This is Generation Software’s strategy to grow PoolTogether. We are presenting it in order to gather ideas, build consensus, and align the community in the same direction. While Generation can build the deliverables needed for the strategy, only the community can fully execute on it. We must work together.
The following is what the Generation team believes is the best growth strategy for PoolTogether V5. We believe we need to maintain the same level of safety, security and fun that PoolTogether has always had, while leveraging the new token mechanics to maximize growth. Concretely, this means we should curate a small group of quality low-risk assets that are in high-demand and focus on making those assets easy to discover, easy to acquire, and valuable to hold.
It is important to note that PoolTogether V5 is permissionless and autonomous, so anyone can pursue a different growth strategy.
The strategy is named “Big Head” because we are targeting the largest in-demand assets, vs the long-tail of small cap assets.
We should initially focus on a small set of assets that have wide adoption and are in high-demand: stablecoins, Ether, and liquid staking derivatives.
For yield sources, we must start with protocols that have strong track records and security standards.
The prize assets that we are pushing out to our users, partners and the world must be of the highest quality and aligned with our values.
The PoolTogether protocol and community have always held dear our core values of:
- Safety. The protocol must be no-loss!
- Security. We maintain high security standards to minimize risk.
- Fun. Let’s make saving money fun!
While V5 affords us the ability to integrate anything, we must take care of our users by making the default PoolTogether experience the safe, secure and fun experience.
PoolTogether V5 has replaced gatekeeping with curation; users can decide for themselves how much risk they want to take on. However, this additional risk must be opt-in by the user. The default experience must only include high quality and low risk assets. There is a long-tail of obscure small-cap tokens that earn high yield, but it would be irresponsible and off-brand to lead with them.
The number of assets we support will grow over time as we incorporate assets that are aligned with our values and standards.
Our core assets and yield sources must be held to high standards:
- Technical risk. As we’ve discovered not all 4626 vaults meet the specification. Due diligence is needed. I.e. fee-on-transfer tokens are not currently supported and Yearn V3 needs a custom integration.
- Asset risk. What risks does the asset have? Is it inflationary? Is it illiquid? How widely held is it?
- Protocol risk. Is the yield source no-loss? Are there moments when it is under-collateralized?
- Custody risk. Is the asset or yield source custodial in that an EOA, Multisig, or Governance system can move the funds? To what degree is it custodied?
- Upgradeability. Is the asset or yield source upgradeable? How are upgrades controlled?
Our curated list of assets must be discoverable by users and accessible to users: everyone should know about prize assets, and it should be easy to acquire them.
People discover projects and tokens through many channels, whether it’s social media, marketing, or on-chain activity. It’s important that PoolTogether is present on all of these channels, but most importantly: what is our message? What is our core narrative?
We need to develop a token narrative; it will be our (3,3) moment, where we articulate the benefits of prize and POOL tokenomics in a simple way. Several POOL economic mechanisms are described in more detail below.
Once we have our narrative, we can broadcast it to the world across all channels. Get the meme out there.
Crypto users typically acquire tokens by swapping through trusted apps; whether it’s DEXs, aggregators, wallets, or otherwise. These channels provide another layer of curation and security that users appreciate.
We can make it much easier to participate in PoolTogether by ensuring there is prize asset liquidity on AMMs, and by working with swapping interfaces to have our curated safe assets recognized.
Our new token mechanics make it possible to simply swap into PoolTogether. The PoolTogether V5 experience can be reduced to one action:
- Swap for prize assets
Winners will automatically receive their prize tokens, so there is nothing more they need to do.
PoolTogether V5 simplifies the experience down to holding a token; which everyone knows how to do. All they need to do is swap in.
Many users deposit only a small amount into PoolTogether. For them, the gas fee is a large portion of their deposit. The cost of a token swap might be cheaper than the gas cost of depositing.
Last year PoolTogether V4 had nearly $500m in yearly volume of prize assets.
By encouraging swapping on secondary markets, a segment of our users can take advantage of lower fees and LPs can benefit from prize asset volumes.
It will be important for us to bootstrap the market; as there are no LPs without volume, and there is no volume without LPs.
We need our prize assets to achieve widespread adoption as the POOL token has. The tokens should be recognized and searchable in all swapping interfaces. We must develop brand guidelines so that the tokens appear uniform.
If there is prize asset liquidity in AMMs, it becomes much easier to get the token added to default token lists in dapps and wallets. It some cases it may even be automatic.
Imagine searching “PoolTogether” or “prizes” in a swap interface and the PoolTogether prize assets pop up!
We must petition all of our favourite interfaces to support our curated prize assets.
A token is only as valuable as the economy around it, so we must build strong economic mechanisms around the PoolTogether tokens. These mechanisms should complement each-other and align stakeholder behaviour.
The behaviour we want to encourage:
- Holding prize assets
- LPing prize assets
- Holding POOL
Our value proposition is prizes, first and foremost. People use PoolTogether to have a shot at winning big prizes and having the excitement of checking or receiving their daily prizes.
Blockchains are keen to improve user adoption, so many give out incentives to encourage usage of the technology. We can pass these incentives on to our end-users using classic liquidity mining techniques. Users stake their prize assets, and receive additional incentives whether it’s ERC20 tokens or NFTs.
We want to encourage LPs to provide prize asset liquidity so that smaller fish can cheaply enter and exit prize assets. We need to bootstrap AMMs so that we can direct a portion of the prize asset volume when appropriate.
There are different LPing strategies, but the LP can minimize risk using like-asset pairs.
For example, an LP can supply the pair USDC/PTUSDC to an AMM. This pair does not incur any impermanent loss because the assets effectively have the same value. The LP would not have exposure to IL and would profit from the swapping fees generated by the pair.
There is a side-effect of LPing prize assets using a like-asset pair, however: the AMM burns POOL. Prizes are automatically claimed, which means POOL is being sent to the AMM.
POOL Liquidity Mining
We can compensate for the burn by setting up POOL liquidity mining for our LP pairs; this means that LPs can collect both the swapping fees and the underlying POOL that accrues. This also means that the liquidity mining is not inflationary; the total circulating supply of POOL remains the same.
The POOL token plays a critical role in PoolTogether V5. The token is used to consolidate liquidity across any number of assets, and is the reward given to winners.
PoolTogether arbitrageurs need POOL for yield liquidations, but they might not have any capital with which to purchase POOL. Existing POOL token holders can stake their POOL and provide it as flash loan liquidity for bots. The stakers earn flash loan fees without incurring any impermanent loss, and the bots can take advantage of plentiful liquidity.
The protocol can also hold prize-asset LP positions. By not participating in LP liquidity mining, the POOL won by that position will be burned forever. In this way, we can make POOL deflationary.
The PoolTogether protocol has a strong track record of safety, security and fun. We must uphold our core values while continuing to evolve.
By curating and focusing on a select group of large cap assets, we can go deep with our adoption efforts and tokenomics. We will develop an end-to-end playbook that can be repeated by others for new assets and integrations.
A Generation PTBR will soon follow that will detail our efforts in terms of concrete tactics that fulfill the strategy.
This strategy will require everyone to pull together; we will go so much farther if we are all aligned. We encourage everyone to comment with their thoughts and feedback.