This P3 proposes an overhaul to Premia's token distribution and emission schedule. It builds upon the Premia Tokenomics 2.0 proposal outlined by the team [here](https://premia.community/tokenomics-2) and is intended to be a middle ground solution between the team's original proposal and the community's call for a large supply burn.
Abstract
This proposal intends to bring Premia's tokenomics in line with what are widely considered best practices in the ecosystem:
High circulating supply relative to fully diluted valuation
66% or more of supply controlled by the community
Low and predictable rate of inflation (<50% YoY)
Simple distribution: Few buckets with clear purpose
Transparency about what party controls which buckets
The proposed tokenomics to achieve are summarized below. Details can be found in this [google sheet](https://docs.google.com/spreadsheets/d/1QLS9DtKZGap0P3vZ0ba2ytTwAUCIRBOS1CTT7LIBRXY/edit?usp=sharing )
Token burn: 25M tokens
The other 75M tokens would be distributed in the following buckets:
Premia Team: 24,5M tokens
33% of supply
To be used by the Team at their will
Vested linearly over 4 years
Liquidity Mining: 25M tokens
33% of supply
Controlled by community governance
Emitted linearly over 10 years (could be changed by community at any time)
Blue Descent: 7,5M tokens
10% of supply
Controlled by the DAO governance body
Vested linearly over 4 years
Bootstrap distribution: 10M tokens
13% of supply (All holders would see their share of ownership increased by 33%)
The FDV in each suggestion is still astronomically low. We’re barely even reaching 0.15, this is still horrible.
Given current LM projections, I think the team will have entirely half(?) the supply of the token to potentially sell onto the market after the 4 year vesting. The circulating supply should have been way greater than 10 million to start. No matter the team or the DAO, wherever the extra tokens go it massively dilutes anybody who wants to buy in the next two years.
As a result, while I’m still thinking it over, we need to consider reducing both the team and dao shares to 10M each, or airdrop supply and increase current holder positions, or offer some kind of program or staking incentives to inflate the current supply, quickly. This would increase FDV to 0.3 and make the overall setup much healthier.
Go ahead, put the stake up in the town square and get a pilot flame burning, but it’s the reality of starting with such a small circulating supply. Straight token burning I don’t think will be enough. And what I expect is the team will argue that they won’t reduce their share (they’ve already said 40m burn is too much), and thus expect the markets/community to take the brunt of burns and inflation – something that won’t help them any when it’s time to cash in their hard work
For context, LINK was able to raise hundreds of millions of dollars for the team with an FDV of 0.333. If we want to fix the tokenomics, we should really start there.
I like this the most so far. 5m might be too little for the team. Maybe take 5m from the strategic reserve for the team, then keep 2m for market-makers? 2m would be between 10-15% of the circulating supply for a few years, enough for them to make their money I think. it also does 1/3 team, 1/3 community launch, and 1/3 dao which is a pretty basic but i think reasonable baseline to work with.
Market Making agreements typically request 10% of circulating supply as loans (18mo-24mo Terms). This is so they are adequetely liquid to make both sides of the market, this is standard business practice esp in Asia for listings on centralized exchanges. So some proposals would limit our ability to ever proceed down that route.
We have golden handcuff agreements (4yr terms) with some contributors who have made meaningful impact to date, and will continue to be integral to the success of premia, you may not see or hear from them often as they are not community facing roles, but they are essential to the vision, so unfortunately we are not in a capacity to straight burn some earmarked for team.
Mining Fund (0x81d6f46981b4fe4a6fafadda716ee561a17761ae - 26mm) is fair game. However, we have been thinking about using some of this for a AirDrip (retro airdrop that streams out, incentivizes users that have used premia in the past to come back for v3, as well as reward active users of v2). As well as incentivize other products lines that are released in the future, the preference is to continue to use premia for those product lines vs creating those product lines under a different brand, thats why there is so much in this fund today. Currently earmarked for 10yrs of incentives based on todays product lines, however via vote this could be used to incentivize new product lines, that attract different yet complimentary user segments.
Partnership Fund (0x22b62a85a2a8f8812b7aac2b873e0227dd0c2125 - 7.5mm) is technically fair game, but for reason 1 above I advise against it, we have set this aside for Market Makers specifically.
DAO Treasury (0xf374e6f8104379eb3f406b6be394d77cd80f2c88 - 10mm) is fair game. But I would like to see it used for a buyback and burn program, or use rewards and pay new contributor groups to build out via grants so that the DAO has a meaningful amount of Premia to become self sustaining long term and retain significant voting influence. Once the legal set up is ready for the Foundation to hold assets, the idea is to put this behind a 4yr linear timelock, with monthly unlocks being staked for 4yrs, so the plan would be that these tokens never really hit circulation in the traditional sense. If approved by vote, move to a 4yr vesting smart contract would coincide with v3 release.
Operator Treasury (0xb9973b4f0b39a9f7f15f6819d063198b76b83d6e) is in a 4yr vesting contract now. This is for the Operator to retain meaningful influence of the protocol in the event that a significantly holder/contributor/founder leaves.
DAO Network Growth Fund (0xee710f7b6ec3da7f5d9be1fe1e15a9503c59a16b - 2mm) is fair game. TBH 12mm total to dao may be too much, however the thought behind this would be to be a delegate we would like to see something like proof of stake where a multisig would have to stake 50k premia to become a delegate, and for early adopters, this could be funded as a grant from here.
Marketing Fund (0x1e9f88f87aba3da62bed1a12f4122a6f73a51798 - 2mm) this is set aside to bootstrap the advocate/ambassador program, as well as academy learn to earn. Is 2mm too much, idk hard to tell, I would rather do 5k targeted learn to earn users at 50 premia each (OTM Premia Calls on V3), and see if a success or not before amending this.
Operator Multisig and Timelock (0xc22fae86443aeed038a4ed887bba8f5035fd12f0, 0xe43147daa592c3f88402c6e2b932db9d97bc1c7f - 1.6mm) This is mostly used to pay out minor expenses (Medium or lower Bug Reports, Bounties, Protocol Owned Liquidity, small marketing initiatives, etc)
The concern about dilution, the distribution of tokens has not changed in almost two years and has barely strayed from the initial outline, and if so was done via public vote. The goal of the premia token is to reward liquidity makers and trading volume. The team believes in the long term viability and business sustainability of what is being built and are meeting with external groups endlessly to increase the depth of liquidity so that more options can be collateralized at any given time, but to also allow for more repetitions of collateral turnover (the amount of times that a single collateral unit can be used to underwrite an option in a given time period). Especially in anticipation of v3 and what can be offered.
Summary: Look, as I have mentioned before i still view V2 as a beta product, V3 is the official release of what an on-chain derivatives exchange can achieve. It’s tailored to multiple user groups, is extremely capital efficient (with margin release), allows for programatic access for larger volume shops, all options are fully collateralized so no bad debt can be accrued (at the base exchange layer, lending will need some time to build the insurance fund) , it literally is a prime broker, exchange, and clearing house, on chain, and the parts that won’t be fully decentralized at the beginning, there is an outlined path to get there. So with that said, I have outlined some notes above on contract addresses we can continue this discussion with, if not addressed then they are off the table. The team will be releasing the documentation on the Founding Parliament Elections (Council of 10) on friday, and the form to self-nominate will be provided as well, I look forward to continuing these discussions and know we will come to an amicable compromise with the Parliament in the coming weeks.
Thanks - DK
Marketing fund,DAO growth fund,DAO Treasury were all in some language addressing the similar objectives. Having any Treasury and Contributions paid in native illiquid token is very bad IMO. thats why i suggest to set a DAO treasury to get fees to achieve all Blue decent DAO ambitions.
Market makers/Partnership are not necessary. LM is trimmed to 5M which can be obtained via a proposal detailing the % token needed and start and end date. utilising it only in growth stage.Obtained LM can be directed to pools via vxpremia.
Reduced LM emission rate to 1.2M tokens/year for 4 years.
This would leave 12 M tokens outstanding that could be used to incentivize liquidity on other products the team might launch. If after 4 years no use has been identified, they could be burned via community vote
Blue Descent tokens will now vest as vxPremia locked for 4 years
Adjusted “Partnerships/MM” bucket to 10% of supply.
“Partnerships/MM” tokens are unvested but cannot be touched unless community votes on it
Added a “Marketing” bucket with 1M Premia vesting over 4 years
Rationale
This proposal intends to bring Premia’s tokenomics in line with what are widely considered best practices in the ecosystem:
1. High circulating supply relative to fully diluted valuation
MCap/FDV at start: 0.37
MCap/FDV after 4 years: 0.81
2. 66% or more of supply controlled by the community
This proposal would leave 33% of tokens in the hands of the team and 67% under community governance
3. Low and predictable rate of inflation (<50% YoY)
16M tokens would be unlocked / year
(1.9M would be in the form of locked vxPremia)
I would keep LM rewards as they are until V3 and then scale them down when we have more data about interest and how much bootstraping we actually need. We can burn some regardless but emissions i feel can be left unchanged until V3.
Also i think borrowing 10% of supply to private market makers to market make on some CEX is pointless. It might be borrowing but its still dillution. Sure i dont know practices but borrowing 10% of supply seem huge. Especialy considering some exchanges list coins without any MM requirement beforehand. I might be wrong but my GMX og’s tell me Binance listet by itself without being handed any coins or any other mm to mm on binance, and obviously someone is market making GMX there regardless. Same is possible for GNS. So if they didnt give 10% supply for MMs on binance, i dont see why should we give 10% if any at all.
I did some quick math reconciling your spreadsheet vs my internal allocations and I think we can get to 15mm burn with relative ease. After 15mm will need to do some more fine tuned dialing in as it starts to become more nuanced.
