DAO to solve this problem for them. 20% of the token supply for each Vassal DAO is max-locked and awarded to the Monarch DAO treasury, giving Knights the financial incentive to optimize the value and utility of Vassal DAOs, and use the accumulated governance power to direct liquidity to the relevant trading pairs. Using the original as a hypothetical example, Monarch DAO would use its governance assets on Ethereum to direct liquidity to the cvxCRV/CRV liquidity pool, ensuring the peg would remain stable.
By creating this symbiotic relationship between Vassal DAOs and Monarch DAO, an economic flywheel is created compensating Monarch DAO for incentivizing liquidity for Vassal DAOs, and when the process is optimized can turn ensuring pegs for Vassal DAOs into a profitable exercise.
And as Vassal DAOs accumulate more governance power over their partner protocols, that in turn increases the yield which accrues to the Vassal DAO tokens in the Monarch treasury.
Monarch Treasury Incentives
Monarch DAO has allocated a full 10% of the MNRC token supply for incentives to attract the targeted external treasury assets. This will allow Monarch DAO to amass and grow a significant treasury and accumulate significant governance power over key DEXes on key blockchains.
Partner Incentives
Partner protocols will be awarded MNRC so that they can vote for their own trading pairs and share in the yield generated by the Knights. Initial partners will get 1% of MNRC, and subsequent partners will get the similar amount of MNRC, adjusted for the MNRC market cap at the time of the partnership.
Partner protocols will also get 10% of the token supply for each Vassal DAO, ensuring partner protocols receieve substantial value beyond the managed peg.
Distribution of Yield
Monarch DAO treasury yield will be distributed as follows:
- 45% to Knights ($vlMNRC)
- 45% to buying additional targeted treasury assets, ensuring continually increasing governance power and yield
- 10% to the Monarch DAO repository (this is also frequently called a project treasury, but here is differentiated from the collection of assets that generate the governance power and yield that we call the Monarch treasury that drives Monarch Finance)
MNRC Distribution
- Ecosystem rewards. — 20%
- Partner incentives — 10%
- Liquidity Mining — 10%
- Team — 20%
- Airdrop — 3%
- Staking rewards — 3%
- Treasury — 12%
- Initial liquidity — 7%
