**This proposal will attempt to improve the utility of $PATH, and align interests between the treasury and token holders. **
Authors: xOctavia and nf.carlos.acutis
Inflationary tokenomics and lack of token utility have affected the $PATH price, market cap and trading volume negatively (PathDAO price today, PATH to USD live, marketcap and chart | CoinMarketCap). We propose a tokenomics revamp that introduces a deflationary mechanism for $PATH, a profit-sharing utility for investors, and an additional revenue source for the treasury. $PATH holders will be able to burn their $PATH for a Pathfinders NFT, which can be staked for 30% of realized treasury profits. This can be raised to 50% of all realized profits at the discretion of the team.
note: The name ‘Pathfinders’ is merely a placeholder until a better name is discovered. Something more creative and original would be ideal.
How it works:
$PATH would be burned out of circulation forever in return for a Pathfinders NFT
Pathfinders NFT is staked for profit-sharing rewards
Rewards would be paid out in USDC, ETH or WBTC (this may be done in epochs or delayed emissions, exact details tbd)
There will be no lock up period for stakers (you can enter and exit whenever you want)
There will likely be a membership tier depending on number of $PATH burned. Each tier will provide stakers will additional benefits, such as, entry into partner project presales, access to real life PathDAO events, PathDAO merchandise etc. More benefits could be added at any time.
Example using February data
Monthly Realized Profits: $580,000
30% of this: $174,000
Number of stakers: 100
Average reward per staker: $1,740
50% of $580,000: $290,000
Number of stakers: 100
Average reward per staker: $2,900
Realized profits and number of stakers are variable. Exact reward per person is determined by the number of $PATH burned into the staked NFT.
Incentivises burning of $path. There are new $PATH entering circulation daily, which dilutes all current holders. This would help offset some of this. If 10,000,000 $PATH is burned, that equates to 1% of the max supply, and almost 10% of the circulating supply. Bear in mind, there is a lot of $PATH already locked in the staking contract.
Incentivises buying of $PATH as a financial utility has been added. In order to access the profit-sharing pool, many will buy $PATH in order to take part. This decreases the supply and puts buy pressure on $PATH at the same time. A higher $PATH price and market cap would be fantastic for marketing, and increase overall satisfaction of token holders. It would also allow PathDAO to engage in further rounds of funding at higher prices.
Increases trading volume and trading fees for LPs as token is given utility. The treasury owns its own Uniswap V3 liquidity for PATH-USDC at 1% fees. This means a daily volume of $1million in that pool would generate $10,000 per day in fees.
Creates a new income source for the treasury through NFT sales royalties. Although no fee has been determined, it is likely that it will be somewhere in the range of 5%. Each time someone wants to exit their position, and sell their Pathfinder NFT on the secondary market, the treasury will earn a piece of that sale. Trading volume of $1m would equate to $50,000 if royalties set to 5%.
Gamifies trading. As PathDAO specialises in gaming and NFTs, it is fitting that the trading of its token becomes gamified. Buying and burning $PATH, minting NFTs for profitsharing and selling the NFTs later on, creates an interesting new dynamic for traders. All of which benefits the protocol in various ways already discussed.
Distances $PATH from being a security while still benefitting from profit share. If we were to use $PATH in order to stake for profitshare rewards, this would class $PATH as a security and exchanges would be forced to delist. In this case, the NFT would become the security. Luckily, there are many decentralised NFT marketplaces we could use.
Helps PathDAO gain exposure to another group of investors. Getting verified on an NFT marketplace could help spread awareness about PathDAO and the gamified trading element could open the doors for new traders.
Exposes investors directly to the performance of the treasury. This will lead to higher engagement from the community members, and higher quality alpha for investment opportunities.
If the project pays out its profits to stakers, wouldn’t that reduce the amount in the treasury and subsequently its growth potential?
Potentially. First of all, rewards are derived from realized profits, so the treasury will still be growing only at a slower rate (ceteris paribus). You must also take into account the additional revenue stream (NFT royalties), token price increase (the DAO can engage in further rounds of funding at a higher price) and the trading volume (LP fees).
How can we be certain that this will have a meaningful impact on inflation?
There are no certainties, but, generally speaking, with financial incentives we should see quite a lot of $path burned to earn these profits, bearing in mind you can still sell your NFT if you wish to exit your position. The incentive to burn and stake would increase with increasing treasury performance. We may see a period of time where it is more profitable to buy the NFTs on the secondary market as opposed to burning, this would still benefit the profit-share rewards through royalties.
What impact would this have on $PATH or Pathfinders NFT being a security?
Using an NFT creates a buffer for $PATH as $PATH itself would not be able to be staked for profit-sharing rewards. There is a chance that the NFT itself would become the security, however, as long as we use a decentralized NFT marketplace, we shouldn’t have any problems with being delisted. The issue of securities is a genuine concern for this model and would need to be taken into account when voting on this.
What about those who have already locked their $PATH
Unfortunately, $sPATH is a non-transferrable token so that would not be able to be included in the burn to mint Pathfinders NFTs. If successful, all $PATH stakers will see a direct benefit through price appreciation, supply decrease (while they get more $PATH and therefore a larger overall proportion of $PATH), and project awareness. Staked LPs will benefit from higher trading fees.
No additional budget required.
- Yes, rewards in USDC
- Yes, rewards in ETH
- Yes, rewards in WBTC
Will leave this up for 5 days before launching an official proposal.