Introducing the PSP token to make ParaSwap even more efficient and decentralized

TokenBrice
Nov 15 · 5 min read

Since its very first days, ParaSwap has been at the forefront of decentralized finance. The liquidity aggregation service delivered by the protocol is enabled and thriving thanks to the ever increasing liquidity available on various decentralized exchanges. Today marks another milestone in the development of the project, with the ParaSwap’s foundation introducing the PSP token.

This article provides a simple and clear framework to help understand what PSP entails and what is the initial vision given to the community to craft upon. It covers the PSP token and its initial distribution, and details its two main functions helping ParaSwap scale and decentralize: its governance capabilities & market makers incentivization. The initial PSP distribution filtering logic is detailed in another article coming out shortly.

The PSP token initial distribution

PSP token distribution

The ParaSwap Foundation is issuing the PSP token to make the protocol more efficient and decentralized. The total supply will be 2 billion PSP tokens, with 7.5% (150M PSP) given to existing active users to bootstrap the community.

Around 20k active wallets are eligible. A filtering process was necessary to ensure PSP was allocated to the most engaged users.

Overall, more than half of the PSP supply is dedicated to growing the ecosystem and the community, through the initial distribution, the ecosystem incentives and budget for future ecosystem development.

Investors’ tokens are subject to a vesting with a minimum period of two years (+4 months lockup) and up to three and a half years for team members (+6 months lockup). Here is the token unlocking schedule:

PSP token unlocking overview

The PSP token contract address is 0xcAfE001067cDEF266AfB7Eb5A286dCFD277f3dE5 (Etherscan link)

Staking on ParaSwapools

ParaSwap is a decentralized liquidity aggregator — providing access to the liquidity of major decentralized exchanges like Uniswap or Curve in one comprehensive and clear interface. Yet, ParaSwap also sources its own liquidity thanks to the ParaSwapPools.

It’s a network of professional market makers providing access to their own liquidity to ParaSwap users. The main benefit is providing MEV resistant and 0 slippage swaps, thus introducing efficiency to DeFi trading.

Staking PSP on a ParaSwapPool

PSP tokens holders can stake on market makers to add weight to their rewards, pushing the market market to deliver more competitive rates. At the end of each epoch (14days) the rewards are spitted between market makers and stakers. The estimated APY is visible directly in the application and auto compounding with each epoch.

Keep in mind that staking on a market maker is subject to a lockup period. The period is initially set to 2 days to enable easy switching at first and will most likely be increased to a full epoch-length (14 days) by a governance decision after a few weeks of operations.

PSP Holders can stake on various pools representing different market makers

Market makers are essential to enable ParaSwap to deliver the best prices to its end-users: a total of 6% of the entire PSP supply is dedicated to reward their involvement. We picture the relationship between ParaSwap and the ParaSwapPool market makers as one evolving and growing in the long-term. In that spirit, PSP tokens obtained by market makers are subject to heavy lockups with a minimum of 6 months.

The ParaSwapPool staking model is inspired by the market maker rebates model used by many order book-based exchanges as well as proof-of-stake blockchains, where stakers vote on validators so as to maximize the shared block rewards. Thus, ParaSwapPool market makers will work in synergy with PSP stakers to make ParaSwap even better for traders, dApps and protocols.

The emergence of the ParaSwapDAO

The arrival of the PSP token marks a new milestone in the project development. Indeed, a new set of actors — PSP holders/governance participants — are joining the ballet already made of the ParaSwap team, the market makers & various services ParaSwap integrates with or integrating it. So how does this work in the long-run?

As stated, with PSP our goal is to maximize the decentralization and resiliency of ParaSwap. This will require a decentralized infrastructure able to support the pathing computation necessary for ParaSwap to function in a timely manner.

Indeed, for a swap on any given pair, ParaSwap computes all/most potential routes to find the perfect mix leading to the best outcome (= best price). Yet, this path-finding process is very time sensitive: Ethereum produces a new block every 15s on average, and each new block can bring changes to prices, therefore changing the optimal route. Thus, the computation for the route optimization has to be done offchain currently to provide a satisfying user experience.

Solving this challenge is a mission both for the team and the DAO: while a technical solution is required, and the team is already working on it, we know that implementing such a solution will require a network of peers providing the computing power required for the pathing computation. This is where the DAO comes into play!

When it comes to governance, here again, we’d like to question the beaten path. To begin with, there will be no governance forum or snapshot. We invite the PSP holders to join us on the Discord to start coordinating: together, we’ll discuss, figure out and set up the first tools of governance.

It’s up to you now

Since its very first days, ParaSwap was developed in synergy with DeFi: it grew and improved with it. Now with PSP, the community can develop even further with the structure it needs to coordinate. So here’s the recap on how you can get involved:

  1. It's time to claim! Check the ParaSwap website to see if you're eligible for any claimable PSP.
  2. Once you’ve claimed the PSP tokens, pick a market maker to stake on to start earning.
  3. Owning PSP tokens gives you a say in ParaSwap’s governance! Join the community on Discord to start coordinating with your peers.
  4. 📅 Save the date! The first Community Call will be held this Saturday (Nov 20) on our Discord, at 5 PM GMT+1.

PSP is not available in the United States, People’s Republic of China or any other prohibited jurisdiction. If you are located in, incorporated or otherwise established in, or a resident of the United States of America or People’s Republic of China, you are not permitted to receive a distribution of, or transact in PSP.

The information provided in this post does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the website’s content as such.

To learn more about what ParaSwap does and how it works please refer to ParaSwap’s user documentation.

ParaSwap

Solving Liquidity for Crypto

ParaSwap

ParaSwap aggregates decentralized exchanges and other DeFi services in one comprehensive interface to streamline and facilitate users’ interactions with Ethereum’s decentralized finance — both for dApp developers thanks to the API and for end-users.

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ParaSwap

ParaSwap aggregates decentralized exchanges and other DeFi services in one comprehensive interface to streamline and facilitate users’ interactions with Ethereum’s decentralized finance — both for dApp developers thanks to the API and for end-users.