The new Plenty Network: A Protocol for Protocols

Much of the growth of Decentralized Finance (DeFi) has been fueled by liquidity mining, also known as farming. However, in its current form, farming is an imprecise incentivization tool that often attracts mercenary farmers. These programs have been taken to the extreme, resulting in a massively inflating supply.

Token emissions on the new Plenty Network need to be more aligned with beneficial actions. This can be achieved by focusing on incentivizing fee generation rather than just simply incentivizing liquidity provision itself. In this context, users who lock their tokens do not have to worry about inflation, while those who do not lock their positions will bear the downside risk of token inflation.

Building for other Protocols

Existing Automated Market Makers (AMMs) are primarily designed for liquidity providers. Liquidity is incentivized in exchange for an emission of tokens. However, today AMM’s are used by other protocols, either through token incentives, bootstrapping liquidity, or protocol owned liquidity.

With the new Plenty Network, it will be easier than ever to add new token incentives to liquidity, bribe token emissions onto liquidity, earn trading fees, and deploy new liquidity pools. Any protocol, Decentralized Autonomous Organization (DAO), or project on Tezos can easily incentivize their own liquidity, be it for their token, their stable coin, or even other derivatives.

Different protocols can incentive their own liquidity by bribing and/or voting for their own liquidity.

Introducing ve(3,3) on Plenty

Ve(3,3) takes the (3,3) notation from Olympus DAO and ‘vote escrow’ (‘ve’) tokenomics from protocols such as Curve. This new token design was introduced by Andre Cronje, founder of Yearn.

There’s no concept of bonding and selling tokens at a discount in ve(3, 3). There are 3 well-formed economic principles that are being used.

The goal of ve(3,3) is to better align emission of tokens to beneficial actions and solve the problem with current AMM designs where liquidity provision is temporarily subsidized. By contrast, ve(3,3) provides a more sustainable mechanism to generate incentives based on trading fees.

Ve(3,3) on Plenty works with two tokens:

1. PLY: a standard FA1.2 token used for emissions.
2. vePLY: A non-fungible token (NFT) based on ve(3,3).

Users can mint a vePLY NFT when locking PLY tokens in a Vote Escrowed (VE) Locker. The vePLY NFT is used for voting. By voting the vePLY holder earns the trading fees and bribes allocated to a liquidity pool. Based on the weekly votes PLY emissions are divided between the different gauges automatically. In the next epoch more PLY emissions are directed to the LPs who received a higher vote weight.

Users can directly trade vePLY NFTs on secondary marketplaces, like objkt.com, enabling the transfer of the corresponding Plenty Network rights and benefits.

A vePLY NFT is fully transferable.

The three economic principles of ve(3,3) that deviate from the standard vote escrow rules from Curve:

1. Weekly emissions are adjusted as a percentage of circulating supply

Meaning, if 0% of PLY is locked for vePLY, the weekly emission would be 2,000,000. If 50% of PLY is locked for vePLY, the weekly emission would be 1,000,000. If 100% of PLY is locked for vePLY, the weekly emission would be 0.

2. ve lockers increase their holdings proportional to the weekly emission

Assume a 1,000,000 PLYweekly emission, a total_supply of 20,000,000 PLY, and a locked_supply of 10,000,000 PLY. This would mean that 1,000,000 are minted and provided as incentives, a 5% supply increase. Our goal is to ensure that ve lockers are never diluted, as such, ve lockers have their holdings increased by 5%.

3. vePLY is transferable as an NFT

By tokenizing the lock position we allow a single address to own more than one lock. Lock balances are cumulative and each lock contributes to the overall voting power. This further allows locks to be traded on secondary markets, as well as to allow participants to borrow against their locks in future lending market places. By extending locks into Non Fungible Tokens, the capital inefficiency problem of ve assets is solved, as well as addresses concerns over future liquidity (should it ever be required).

A ve lock can last as short as a week or as long as four years. Once a vePLY NFT is created, a user can vote on different gauges to receive trading fees from the gauges that the user has voted for. The following is a general overview of the different time lock based voting rights:

• Four Year Lock: 1 PLY = 1 vote
• Two Year Lock: 1 PLY = 0.5 vote
• Six Month Lock: 1 PLY = 0.125 vote

The longer you lock the more voting power you’ll receive.

Voting for trading fees

One important innovation here is that vePLY holders receive trading fees ONLY from the liquidity they have voted for. This is a modification to the Curve mechanism in which veCRV holders receive fees from the entire protocol itself.

In the case of vePLY voting, users will vote for pools which generate the most trading fees. That should have the positive effect of attracting more liquidity in that liquidity pool, potentially leading to an increase in volume and trading fees.

Another innovation is that vePLY holders also receive a share of PLY emissions based on the circulating supply. Anytime the circulating supply increases through inflation, the same percentage increase will be attributed to vePLY holders. This makes the value proposition of locking very attractive as your lock does not get diluted by new PLY emissions. This inflation is added to the lock directly and the vePLY holders do not receive ‘plain’ PLY tokens.

As vePLY NFTs can be traded, a different user from the one who created the vote lock in the first place can hold them to benefit. If this user is a protocol, it could try to attract (bribe) more vePLY votes to direct PLY emissions to its own liquidity pool.

What are gauges?

A gauge is a fancy crypto term for defining how much of the PLY rewards a liquidity provider can earn when providing liquidity to a liquidity pool. The higher the votes for a gauge, the more PLY can be earned by staking LP tokens in a gauge.

The gauge is an instrument to measure which liquidity pool is weighted most heavily with rewards. Voting with veNFTs for gauges occurs weekly. Users can allocate their voting power towards one or more liquidity gauges to earn trading fees and bribes attached to the liquidity pool. Gauges receive a fraction of newly minted tokens proportional to how much voting power the gauge is allocated. Each voter can change their preference at any time and is required to vote each week to keep earning trading fees and bribes.

What are bribes?

To attract voters to a gauge any user can add extra incentives to a specific gauge, these extra incentives are known in DeFi as “bribes”. The new Plenty Network natively supports gauge bribes and automatically adjusts them according to user votes. In addition to traditional bribes introduced in the Curve ecosystem, which allows a protocol to expand their on-chain liquidity by bribing voting-escrow token holders to vote in a specific way (e.g. Convex bribing veCRV token holders), the Plenty Network allows any user to attach bribes onto the liquidity pool and those who vote for it are then able to claim them.

Which Role Can I play?

Let’s go through a few scenarios to fully explain the advantages and differences between the old and new Plenty.

The old ways

Currently Plenty still works like most AMMs. Users provide liquidity in a liquidity pool and stake their LP tokens in a farm to earn rewards. This results in users only providing liquidity in a pair that has a farm, and most probably a farm with high emissions. For each change in emissions a governance proposal and a vote from xPLENTY holders are required. The change is implemented by the dev team after approval.

This model works short-term but has shown to be is an imprecise incentivization tool that often attracts mercenary farmers. This results into a pump and dump. Something that is visible in the current PLENTY price chart.

What can users do on the old Plenty:

• “Yield Hopper” Alice: Alice earns PLENTY emissions by staking LP tokens in a farm. Trading fees accumulate in the liquidity pool and are claimed when removing liquidity. For a yield hopper there is no incentive to hold PLENTY.
• Bob “ PLENTY HODL’er”: Bob stakes his PLENTY for xPLENTY. xPLENTY appreciates in value over time against PLENTY. By actively voting with xPLENTY Bob earns no extra rewards.
• Carol “Plenty Supporter” : By providing liquidity and staking in the a farm Alice earns emissions. Trading fees accumulate in the liquidity pool and are paid out when removing liquidity. Carol stakes her PLENTY for xPLENTY. xPLENTY appreciates in value over time against PLENTY. By actively voting with xPLENTY Carol earns no extra rewards.

The new Plenty Network

The goal is to better align token emissions to beneficial actions and solve the problem with current AMM designs where liquidity provision is temporarily subsidized.

To solve the inflation issue weekly emissions are adjusted as a percentage of circulating supply ⇒ Make the token supply scarce. vePLY NFT holders can vote weekly and earn trading fees and bribes by voting. By voting as a vePLY holder you are protected from PLY inflation.

The new roles of the new Plenty Protocol:

• “Yield Hopper” Alice: By providing liquidity and staking in the gauge Alice earns emissions. No trading fees or bribes. By not actively voting for the gauge the emission percentage is reduced next epoch due to votes by Bob and Carol on other gauges.
• Bob “HODL’er”: By voting Bob earns trading fees and bribes related to the gauge. Voting increases PLY emission for the next epoch for the gauge. By voting Bob is protected from PLY inflation.
• Carol “3,3'er”: By staking LP tokens and voting for a gauge, Carol earns PLY emissions, trading fees, and bribes. Voting increases PLY emission for the next epoch due to reduced voting activity on other gauges. By voting Carol is protected from PLY inflation.

WHEN LAUNCH?

Smart contracts for the new Plenty Network go for audit this week! We will share a developer update on the Plenty Bridge soon.

About Plenty

The Plenty team is building an all-in-one decentralized platform on Tezos. Plenty will allow swaps on uncorrelated assets, and low cost, near 0 slippage trades on tightly correlated assets. Plenty will also feature a built-in bridge from multiple EVM blockchains to Tezos.

Website: https://www.plentydefi.com/

Discord: https://discord.gg/9wZ4CuvkuJ

Twitter: https://twitter.com/plentydefi