The Power Universe: understanding Powerpool’s ecosystem

Power Universe is the ecosystem of Defi products, forming a meta-governance layer, and providing a new level of decision making coordination in Defi.

Starting to develop PowerPool in early August we planned to launch a lending market for governance tokens. Two and a half months have passed and we delivered a whole ecosystem, which operation is united around PowerPool’s meta-governance mission:

• The Power Index — community governed and maintained a decentralized Defi ETF-like product with $500k liquidity supplied within a week. Pooled GTs are used for meta-governance.
• Power Oracle — truly decentralized cross-chain oracle, reporting price feeds (public and free to use by any dApp) in Ethereum, xDAI, and Matic.
• PowerPool Governance — modular governance system, integrating different sources of votes. It allows users to vote using L2 networks (xDAI and Matic), vested tokens, Balancer/Uni LP tokens, and PIPT tokens
• GT Lending Market — a lending market for Power Index token PIPT

The foundations of Power Universe

PowerPool is a meta-governance protocol aimed at accumulating voting power in decentralized protocols and using it based on decisions of PowerPool (CVP) token holders.

However, it is impossible to accumulate governance tokens inside some sort of smart-contract, acting as a reservoir for inter-protocol voting power without offering value for GT token holders in return. The meta-governance model depends on voting power (governance tokens liquidity), supplied by the community. To attract sufficient GT liquidity it is necessary to launch a product, generating value for GT holders. At the same time, this product has to pool governance tokens and allow using them for meta-governance purposes.

Starting to develop the meta-governance idea, we identified three groups of Defi users as target ones for the PowerPool:

• Minority token holders, which main pain is GTs in their wallets not providing income and not influencing any voting
• Majority token holders, which aim to grow their capital and increase their influence in the ecosystem, exposing capital to as low risks as possible
• Protocol Politicians, which want to receive support for their ideas and proposals in terms of collected votes and be rewarded for their activity as well

Table 1. PowerPool’s value proposition for different groups of users.

Each target group receives a certain value in exchange for entering the ecosystem, being active, and supplying their GTs into the protocol. Protocol Politicians will be rewarded by grants. We plan to tell more about inter-protocol proposals in the next article.

GT Lending Market as a starting point

Initially, PowerPool’s meta-governance system should have been launched on top of the lending market for GTs. The idea was simple — unborrowed GTs would be used for voting in their native protocols. This lending market was tested at Alpha/Beta/Gamma testing rounds at L2 networks — xDAI and Matic.

Why was Powerpool initially focused on integrating with L2 networks?

Layer two networks were selected as promising R&D direction as in August 2020 it became evident that gas fees are too high for retail users (Minority token holders first of all) to adopt the protocol. Talking about governance, L2 is an exciting possibility to decrease the cost of participation in voting almost to zero, maintaining a high level of security (assets aren’t transferred to L2 and remain at L1).

The appearance of the Power Index
After the Gamma testing round, we received an idea of Power Index from Delphi Digital in the form of a proposal for PowerPool improvement. Its rationale was simple — if Power Index would be implemented instead of Lending Market, PowerPool TVL of governance tokens would be bigger as well as adoption and user base in general.

Disadvantages of the Lending Market model for creating a meta-governance layer on top of PowerPool:

• In the lending market tokens can be borrowed, so the only a certain share of liquidity, supplied to the protocol is available for meta-governance
• The lending market model has certain risks for the capital of LPs (as a result of liquidations, etc)
• The lending of GTs is a narrow use case in Defi, so the potential user base is quite limited

Advantages of the Power Index model for creating a meta-governance layer on top of PowerPool:

• Index of GTs is a useful product for the entire Defi ecosystem with a huge potential user base (significantly bigger, than in the case of Lending Market)
• In Power Index GTs are never lent out, so 100% of provided liquidity can be used for meta-governance purposes
• As GTs in Index are correlated in the general case it results in a low impermanent loss. The risk for LPs is less than in the case of the Lending Market.
• In the case of Power Index, there is a possibility to create a positive feedback loop for liquidity mining program, which would drive liquidity growth (would be discussed further)

So, finally, the decision was made to replace the PowerPool flagship product with Power Index.

The Lending Market was transformed into a secondary market for PIPT (Power Index Pool Token) — a share of the index.

So, the Lending Market became an ecosystem product, supporting the operation of the main one — the Power Index. It is important to point out that we received all necessary security audits for the Lending Market back in September, so it is ready for launch for PIPT token lending/borrowing/using as collateral.

The appearance of Power Oracle
Developing the lending market, we found out that for the majority of governance tokens there is no publicly available price feed at the moment of development — mid-August 2020. Moreover, even if these feeds are available they are costly (hundreds of USD per hour). So, we decided to develop a simple, but truly decentralized oracle to supply price feeds to our products such as Lending Market. This oracle is based on AMM and requests TWAP (Time-weighted Average Prices with 30 min average) from Uniswap, records it as a value of the variable in the contract and any dApp can use such a price feed.

After successful tests of Power Oracle, we decided to implement economic incentives into it provide an opportunity to the CVP community to become the Price Keeper (agent pooling the contract for a certain fee) or Fisherman (agent, controlling quality of Price Keeper service, slashing his deposit if the price wasn’t reported in time).

Power Universe today

Power Universe today is the ecosystem of Defi products, united around the purpose of accumulating voting power by offering valuable Defi services to the end-users and LPs.

Power Index
Power Index is a Defi index and a flagship product of Power Universe. The index contains 8 GTs and is entirely community-curated: CVP holders can add, remove GTs, change their shares, fees, and values of other index variables via governance proposals. All GTs, pooled into the index is used for voting in composite protocols, executing the meta-governance mission of PowerPool. Currently, Power Index is live in Ethereum mainnet with a limited liquidity cap. Check out the Index Page in PowerPool and the Index Contract. Read more about Power Index (links in historical order) [1], [2], [3].

The Power Universe map:

Power Index uses pooled assets for several purposes:

1. Meta-governance (voting in composite protocols using pooled tokens)
2. Representing these assets using a single one — an index share (PIPT)
3. Swap GTs, using Power Index as a liquidity pool

PIPT (Power Index Pool Token) is a single token that is proposed to use instead of 8 GTs in Power Index. This token is minted in case of liquidity provision into Power Index and is burned when it is redeemed. Read more about PIPT here.

So, Power Index is at the center of the Universe as it serves different users’ groups, pooling GTs for meta-governance purposes at the same time.

The Population of Indexes
It is possible to launch new indexes besides the main Power Index. It is possible to launch new indexes based on community voting, for example, indexes for certain sectors of Defi projects.

The secondary market for PIPT
Incentivized PIPT-USDC trading pair is a primary gateway for buying/selling PIPT tokens acting as a secondary market. It is live now. In addition, PIPT can be lent, borrowed, and used as collateral for stablecoin loans on the Lending Market (not launched yet).

So, Lending Market is planned to be used solely for creating lending markets for index tokens (PIPT and tokens of any other future indexes, launched in Power Universe).

Power Oracle
Power Oracle is currently production-ready. It will provide price feeds to Ethereum, xDAI, and Matic soon (Binance Smart Chain and Near Protocol are at the development stage). Besides public price feed, available to all dApps built on top of mentioned networks it would provide price feed to PowerPool Lending Market (PIPT price).

So, Power Oracle is a PowerPool’s contribution to Defi development (all provided price feeds are public and free to use). Read more about Power Oracle here.

PowerPool governance system
The Power Universe is entirely governed by CVP token holders. Recently CVP token distribution scheme was re-defined by the community during voting on Proposal 6 (passed), creating a governance precedent in Defi.

CVP (Concentrating Voting Power token) is PowerPool’s governance token. It captures value from:

1. Voting Power of governance tokens pooled in the protocol
2. Power Index liquidity and capitalization (CVP owns 12.5% of the index, so its market cap depends on the total index liquidity)

The PowerPool governance system is modular and allows the use of L2 networks, vested tokens, LP tokens, and PIPT tokens to vote. Read more about sources of votes.