KIP-4: Kwenta Tokenomics

Author
StatusDraft
Created2021-11-08

Summary

A proposal outlining the purpose, function, and distribution for the Kwenta protocol token.

Abstract

The Kwenta token will be used to incentivize coordination and growth within the Kwenta DAO. The token will have two primary functions:

Staking - Community members who stake Kwenta will receive inflationary rewards. Inflationary rewards are intended to favour those who use the product most as well as those that contribute to the DAO. This mechanism will also offer the infrastructure needed for the DAO to become financially sustainable.

Governance - Community members that stake their Kwenta token will gain voting power within the protocol. At launch, voting power will be determined solely by the amount of tokens a user has staked. Ex. A user holding 1.72 Kwenta tokens would have 1.72 worth of voting power. The intended outcome of enabling community members to vote with their token is to decentralize the decision making process of the DAO.

Motivation

The Kwenta DAO requires a token to coordinate governance in a decentralized manner. Additionally, the token will be used to incentivize targeted behaviour within the DAO. DAO operators and product users require incentive alignment to see the protocol be successful and token is an effective way to achieve this. The goal with this model is to reward members that provide long-term value to the protocol.

Specification

The Kwenta token will follow the below model.

Ticker - KWENTA

Initial Supply - 313,373

Inflation Model - Inflationary rewards will start at 60% APY in KWENTA and linearly deplete to 1% indefinitely over the course of 4 years. This will result in a total supply of 1,062,486.81 KWENTA at the end of 4 years.

Allocation breakdown:

30% - Synthetix Stakers

5% - synthetix.exchange and early Kwenta Traders

5% - Investment

25% - Community Growth Fund

15% - Core Contributors

20% - Kwenta Treasury

Inflation and Fee Allocation:

20% of inflation and fees will be routed to the treasury. 80% of inflation and fees will be routed to stakers. These percentages can be adjusted at the Elite Council's discretion via a KIP. This will enable Kwenta to sustainably fund DAO roles while enabling the community to use the entire token supply as needed.

Vesting Mechansim:

KWENTA printed via inflation will undergo a 1-year lock-up period. The lock-up mechansim will begin with an 80% fee for vesting KWENTA early which will decay linearly. If tokens are vested early, the percentage of tokens that are still applicable to the fee will be burned. After one year, the fee would reach 0% and no tokens would be burned when vesting KWENTA.

Distribution:

A future KIP outlining the launch distribution methodology will be published.

Copyright and related rights waived via CC0.