Pollen Tokenomics: A Deflationary Supply Model

Introduction

This is an overview of Pollen’s tokenomics, including details of our private sale, the team buckets, operational reserves and most importantly our governance rewards model, which includes some insight into PLN’s deflationary supply model.

The Basics

Team, Investors & Operational Reserves

94M (47%) over 3 years

Upon the deployment of the PLN token contract, there were a total of 94M tokens initially minted. This initial supply includes an allocation for the team, investors and operational reserves. The team and investors will be vesting tokens on a linear schedule over 3 years.

Governance Rewards

106M (53%) over 4 years

Over the next 4 years there can be a maximum of 106M more tokens minted through governance rewards, bringing the maximum total supply over that timeframe to 200M.

The token economic design of the Pollen protocol shows that this limit is extremely unlikely to be reached. Our models predict supply should contract rather than expand, more details below.

Operational reserve breakdown is an estimation only.

Pollen’s Deflationary Supply Model

The PLN token emission model is dictated by the protocol rewards and penalties, with a mechanism in place that sees tokens being minted and burned respectively.

Why is a deflationary token model important?

A deflationary token model means its supply decreases over time, the most exciting tokens on the DeFi market today have deflationary models. LUNA’s unique buy-and-burn mechanism to create Terra stablecoins led it to become a top performer in 2021. Curve’s unique lockup contracts have made what was originally one of the highest inflation regimes in crypto, to one of the most sought after tokens today as other protocols seek to accumulate the CRV governance token in order to accommodate their own composable protocols on top of Curve.

Earn or Burn in the Pollen protocol

When Pollenators stake PLN in virtual portfolios, their asset management performance is tracked on-chain. When they make good portfolio management decisions and the overall value of their chosen assets increase, Pollenators will receive rewards relative to their stake. On the flip side, when Pollenators underperform, they will incur penalties and some of their stake will be burned.

The supply of PLN is controlled by an algorithmically defined tracking and virtual issuance schedule. In periods where rewards minted are low, rewards issuance increases, recalibrating with the theoretical issuance schedule. In periods where rewards minted are high, rewards issuance decreases to stay in synchrony with the theoretical issuance schedule.

The rewards released and penalties imposed are parametrized such that Pollen becomes more attractive when compared to the market. For example, it issues more rewards in bullish market conditions and fewer penalties in bearish conditions.

Supply Control

Delegating

For Pollenators looking to take a more passive role, PLN can be delegated to the best performers, that is, those with an established reputation. Delegatees will tentatively receive 20% of returns generated, producing a passive yield for Delegators. Ultimately, this delegation system will encourage more PLN to be locked up in the protocol.

Asset Pool Staking

The purpose of virtual portfolios is to provide signals that inform the Pollen protocol on how to rebalance asset pools, which are portfolios backed by real assets and their value reflected by a token. The staking of PLN is one of the requirements when opening a new Asset Pool. This also reduces the supply velocity and adds deflationary pressure.

How does all this make it deflationary?

Pollenators will compete to be at the top of the leaderboard. In reality, there are a limited number of elite traders that consistently outperform the market and thus the most probable scenario is that more PLN will be burned than minted, meaning the PLN supply will be deflationary by design. If by some chance Pollen manages to attract only the best traders, where the majority make profit and rewards become inflationary, then this will be reflected in the success of asset pools, in which case rewards will become mostly obsolete and earnings from asset pool profits alone will be enough incentive to maintain the protocol.

In the rare situation that the platform contains mostly elite traders that consume all the rewards at the end of the initial 4 year emissions period, the DAO will have the ability to vote on another set of reward emissions if necessary.

Our revised Whitepaper is almost complete and we’re excited to share with you a more comprehensive description of our protocol mechanics very soon.

Beta Coming Soon

At Pollen DeFi, we will soon be launching our Beta protocol on testnet. We can’t wait to have more members of the HiveMind to be able to see, experience and understand what it is we are building at Pollen DeFi.

Information supplied based upon product under development, subject to change in the development and testing of the product.