For those who have been keeping up with DeFi Rate, you’ve surely heard us talk ad nauseam about the growing trend of DeFi products tokenizing governance rights over major protocol roles and decisions. In the past 48 hours, we saw two more projects – pTokens and Curve – join the movement.
Introducing the pNetwork and $PNT! 🦜
With a commitment towards progressive #decentralization, here's how we're building a truly decentralized system.
— pTokens 🦜 (@pTokens_io) May 29, 2020
This Friday announcement was compliment by Curve sharing this Tweet earlier today.
Time for a quick announcement.
Curve is working on decentralizing its ownership through a Curve governance token. All liquidity providers since the inception in January 2020 will be considered for the initial distribution proportionally.
Details on supply/demand to follow soon!
— Curve (@CurveFinance) May 30, 2020
With both Provable and Curve playing growing roles in the DeFi ecosystem through interoperability and lending, the introduction of a tokenized governance vehicle places even more power in the hands of its users.
Here’s what you should know about each.
pNetwork & PNT
For those unfamiliar with Provable, you may recall our interview with the project when they launched pTokens – an interoperable onramp for assets like Bitcoin to be ported to Ethereum in the form of pBTC.
To ensure a smooth launch, pTokens went live with a centralized model in which pTokens were backed by a single validator node. Now, with 27 pBTC (~$270,000 at the time of writing) currently circulating, Provable will transition to a decentralized validation system via the pNetwork.
“Validators are node operators having special signing capabilities — these are an essential component of the network as they validate the asset switch from one blockchain to another (peg-in and peg-out) in a secure and decentralized fashion. Validators can cooperate and perform the cross-chain movement of assets after they have all verified independently the external blockchains’ conditions.”
Validation will be permissioned to start, with the intent to become permissionless over time. In order to become a validator, node operators will need to post a bond of 200k PNT – the network’s native governance token.
Outside of validation, PNT will mark the introduction of a pNetwork DAO in which validators can govern pegs, fees, and resource allocation while earning interest for participating in governance and contributing in value-added ways to the Provable ecosystem.
Provable is set to incentivize validation by providing PNT issuance with a 63% return 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.
What this goes to say is that it will pay to be involved from day one – and that by validating on the network you stand to earn both PNT inflation and fees collected from cross-chain tokenswaps.
Curve – a rising liquidity aggregator – was popularized through its interest-earning stablecoin wrapper – yTokens. For those unfamiliar, users can pool a suite of stablecoins like Dai, USDC and sUSDCand receive yCurve – a token that collects interest by routing liquidity between different trades and lending protocols.
This week, Curve has been making waves with its introduction of a BTC Curve pool – supporting a way to earn interest by supplying renBTC and wBTC. This goes to signal that Curve is quickly evolving to more than just stabelcoin, hence the need to govern what new pools are introduced.
While news of Curve’s new governance token remains vague, we can assume it will follow a SAFG model like Compound or FutureSwap in which those using the protocol are the first to earn the native token. As stated in the original tweet:
“All liquidity providers since the inception in January 2020 will be considered for the initial distribution proportionally.”
To this end, we also know that Curve is exploring the use of an Aragon DAO to introduce unique voting frameworks for the growing liquidity aggregator.
Actually, building with @AragonProject with interesting contributions to solve some token-based governance challenges
— Curve (@CurveFinance) May 30, 2020
More so, they’ve stated they will look to make enhancements on the “one token one vote model” likely introducing some sort of weighted voting schema where those who actually earned and used the protocol might have more voting power than someone who comes across tokens otherwise.
Across the board, the charge for DeFi protocols to introduce a native token AFTER they’ve found product-market fit is one we can certainly get behind.
Better yet, the capacity to distribute tokens to users – rather than pure speculators – is thought to better align incentives and encourage participation as those holding the tokens are the very people who care the most about the products’ future.
Cooper is the Editor of DeFi Rate and an active contributor to leading DeFi media outlets like The Defiant, DeFi Pulse, and Bankless. He works with early-stage teams through Fire Eyes DAO to incubate governance models and grassroots community development. He is an ambassador to Set Protocol and an author of a weekly publication called Token Tuesdays. To stay up with Cooper, follow him on Twitter.