finance.vote: token economics
This post details the current design decisions of the finance.vote token economics and details how the Finance Vote Token ($FVT) will work within the ecosystem. We roadmap the token’s interaction with the different components of the network and discuss how the token will evolve over time.
The detail in this post should be considered the initial state of the system, if they change over time (and we will consider it a success if they do), it will be due to the governance decisions made by token holders.
Design Philosophy
The following are a set of thematic design principles that we set as targets for the formation of the finance.vote network.
Decentralisation
The finance.vote network is aiming for maximal decentralisation.
That is, we will aim to be as decentralised as possible throughout the development trajectory. Necessarily, the network will launch with a pseudo-autocratic power structure, but this will progress towards decentralized direct democracy over time.
From the outset, founders will manage some keys that hold final decision making power for a period of time. These keys will be transferred to the crowd once an effective governance structure has emerged.
The Finance Vote Token ($FVT) makes this possible, it represents power in the system. The finance.vote ecosystem will pioneer a number of new voting systems that are designed for generating the progressive diffusion of power away from any central arbiter within the system.
Incentivised Action
The $FVT token model is designed to generate user action through rational financial decision making. Users will vote in the system if it makes sense for them to do so. In the world of crypto-economics that means it makes financial sense.
All token systems must wrestle with the balance of distributing tokens to participants in order to incentivise adoption and network value dilution arriving from inflation. Adoption comes at a cost.
We balance the incentive dynamics in such a way that they generate adoption through a range of vectors targeted at different stakeholders, including market analysts, decision-makers, workers and liquidity providers.
All of these mechanisms add new tokens into the ecosystem but are distributed to users who bring value to the system. Ultimately, it is the responsibility of the network to balance these incentives against one another, managing the inflationary and deflationary dynamics of the system along with a range of other monetary policy decisions.
The inflationary dynamics of the system at this point are a direction that can be steered by the $FVT holders.
Responsive Governance
Good governance is responsive. It is a system of decision making that responds to the needs and desires of the participants effectively.
The system is designed in such a way that users can build an understanding of key parameters in the system that can be tuned or optimised for maximum engagement and healthy ecosystem growth.
finance.vote will release a range of voting mechanics that build the reputation of stakeholders in the system. User voting power will be scaled through a mix of meritocratic validation of decision-making history and token stake.
Those that have the power in the system will be those that have earned it through participation and high-quality decision making.
Those users who are effective in other areas of the system will graduate to the main DAO, the DMF (Decentralised Monetary Fund), which will make high-level monetary policy decisions and decide how the treasury is spent.
Outcome Indeterminacy
One cannot say any real governance has taken place if the outcome of a decision point is knowable prior to a vote. finance.vote aims to ensure that the network economics develops in such a way that governance decisions are not cornered by large token holders, leading towards pure plutocracy.
From the listing price, through to monetary policy decisions, the system will be designed to ensure outcome indeterminacy prior to any vote. This may not be achievable without tuning, but we foreground this here as a design paradigm for the system. Outcomes will be determined by knowledge, wealth and participation.
Discourse
The key to good decision making is dialogue.
As the system develops we will find mechanisms to channel and focus discourse into decision making. Our second layer governance system will provide a space for crowd curated user dialogue that can tangibly influence not only our system but others too.
It will be a platform for content aggregation, curation and collective learning. As the ecosystem develops we will build an inclusive international community, which aims to maximise understandability of the system and optimise for involvement in governance decisions.
Utility
The Finance Vote Token ($FVT), but will aggregate additional utility over time by integrating functionality determined by the needs of the system and the desires of the token holders.
The system will hold day one utility. From the moment the token is tradable it will be exchangeable for a voting identity in the system and usable within our vote markets. None of the system’s functionality will be accessible without an identity.
There are three core aspects of utility that the founders are committing to deploying during the bootstrapping phase of the network: vote markets, second layer governance and social trading. We believe this utility set is strong enough to build a sustainable network, however, this token economics system provides a substantial treasury which is to be spent on funding open innovation that falls within the emerging shared design philosophy of the system. What the final state of the utility of the system will become, is outcome indeterminate.
Identity Tokens
Identity is a crucial component in voting systems. The approach used by finance.vote is to issue a decentralised identity token (DIT) to participants.
These will take the form of NFTs that are tradable if the user desires. The cost of an identity token is dynamic (depending on demand) but begins at 100 $FVT. Users must burn this amount in our identity distribution system to obtain a DIT.
These NFT’s will be numbered by point of issuance and will be curatable as digital objects through a number of means in the future.
This identity is linked to users’ voting histories and their performance within the system. This will generate a budget of our internal vote power tokens ($V). They are pseudo-anonymous but are a vector for building trust and reputation to participating accounts in this ecosystem and beyond.
Quadratic Voting
Quadratic voting will change the world.
Quadratic voting has numerous theoretical benefits over binary or linear voting. In simple terms, it’s a more nuanced way to express your preferences. We live in a complex society and the solutions to our problems are not generally black and white. Quadratic voting allows you to express the magnitude of your preference, without giving the most extreme voters all the power.
We utilise quadratic voting in a mechanism we call Semantic Ballot Voting. Users are provided with a constantly replenishing budget of vote power ($V), which they distribute on votes through various mechanisms in the system. Typically this action will involve sorting some list of semantic items (token cash tags in the first instance) by preference, through distributing $V quadratically.
One challenge with quadratic voting in anonymous/permissionless systems is that someone can bypass the quadratic restriction by splitting their vote across multiple accounts, aka doing a Sybil attack. This is why using our decentralised identity tokens, we allow Sybil attacks, but attach a predictable cost to them (pay-to-sybil). This cost rises exponentially in the short term, creating an interesting tradeoff space where users should think about how an additional identity would change their expected payout in the game.
The resultant cost-benefit gradient creates a crypto-economic energy barrier that mitigated against destructive behaviours.
Education
A crucial component of the finance.vote ecosystem will be building understanding across our community members of the kinds of systems we are making decisions about. Good decisions arise through informed consensus.
Asymptotically, the best players in this game will be those who can read code. We will support the development of understanding through teaching and materials of how best to understand the cryptospace. The best researchers will win.
Token Metrics
The $FVT token has an initial generation amount of 1 billion tokens (1,000,000,000 $FVT).
These tokens are split into a set of tranches as follows:
Initial Distribution
20% of the tokens (200,000,000 $FVT) are to be distributed to early-adopting participants through a series of distribution rounds.
The first wave has concluded and took the form of two private rounds:
Seed 6% (60,000,000 $FVT) tokens @ $0.007
Private 12% (120,000,000 $FVT) tokens @ $0.008
Those participants that obtain tokens in these rounds are subjected to cliff-linear vesting over a period of 5 months.
The final 2% of these tokens (20,000,000 $FVT) will be distributed by a decentralised auction mechanism (auction.vote), which will go on to form a key component of the finance.vote ecosystem (details of this mechanism will be released in a standalone post).
Team and Advisor Stakes
15% of the tokens are allocated to the founders of the network. These are released to the team using (6,3) cliff-linear vesting i.e. vested for three years, with a 6 month cliff.
5% of the tokens are allocated to valuable strategic advisors. These are released individually to advisors using (6,2) cliff-linear vesting.
Governance Incentive
10% of the tokens are to be distributed to voters of the system over a (6,5) cliff-linear vesting schedule. These tokens will be distributed to users proportionally to the number of $V spent in the system associated with their identities. We call this process vote mining and it is one of a number of mechanisms designed to break voter apathy in blockchain governance.
The DMF Treasury
30% of the tokens (300,000,000 $FVT) will be distributed through (20,5) step vesting i.e. 20 tranches of 15,000,000 $FVT, in a lump sum for 5 years to the DMF treasury.
DMF funding tranches will be distributed via quadratic funding mechanisms to stakeholders who bid to do work for the network. If the DMF participants choose, a proportion of each tranche can be burned, providing further control of the monetary policy.
Liquidity Pool
20% of the tokens (200,000,000 $FVT) will be utilised to bootstrap the liquidity of the finance.vote network.
The liquidity pool is split as follows:
Approximately 2% of the tokens (20,000,000 $FVT) will be utilised as match liquidity in the initial distribution auction.
A minimum of 9% (90,000,000 $FVT) are allocated to liquidity miners in the DEX space. These will be distributed via a pulsed liquidity mining incentive scheme to holders of LP tokens in respective decentralised exchange pools.
9% of the tokens (90,000,000 $FVT) will be utilised to engage with the centralised exchange (CEX) space. These are unlocked from network launch but will be utilised transparently so that users can understand monetary flows in the system.
Circulating Supply
The aggregated emission from these schedules provides us with the following emission curve represented as a percentage of total genesis supply.
Inflationary Mechanisms
The finance.vote core contracts hold the power to mint new tokens beyond the 1,000,000,000 $FVT at genesis. This is chosen to ensure that there is an open-ended solution to incentivising adoption and liquidity formation in the vote markets. In the first instance, a small amount of additional inflation is used to seed liquidity for reward pools in our vote markets, starting @ 100,000 $FVT per week / per market.
Deflationary Mechanisms
In order for any user to take part in the system, they must first obtain a Digital Identity Token (DIT). In order to do this, users must obtain $FVT and burn at least 100 to take part. This introduces an adoption based deflationary dynamic to the system.
Emission Schedules and Monetary Policy
The emission schedule of a token system determines the inflation rate of a token economy.
It has recently become the trend to release entire token supplies in a matter of months if not weeks. This has led to hyperinflation and short-lived token economies.
We are not aiming for a multi-generational store of value system, neither are we claiming to be “money” (not yet anyway). The Finance Vote Token ($FVT) is a utility token, which provides users with access to a governance system.
The governance system acts as a kind of crypto-economic hub, which the users will ultimately control. $FVT is required to access the system, without it you will not be able to vote or participate in the governance decisions.
High-level details of how the above token metrics are formed through smart contract mediated token emissions are provided here:
Cliff-linear Vesting
Cliff-linear vesting is a smart contract based vesting schedule that we have engineered to add high degrees of confidence to emission schedules and consequently the circulating supply.
The greatest threat to a token economy is a highly asymmetric token distribution, even worse if it is an unknown token distribution.
We have programmed a schedule, which releases a small proportion of tokens to network stakeholders in a lump sum, followed by a block-by-block distribution for a prolonged period of time.
We define:
Token Amount : (month of cliff from genesis, vesting period length in years)
Or:
TA : (m,y)
For example, if Alice has done work for the network and is owed 1,000,000 $FVT : (2,2), she is owed 1368 $FVT a day for two years, with 2 months reverse cliff vesting i.e. at 2 months post genesis Alice will receive 82,135 $FVT, followed by 1368 $FVT daily for 2 years.
Vote Mining
A 100,000,000 $FVT(6,5) allocation has been granted to all voters in the system. This means that approximately 9,917,808 $FVT will be airdropped to voters 6 months after genesis and then continually at the same rate of 54,794 $FVT per day for 5 years.
This allocation will be steered by the community throughout the 5 year vesting period. At the moment it is only possible to vote in our vote markets, but eventually vote mining rewards will be flowed to both our miniDAOs and the DMF to break voter apathy.
Pulsed Liquidity Incentives
The provision of decentralised liquidity is a revolution. The dynamics of this activity are very early, however the dawn of the “agricultural revolution“ has introduced incentive dynamics to the provision of liquidity with demonstrable success.
We have created a tuneable system that will ensure that we maintain effective capital efficiency of our trading pools for the lifecycle of the network development, aiming to optimise for trade volume Vs market depth Vs inflation cost through dynamic incentives.
Our approach to this is through adding a cyclical liquidity dynamic, with tunable parameters, that include pulse height, quadratic decay rate and a pulse width.
The result is a liquidity cycle with periods where, yield is high, yield is low and a range of levels in between that drop quadratically between pulses.
This provides LPs with short time horizon trading strategies with an opportunity to optimise their yield through complex farming techniques, or users with more long term strategies can decide to stay the pool across cycles.
The management of these parameters will be tuneable in the DMF and offer the possibility to minimises loses from divergent loss by optimising for pool growth through governance activity.
Summary
The finance.vote token economy introduces a range of dynamic crypto economic monetary policy ideas with the view of creating a sustainable crypto economic hub. The system uses collective decision making and voting technology to create a participatory token economy driven by the desire to understand the cryptospace itself.
Feel free to participate, or just sit back and watch the network evolve into a crowd directed experiment in collective crypto economic governance.
Play the game or don’t, it’s up to you.
