In a previous post I described what a sustainable, decentralized PoolTogether could look like and the feedback was overwhelmingly positive. Here is the associated Snapshot Vote
In this post I’m going to outline a roadmap that describes the steps we need to take to achieve that vision. This post is presented as a strategy for the protocol. This is not a strategy for any one team. We’ll start by looking at our finances and how we can manage our burn rate, then we’ll look at what we need to build.
The PoolTogether protocol treasury has ~$1.93m in assets remaining. Our goal for these assets is to build a successful prize savings protocol that grows on its own accord and benefits the POOL token holders.
Given our finite resources, we need to carefully manage our spending so that we are able to set the protocol up for growth. It will be much easier for us to strategize our spending by thinking in terms of a framework.
A Spending Framework
We can simplify the construction of a protocol into three key phases:
- Launch. The first complete deployment is launched on a chain.
- Replication. Once the deployment has proven successful and has matured, it can be forked to other chains so that it can tie into their ecosystems.
- Maintenance. After a deployment matures, the effort around it is focused on business development and partnerships. The goal is increased integrations, incentives, and promotion. The protocol serves as a foundation.
These three phases require different skillsets. It’s analogous to the construction of a building; the architects are part of the design phase. The construction team is the building phase, and maintenance workers manage upkeep after the building is constructed. Each phase requires a vastly different skillset and budget.
In that same way, we should be thinking about the construction of the protocol.
Launch requires the biggest lift; it needs specialized expertise to make it happen. This will form the bulk of our spending.
Replication is far less expensive, as there is far less R&D that requires developers or auditing. However, there may be minor modifications or integrations required to function in a new ecosystem.
Maintenance is the least expensive. Someone just needs to keep the lights on and the doors open.
Our Biggest Expenses
By far, PoolTogether’s biggest expense is people. We need people to help us to achieve our vision; whether they are developers, designers, business strategists, community builders, or otherwise. People are what drive the evolution and adoption of a protocol.
To efficiently manage our biggest expense, we’ll need to match the personnel to our phase of building. However, personnel aren’t some resource that can easily be increased or decreased.
- Quality expertise is hard to find and retain.
- Our protocol requires knowledge workers; getting them up to speed with our technology and culture takes a tremendous amount of time and energy.
- Once people leave, they don’t come back.
This means we need to be very careful with the people that we have, and selective with who we bring on.
The bulk of our costs at the moment are builders; and for the first two phases we need to retain them. In this way, we need to front-load our spending. We should spend liberally early on to achieve launch and replication.
The V5 core took about eight months, from start to finish. It was a complex project, and required heavy auditing and testing to ensure that it worked successfully.
I think we can safely estimate that we can achieve full re-launch of the core with new pieces, and replication to more chains in less than six months. After this time we can reduce our personnel according to our needs.
We finalize a deployment of PoolTogether that forms the foundation for our future vision of PoolTogether and addresses any shortfalls or technical issues we’ve identified since our initial launch on Optimism.
We need to establish the narrative for the POOL token. We should renounce ownership of the token so that no more POOL can ever be minted. This reinforces the finite nature of POOL, while leaving the protocol some flexibility thanks to the POOL in the treasury.
The treasury has about 40% of the supply of POOL tokens (~4m), which can be burned or disbursed later.
The treasury holds OP tokens, which naturally lead us to deploy on Optimism and incentivize the vaults with OP. This will help bootstrap our first deployment.
We forge ahead with the USDC and wETH assets.
With a finite supply of POOL tokens, the only indefinitely sustainable and scalable source of staking incentives would come from the Prize Pools themselves. A portion of each Prize Pool’s yield will be set aside for stakers on that prize pool.
Prize Pools will be autonomous, so it’s important to have this as part of our launch.
The ideal user experience would be to win more of the tokens they already hold. This is achievable, but complex. The POOL prizes would need to be efficiently and trustlessly converted back into the asset of whatever vault won.
Since the protocol is permissionlessly extensible, vaults that behave this way can be added later. We need to evaluate whether automating this is worth the effort for launch. To test the viability and desirability of prize compounding with low effort, we can introduce interface improvements that enable users to compound their winnings manually by directing them to a POOL to PUSDC/PWETH swap.
Several existing shortcomings need to be addressed:
The old vault has a collateralization issue that is problematic for users and prevents us from growing.
We need a new vault that is compatible with Aave and allows us to grow indefinitely. This vault needs to be audited and a new factory deployed.
More Efficient RNG
We need to minimize the RNG costs so that the reserve and stakers earn as much POOL as possible, otherwise staking is ineffective until higher TVLs.
Prize Pool Tweaks
The prize pool allocates too much liquidity to the daily prizes when tiers are reduced. This needs to be adjusted.
Once we have the protocol running successfully on one chain, we can leverage the traction to build out the protocol on other chains, with new yield sources, or new assets.
We must be agile, and seek to deploy where:
- There is longevity. When we deploy we should be thinking long-term.
- There are incentives. If we can arrange incentives for the users, it will drive traction.
- Effort is minimal. We must shoot for easy targets first, otherwise we risk spending more effort than is worth it.
Ideally we’ll be able to simply re-deploy the protocol, but there may be instances where we need to integrate with new protocols for a more “native” implementation. Custom yield sources, RNGs, or otherwise may prove to be different.
Once the protocol is live and running, we can reduce our technical expenditures and focus on community and partnerships.
- Wallet integrations
- New vaults
- New yield sources
It will be important for us to continue to have a place to bring users and contributors together; people need a place they can come and ask questions and explore partnerships. We will need to maintain a funnel for these people.
We will likely still need a technical arm along with a budget, but it will be for evaluating integrations, funding audits, and require minimal custom development (ideally!).
If this plan works out, the POOL token value will increase and there will be an opportunity for POOL token holders to capture value. The token can be leveraged in numerous ways.
The following chart shows the treasury levels against a quarterly burn rate. This excludes POOL and assumes no more funds are raised by the treasury. The total treasury is the y-axis, and the quarterly burn rate is the number within each bar.
The intent of this graph is to show how we can manage our burn rate to front-load costs and retain people while still getting good longevity out of the treasury. These numbers are meant to be illustrative and not taken literally.
If we front-load development now and progressively lower our burn rate, we can easily support the protocol for another two years.
I believe we need to employ the above strategy to set PoolTogether up for success. We will front-load the development and construction of the protocol so that we have a foundation on which to stand. Once we have a strong foundation, we can reduce our technical efforts and focus on helping others build on the foundation.
I’ve created a Snapshot vote so that POOL token holders can signal whether they agree with this strategy.
If anyone has any feedback, please comment below.