First of all, many thanks to the community for the constructive feedback we received both in this discussion and privately. Currently, we are working hard on potential improvements to the concept.

A valid point was brought up by @ageless, namely that the kokoon pool becomes less and less attractive over time if no exogenous assets are added to it.

We have been running some simulations (check out the link below if you’re interested) where it becomes apparent that this problem has to do mainly with the proposed limited KKN token supply.

With the limited-supply model presented, the interest sharing runs into a fairness issue: For instance, assume we airdropped 30% of all KKN tokens to the PT community. Now 30% of all interest generated will forever be paid to those KKN holders who didn’t necessarily contribute to the prize, making the kokoon pool less and less attractive if it doesn’t grow.

[*More mathematically speaking*:

*Assume a scenario with 4% Compound interest. If you entered the pool as the last person with p percent of all tokens having been distributed already and stay there indefinitely, your expected share of the interest converges towards*

*(prize expectation) + (income from accumulating KKN)*

*= 3% + (1% * (1-p)) --------- which is < 4% and hence neither fair nor attractive.*]

So how can we combine prize sharing, loyalty reward and pool fairness sustainably? The simple answer is that we could make the token inflate indefinitely by giving it **infinite supply.** Now, the rewarded interest for having been in the pool decreases over time if you leave the pool, which is more than reasonable.

Analogously, the effect of any initially distributed KKN decreases over time.

[*More mathematically speaking*:

*Assume the same scenario with 4% interest. Further, assume a very simple minting mechanism where one token is distributed at every time step. If you enter the pool as the last person at time T , exactly T tokens exist already. Again assume you stay there indefinitely and everybody else does so too. Now your expected interest at time t is*

*(prize expectation) + (income from accumulating KKN)*

*= 3% + (1% * (t/(T+t)) --------- which converges towards the fair 4% and is sustainably attractive.*]

Despite the infinite supply, any scenario with faster pool growth than token minting results in an increase in income per token, so the loyalty reward incentivization persists. For long-term members, the expected interest converges towards a fair equilibrium from above, for new members from below.

As a nice side effect, this would also allow being more liberal with the initial distribution of the token. There could be an airdrop to POOL holders or POOL governance, without making the Kokoon pools decreasingly attractive in the long term.

**Summing it up, token inflation presents itself as a way to maintain sustainable fairness while airdropping KKN tokens, rewarding both POOL holders and new Kokoon pool members simultaneously.**

If you are interested in the details, hit me up or check out the simulations in this Colab Notebook: https://colab.research.google.com/drive/1YinckZscU2aJCegnZbLCkif5w0o-TFDv?usp=sharing

We are excited to hear your feedback about this!