Nolus Token Model
The Nolus ecosystem has been uniquely designed to incentivize holders and maximize their benefits through staking, which encourages economic growth and the network’s longevity.
The Nolus Protocol is a Web3 financial suite that offers an innovative approach to money markets, contributing to the expansion of the ever-evolving DeFi ecosystem within Cosmos. Our novel DeFi Lease solution provides up to 150% financing on initial investments, with the user retaining full ownership of their digital assets. When combining this with an intuitive and easy-to-use UI, lower risk of margin calls, and cheaper costs, Nolus provides the best environment to borrow on Cosmos. This premier product will create a lot of value within Nolus Protocol, but how is this directed to our native token?
The protocol utilizes a PoS (Proof Of Stake) Layer-1 blockchain built using the Cosmos SDK, where NLS is the native token of the network. The NLS token supports four critical functions:
1. NLS is a medium for transaction fees and any other fees for network usage, paid by users to the validators that run the network;
2. NLS is used by holders to stake and participate in governance by voting on proposals (such as a parameter change or protocol upgrade);
3. NLS enables incentives to support the decentralized Proof-of-Stake consensus that secures the network and validates transactions on the chain. Validators receive NLS rewards as incentives to maintain the integrity of the network. These rewards are automatically distributed in line with the parameters set by the network;
4. NLS is used to reward ecosystem contributors and participants that support the growth of the network and add value.
The Nolus ecosystem has been uniquely designed to incentivize holders and maximize their benefits through staking, which encourages economic growth and the network’s longevity. This staking incentivization mechanism will further ensure that a sizable proportion of the NLS token supply is delegated to validators that contribute to the network’s consensus and security.
Value Accrual Mechanisms
Adjusted DeFi Lease Interest
Staked NLS tokens will grant borrowers lower interest rates when leveraging through DeFi Lease positions. Reduced interest will be calculated dynamically based on the staking duration; the longer the staking duration, the lower the interest for consequent DeFi Leases. However, the interest will reset to the base rate if NLS is undelegated, regardless of the amount.
Lenders Tiered APR Incentive
Lenders will have to buy and stake NLS tokens to increase their rewards on supplied stablecoins or tokens. When more users utilize the protocol, lenders will be required to buy more NLS tokens to achieve higher APRs. Consequently, the token value will grow proportionally to the Total Value Locked (TVL) within the platform.
Lease Revenue
The majority of the protocol’s revenue will come from the interest-bearing DeFi Lease contracts. Part of the total operating income will be used to buy back NLS tokens on the open market, which would subsequently be added to the Nolus Incentives Pool and used to pay out Lender’s rewards.
NLS Genesis Allocations
At the Nolus genesis block, 850 million NLS tokens will be issued and allocated to stakeholders. Most tokens are locked at genesis. They can be staked but cannot be spent or transferred until they are unlocked or released. Each stakeholder category has a release schedule that determines when tokens enter the circulating supply and can be spent.
Community (DAO treasury)
24% of the token supply is reserved for the community. Nolus community governance will determine how and when to distribute these tokens through various incentive programs. All types of contributors can be eligible for community token incentives, including but not limited to technical contributors, community builders, and educators. All Community tokens will be vested linearly for 36 months starting at the network genesis.
Token Sale
20% of the token supply is allocated to investors who participated in one of Nolus’ private rounds. Proceeds will be used to fund the protocol needs in terms of offered products. Additionally, part of the proceeds will be focused on Protocol adoption expenses and technical completion. These tokens are subject to a 9-month cliff, beginning at the network genesis, followed by 24 months of linear vesting.
Team & Contributors
19% of the token supply is reserved for the core team that incubated the Nolus Protocol and the teams assisting the development. Part of the allocation will be used to help attract new talents and reward members for their work. The allocation is subject to a 15-month cliff, beginning at the network genesis, followed by 36 months of linear vesting.
Lenders Incentives
12% of the token supply is reserved for the Protocols Incentive pool, which will distribute rewards to lenders. The allocation will be liquid at network genesis, but the distribution depends on the Protocol’s economic activities and growth.
Strategic Partners
5% of the token supply is reserved for strategic partners to help develop the ecosystem and further contribute to the growth of the Protocol. These tokens are subject to a 9-month cliff, beginning at network genesis, followed by 24 months of linear vesting.
Liquidity & Bug Bounty
4% of the token supply is reserved to bootstrap liquidity and incentivize pools on several Market Makers. An additional 1% will be allocated to a bug bounty program. These tokens will be liquid after the network genesis.
Circulating Supply
The circulating supply is defined by the number of available tokens to be spent and is equivalent to the number of released genesis tokens plus the number of tokens minted as rewards. The rewards injected into the system are unlocked when the protocol mints them and the rate at which rewards are issued is subject to various factors, including the amount of stake delegated and governance choices.
Total Supply
To reach the 1 Billion total supply, 150m NLS tokens (15% of the total supply) shall be minted in 10 years and will serve as staking rewards to incentivize validators and delegators on the blockchain. At the end of the first month of operations, 2.5% of all tokens will be minted then the monthly percentage of newly minted tokens thereafter will decrease by 0.05 p.p. per month compared to the previous month until the end of year 1. In the following years, the amount will decrease monthly by 0.04 p.p. in year 2, 0.03 p.p. in year 3, 0.02 p.p. in year 4, 0.015 p.p. in years 5 to 7, 0.0125 p.p. in year 8 and remain constant until the end of year 10.
Successfully building a token economy requires gearing the token economics towards achieving key outcomes from the ground up. The key outcomes for Nolus and the NLS token are:
- Security;
- Longevity;
- Decentralization;
- Economic growth.
Ensuring that a vast majority of NLS is circulating amongst the community is critical for the long-term health of the token economy. It incentivizes community engagement, ensures continued investment in the protocol’s health, development, and security, as well as providing sufficient liquidity for validators and users. A linear unlocking schedule ensures that the token economy does not have to handle sudden supply shocks before it has had time to mature.
The on-chain protocol governance mechanism may adjust NLS token economics parameters (such as inflation rates). Community members who stake will be eligible to vote on the upgrades to the protocol and protocol parameters; all agreed-upon changes are subject to validator adoption.
