Power the pNetwork DAO and earn 42% interest APR on your stake

Provable Things
Jul 15 · 8 min read

Governance models, the Aragon framework and staking PNT

We recently announced the pNetwork (pTokens Network), the increasingly decentralised layer powering and governing the cross-chain pTokens solution.

In line with the project’s progressive decentralization roadmap, a Decentralised Autonomous Organization (DAO) will be introduced later this month.

(UPDATE 7/31: The pNetwork DAO is now live!)

The pNetwork DAO is the first major step towards decentralising the pTokens system, encouraging community-participation and removing any exclusive governance powers from the main development team. This is a critical component in the context of any truly decentralized system. We believe all DeFi projects should avoid making networks which are decentralized on paper, yet retain centralized planning and decision making.

In the case of thepNetwork, anyone holding $PNT will be able to participate in the governance of the project by staking and voting on various proposals. To incentivise and reward this active participation, holders will earn interest on their tokens at stake. Such interest serves as an initial incentive to encourage participation while the pNetwork is still in its infancy.

Aragon, the foundation for the pNetwork DAO

A Decentralised Autonomous Organization is run democratically and collectively by a group, rather than by a traditional hierarchy of staff and contributors. Operations are programmed and automated, with rules enforced by code and smart contracts. DAOs run on transparent, permissionless architecture (blockchain technology) which is resistant to centralised control or influence.

The pNetwork DAO has been created using Aragon, a global platform for hosting and managing community-run initiatives and online organisations. The vision for Aragon is to create a digital jurisdiction — a place on the Internet where people can self-organize in a free, peaceful, sustainable, and inclusive way.

The Aragon-based pNetwork DAO comprises three main elements: a staking app, a voting app and a rewards app. These apps interconnect and communicate with each other via the Aragon platform. Using the Aragon framework, we designed custom Aragon apps so they could be added to the core DAO infrastructure, allowing extra functionalities to be added. These apps can be consistently upgraded with new logic and rules as the DAO evolves, thanks to the possibility of the DAO to upgrade itself!

The role of pNetwork Token (PNT)

The PNT token was recently introduced to the system as a means for the community to participate in the pNetwork DAO, and to help the project reach its progressive decentralization aims. The team is committed to continuously and incrementally evolving the system into a fully decentralized one.

Considering this, a highly-engaged and diverse community is an inherent and essential component of the pNetwork’s success and longevity. For this reason, an incentive mechanism has been designed to encourage active participation and boost adoption of the pNetwork ecosystem (more on this later).

Over 7,500 Ethereum addresses currently hold $PNT tokens. This means that upon launch, the pNetwork DAO will be set up to become a truly decentralized governance system. As a collective, the community has already staked approximately 5 million $PNT tokens through the Eidoo Card program and Eidoo Staking Accounts initiative of December 2019. These hundreds of staking participants, who are not part of the project or founding team, will serve as the pNetwork DAO’s initial community base. This is a win-win situation, whereby the project’s early supporters have the possibility to gain extra rewards, while also kicking off the governance system in a decentralized manner.

A large portion of $PNT tokens are locked within the DAO, including the company treasury and team-owned tokens, as well as the reserve dedicated to the Eidoo Card cashback program. These tokens being staked within the DAO upon its launch will increase the total number of staked $PNT tokens to over 29 million, and therefore reduce the circulating supply to approximately half the current total supply.

Staking in the DAO

The Staking Manager app will be the behind-the-scenes gateway for interacting with the DAO and the first app you will use. This is what enables you to enter and exit the DAO, by staking or unstaking your PNT.

When depositing tokens via the Staking Manager, the stake will be tokenised and a receipt will be issued, represented by a new token called daoPNT. From a technical perspective, this representation is similar to Compound’s C tokens (eg. cDAI), which represents your stake in a liquidity pool. The daoPNT token acts as a community ticket for voting within the DAO (more on voting below).

The process of tokenising PNT to issue daoPNT is referred to as “DAO staking”. Similarly, every time you withdraw your tokens, you are burning daoPNT and unstaking the corresponding PNT tokens.

Please note that all staked PNT tokens will be subject to a short time-lock of 7 days. This is to avoid abuse of the DAO.

Notably, most of the PNT tokens initially at stake upon the DAO launch are at stake with a significantly longer time-lock: the company and team have decided to voluntarily re-lock (vesting) their tokens to demonstrate their commitment to the project.

Voting

A highly-engaged and diverse community is an inherent and essential component of the pNetwork’s success and longevity. An incentive mechanism has been designed to encourage active participation and boost adoption of the pNetwork ecosystem. For this reason, staking in the DAO alone doesn’t guarantee rewards, but incentives are awarded to voting participants.

In other words, those who have staked PNT (and received daoPNT) are granted the right to vote. Through active voting, daoPNT holders become eligible for earning interest on their tokens at stake. As explained above, this also applies to Eidoo stakers who previously participated in our December staking initiative, or staked for Eidoo Card VIP and Black since their tokens will be staked within the DAO from the very beginning. These staked tokens will be transferred to the DAO, and they will uphold the same agreed time-lock as before. This provides additional benefits, as now there is a possibility for them to receive extra rewards by voting within the pNetwork DAO.

Voting will take place through the Aragon app and will be accessible only to those who hold daoPNT. Stakers will be able to vote on different improvement proposals, ranging from strategic propositions such as approving the development of a pTokens bridge, to more complex and technically-focused ones. Upon launch, proposals will be submitted by the main development team on a regular basis. Each proposal will be open to anyone holding daoPNT to vote either for or against the proposal itself. This will change in future iterations, as the DAO itself will encourage proposals from community members as well.

There will be no minimum amount to stake in order to vote, so the entry barrier is almost minimal. The DAO is set up with a linear voting system; each daoPNT token represents one voting right, granting each holder voting power that is proportional to the amount of tokens they have at stake.

Incentive mechanism (rewards)

As mentioned above, the PNT token was recently introduced to the system as a means for the community to actively participate in the pNetwork DAO. The PNT token represents a key element of the system as it aligns incentives for all participants. In fact, PNT is leveraged internally by the pTokens system to enable operations for both validators and DAO members.

For DAO members, the incentive mechanism is an inherent and essential component of the DAO itself. Its aim is to encourage active participation from the community, driving the success of the project by boosting the adoption of the system.

While at stake, PNT tokens will mature an overall 63% interest over two years. Such interest is designed as a simple interest and therefore it is calculated on the principal amount of tokens at stake. These rewards are distributed every fortnight to daoPNT holders actively voting in the DAO.

Up to 28.35M PNT tokens are dedicated to this initiative, which are generated through an inflation mechanism that grows the total supply of 60 million PNT through a specific function in the pNetwork Token smart contract. The interest is split across a two-year period, granting a higher reward during the first year (42%) and transitioning to half that rate (21%) during the second year.

From a technical perspective, these newly minted tokens are housed in a dedicated vault within the DAO and regularly distributed to daoPNT holders every fortnight. Such a procedure is executed by the custom-made Rewards Aragon app. Every two weeks, an automated check is run by the app, which reviews the status of current daoPNT holders and their voting activity.

A DAO member is considered active and only becomes eligible for rewards if they are daoPNT holders and the check confirms that they have voted on at least all proposals except one within the two week period. The app is able to check how many proposals have been voted upon by each Ethereum address holding daoPNT, therefore determining the rewards distribution. The reward of 42% APR is then distributed among those DAO members who meet the requirements.

Put simply, those who have daoPNT at the end of the fortnight and have actively voted either for or against each improvement proposal but one during the two weeks period will be rewarded.

Users don’t need to take any actions other than voting to receive rewards.

The incentive mechanism is designed as a simple interest — the 42% annual interest is calculated on the originally staked amount, distributed as described above and released after a one-year time frame. Such a time lock on the matured interest serves as a security measure to prevent an individual’s voting power from increasing during the period through the compounding of tokens. While being released within a one year timeframe, the annual interest is matured on the original amount of tokens at stake and distributed to daoPNT holders every fortnight guaranteeing them the possibility to remove their initial stake at any time.


🦜 Want to join our flock? Connect with us on Twitter and join the conversation in our pTokens Telegram.

💡 For a more technical deep dive into pTokens infrastructure, read our technical paper or check out the summary on our website.

🔋 Learn more about the pNetwork, the decentralized system and DAO powering pTokens.

🔗 For any blockchain project looking to integrate pTokens into their infrastructure, we have also built a pTokens JS library.

💌 Excited about pBTC? Sign up for our newsletter and be the first to know which blockchain pTokens will make their home in next.

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