Temperature check - pNetwork Sustainability Plan

Discussion
1

Hey pNetwork community,

The pNetwork Community Association has some big updates and proposals we want to share with you!
These cover everything from the 2024 roadmap to a new sustainable inflation plan to keep pNetwork thriving.
Your feedback is crucial in shaping the future of pNetwork, so we really want to hear from you.

Here’s a non-exhaustive summary of what’s in the document:

  • 2024 Roadmap: Our plans to make pNetwork v3 a reality and drive adoption.
  • New business opportunities unlocked by the new level of decentralisation provided by pNetwork v3, better positioning in the cross-chain ecosystem and securing our position in the regulatory landscape.
  • Sustainable inflation plan: Three different scenarios to be discussed
  • Inflation protection: Special incentives for active DAO members aimed at protecting users from the necessary inflation and strengthening the DAO governance and its security.

To get the full picture, it’s important to read the attached in-depth article.
It contains all the details you’ll need to share informed feedback.

This proposal, and the discussion that will follow, is another step towards making pNetwork the community-led project we’d like it to be.

Let’s continue to build a stronger, more decentralised pNetwork together!

Read the article here:

The forum discussion should last at least two weeks. Then we could have a temperature check vote on Snapshot for all PNT and daoPNT holders to gauge support for the proposed solutions. Only after thorough discussion and a temperature check, should there be consensus, will we proceed to a DAO vote.

The pNetwork Community Association

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Hi,

I think this proposal goes in the right direction. The entire team and association need to be focused on the use cases and long term business sustainability.
The v3 needs to be an attractive product and the presented use cases need to be concrete and supported by the industry. I strongly encourage the team to look for any opportunity to discuss with other protocols (eg. lending protocols) on the current design, use the outcome to improve the product and publish the recap of such interactions. This is going to show that pnetwork is keeping its eyes open on the market and the related demand.

Thank you for this great job

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Hey! PNT staker and DeFi ninja here. I just wanted to say thanks for the awesome rundown on what’s in store and the outcomes each option might bring.

This proposal is super detailed, but to keep it short and sweet, here’s what it covers:

  • Brand new project and bridge.
  • Figuring out the funding and budget stuff.
  • Dealing with inflation and protecting the active DAO members from dilution (keeping the slackers in check).
  • Options for managing inflation.

Now, onto my thoughts:

  1. You mentioned pNetwork v3, DAO v2, a fresh dApp, and giving the brand a facelift. It sounds like you’re gearing up to launch a whole new bridge project, especially with the bull market in mind.

I totally get that making wrapped assets more decentralized makes them more appealing for the DeFi crowd. But let’s not forget, there have been some massive bridge hacks worth a whopping $2.6 billion! That’s a big turn-off for people and protocols. Do you reckon this improved decentralization will help regain trust and make bridges more attractive?

  1. You talk about this lean budget, like $75k per month plus 15k PNT per week for LP incentives – pretty darn efficient if you ask me!

But here’s the kicker: this budget setup seems to work well when we’re in the bear market, but what happens when the bulls start charging? And hey, where’s the cash for those audits? I mean, your 100k estimate sounds kinda on the low side.

Now, onto the crystal ball stuff: How do you see the treasury expenses shaping up down the road?

And that $1.3 million budget for 2024 – that’s a hefty sum. Considering what happened in the past when the market took a nosedive, how can we be sure this new budget plan will keep the funding train on the tracks? Are you thinking about stashing some stablecoins for a rainy day? Maybe hunting down some extra cash from other sources, like grants from L2s like Optimism or Base?

  1. In a nutshell, we’ve got 96.8 million PNT tokens in circulation, with 10 million PNT locked up in the DAO. To keep the project humming for a year, we’re talking about needing $1.3 million, which translates to 15 million PNT (assuming PNT’s riding at $0.09), resulting in a 15% inflation.

Now, instead of finding ourselves in the same pickle twelve months down the line, you’re pitching a master plan here. It’s a multi-year inflation strategy with these periodic check-ins with the DAO. This whole setup includes a combo deal of basic DAO inflation plus an extra layer for DAO incentives. All of this should keep the project funded and cozy for a solid three years.

What’s sweet about it is that while the project’s pockets stay lined, the PNT champs who’ve thrown their weight behind it won’t get watered down. That’s thanks to a tempting 27% APY (that’s fixed for three years!) for the active DAO gang, and to top it off, those rewards keep piling up with automatic compounding!

Plus, with that fixed APY capped at 20 million PNT, there’s a real incentive for folks to hop on board early and grab a slice of the action. Get in while the getting’s good!

  1. When it comes to those inflation scenarios, here’s the deal:

Option A seems like the safe bet because it maps out a clear funding plan for a solid three years. But, it does lock in a huge commitment and long-term inflation strategy at a time when the DAO action is pretty slow.

Now, Option C, well, it’s a bit of a wild card. It puts every new idea up for a DAO vote, which can be dicey. But the cool part is, it only commits to a general inflation plan now and leaves the specifics for later when (hopefully) more folks are in the PNT and DAO mix.

With Option C, though, you’ve got to be super vigilant about spending. Since the DAO only approves one thing at a time, there’s a risk that the budget could end up all over the place, especially in the bull market.

One big perk of Option C is that it’s not really tossing out 20% more tokens right away. It’s more like, “Let’s see how the market plays out.” On the flip side, Options A and B are all about pumping out that extra 20% no matter what’s cooking in the crypto world.

So, talking about Option C, here’s a burning question I’ve got: What’s the deal with that fixed APY for the DAO crew? It seems like it might not be all that fixed if the budget for it isn’t given the green light down the road, right?

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Thank you for your support and feedback! :handshake:

We are definitely planning to work with other players in the ecosystem, we are already in contact with many of them and once the v3 is more advanced and on solid ground we will promote it further!

By being so decentralised, integrations would be easier than with previous versions of the protocol.

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Hey @yogalabsintern, thanks for your comprehensive feedback! You summarise all the key points well and your questions are on point. The document is long enough and we couldn’t go into detail on every aspect. :grimacing:

I’ll try to answer all your points below :point_down:

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Security is a top priority for pNetwork, see what’s already in place at Security.

By being fully decentralised, pNetwork v3 removes all the centralisation points that have been the main factors in past security breaches in the industry.
By design, the new pNetwork architecture would be more secure than previous pNetwork versions and most bridges on the market.

In addition, in v3 there are multiple players ensuring the security of the protocol. Read more here: pNetwork v3

Of course, there will be one or more audits in 2024 to ensure that the codebase and logic are also bug-free.

We expect that all these factors will make the protocol more attractive to users and partners!

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The budget is projected with the current market situation in mind (and conservatively), but of course, if the market recovers, the budget will also be adjusted!
As the Treasury will be (mainly) priced in PNT, its dollar equivalent will also grow with the market and the DAO will be able to allocate more results to new initiatives.
Some of them are already in the budget, others will be decided with community involvement.

As for the audit, it might cost more than $100k, but for simplicity we’ve allocated this sum every year for 3 years, but it’s unlikely we’ll do 1 audit per year, so we’ll probably go over budget in the first year, but then the cost will be amortised.

Good question!
Especially if option 1 or 2 is chosen, we want to implement an intelligent treasury management strategy.
This will involve a diversification of the DAO treasury, which has yet to be defined, but the Association is already in contact with some third-party projects that can help.

These decisions will be fully managed by the DAO.

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Your analysis of the three options is correct.
However, I wouldn’t say that option C is more generous and uncontrolled than the others, because the DAO has to approve (or not approve) each initiative as part of an overall annual plan, and there is also a monthly and annual cap.
DAO members should always do a careful analysis.

So, in my opinion, it is the most conservative.
The only drawback I can see is that the exact inflation plan is a bit confusing (because it’s not fixed), but the cap is there on purpose.

The idea is that if Option C is preferred, the DAO should allocate the DAO rewards in advance for 1 year. This is considered outside the monthly cap as it’s not spent, just allocated.
In this case, it’s likely that the first year’s DAO incentive will last longer than 1 year (as it will take time to reach the 20M daoPNT target).
Another option is to request the required funds for the DAO incentives each month.

Let me know if my answers are clear and precise, and remember that the DAO always has the final say on these matters.

1 Like
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from all, scenario A looks like the more secure for the project success, anyone see other drawbacks there other than the one outlined in the document?

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Hi, I hope it is not too late! Thanks for the detailed plan and all these options. My thoughts:

  • What happens to unused PNTs for DAO rewards? Will be used in the following year/phase? Where will PNTs be taken for year/phase 4? For example, in scenario A, according to the estimates, the first and second cycles have 2420 + 1210 = 3630 unused PNTs whereas Y4 requires 1210 more.
  • At least for me, cell A9, “Inflation for DAO incentives” is misleading. It seems to suggest the total inflation will be 25% (20 + 5 for DAO incentives) while it is understood that 25% of 20% of PNT minted are for the DAO. In “Scenario B”, for the first year, the number of PNT allocated for the DAO will be over the %5. The 25% of 25% is 6.25%.
  • With option C, the incentives for the DAO are placed on proposals (because they are minted) and can be lowered or refused.
  • If the price doubles, triples or even better, “new funds” are spent on marketing or other activities. There’s a cap on cash spent → more revenues, any plan to use these funds on rebuilding the treasury using stable or BTC?

Option A seems the safest and easiest one. Option C seems the coolest one and more sustainable (if the price goes up) but need more planning.

EDIT: A big pro of v3 with upcoming MiCA is not requiring KYC for bridging tokens. I believe no other bridge can offer that.

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@Carbonaut Cheers for clearing things up and tackling all my queries. I reckon option C is the way to go overall. Sure, it might need the folks in the DAO to keep a closer eye on divvying up resources, but I think the association can chip in by dishing out regular reports on where the funds are going and how the proposal would shake up the allocation.

The idea of tossing in some rewards for DAO stakers via DAO approval also sounds spot on.

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@intergalactic-horse That was my initial gut feeling too. However, on second thought, it occurred to me that option A might actually put a brake on pNetwork’s growth and expansion, especially if the crypto market goes bull. In contrast, other choices, like C, seem more flexible in that regard. Option A locks up funds for a year (which, in the crypto realm, is a long time), so we’d need to come up with a game plan for preserving and distributing those resources. But in a bull market, things can go haywire overnight, requiring a boatload more effort – think tons more product launches, partnerships, development output, and marketing hustle. Unfortunately, option A’s fixed funding might just cramp our style (imagine having to convert a chunk of it into stable assets to safeguard against a bear market).

Right now, we’re looking at a ballpark figure of $1.3 million to keep the project afloat for a year. So, with option A, I’d anticipate that sum being locked in once the inflation phase kicks in (this shields us from a bear market’s wrath). However, in a bull market, we’re talking a whole different ballgame. The budget needs would shoot up significantly. Take the security audit, for instance – it’s currently pegged at around $100k. But when the market goes bullish, I’d expect that cost to at least double (thanks to price hikes, queue jumping, and the likelihood of more traffic across the bridge requiring multiple audits – speaking from experience, I’m part of the Lido crew and we’ve got a bunch of audits going on: GitHub - lidofinance/audits).

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Thanks @Carbonaut for sharing this much needed work. I just wanted to share my perspective as a community stakeholder.

While inflation discussions are never easy and liked, I feel like option C makes a good job in limiting the damage inflation could do in the worst case. If the market recovers, option C won’t affect the supply as much as the other options would, while if the market doesn’t it would basically all work out very similarly to a standard fixed inflation plan similar to the one done last year with ethPNT. The new DAO incentives seem also to be going in the right direction to address the DAO apathy issue many projects have been facing during this bear market, while specifically protecting from inflation those users who show a strong commitment to the governance needs - I may be overly optimistic there, but I feel like this wake up call could renew DAO participation and strengthen it again, which seems to be a requirement for a safe v3 protocol deployment.

My personal vote will go on option C for the reasons above. I don’t have much else to add, keep up with the good work!

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hey @yogalabsintern (cc @intergalactic-horse) I agree with you on the fact that option C is more flexible and that in bull markets all costs will increase, but please note that option A (unlike option B) is structured in 3 periods with flexible duration and this gives flexibility in both bear and bull markets. I just wanted to clear this up. :pray:

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hey @Enchilada, thank you for your feedback and questions. It’s not too late, and I’ll try to answer all your points.

In the case of PNT minted but not allocated to DAO rewards, these PNT tokens can be used for other initiatives. Of course, their allocation will be at the discretion of the DAO.

Y4 in the spreadsheet only shows a scenario where the 20m DAOPNT is reached and therefore the APY decreases (from 27% to 17% in this example, which is purely illustrative).
The DAO will discuss each year how to allocate the Treasury resources and whether (or not) to retain the DAO rewards after the 3 years (or 3 periods).

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thank you very much, I rephrased A9 and edited numbers in line 8. [SHARED] DAO incentives - Google Sheets

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Here’s my answer to a similar question, let me know if it’s clear enough!

The idea is that if Option C is preferred, the DAO should allocate the DAO rewards in advance for 1 year. This is considered outside the monthly cap as it’s not spent, just allocated.
In this case, it’s likely that the first year’s DAO incentive will last longer than 1 year (as it will take time to reach the 20M daoPNT target).
Another option is to request the required funds for the DAO incentives each month.

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Especially if option 1 or 2 is chosen, we want to implement an intelligent treasury management strategy.
This will involve a diversification of the DAO treasury, which has yet to be defined, but the Association is already in contact with some third-party projects that can help.

These decisions will be fully managed by the DAO.

This is a great competitive advantage, let’s see how the other bridges and the DeFi project will position themselves on this matter, but pNetwork’s position on this is already clear and solid :muscle:

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Thanks a lot Thomas, your feedback is always very welcome!

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Hey @Carbonaut , do you know if there’s somewhere they post updates and interactive discussions happen? I used to be in that Telegram group, but it was pretty frustrating because people weren’t really boosting the project.