Multi-Chain Expansion Strategy
Liquidity mining programs, for the most part, have been the most common form of incentivizing protocol participation among DeFi users.
However, many protocols (especially if they are on multiple chains) are limited by how much rewards they can give out since there is a limited supply.
At some point in time — most projects — no matter how good they are, can be overtaken by another competitor purely based on the fact that their competitor provides better rewards — through their token emissions. i.e. Uniswap vs Sushiswap or Aave vs Compound.
A single AAVE token on all chains
Taking AAVE as an example, because they’ve limited themselves to having just one token that’s able to be used on every chain, this severely limits how much they can incentivize users of other ecosystems to use their protocol as Aave will need to dilute their token emissions. Take this scenario for example:
- 1.Aave on ETH emits 10 Aave tokens per block, netting lenders a 5% APY reward.
- 2.Aave expands to Fantom and wants to provide a liquidity mining program, to avoid increasing inflation of the token and reaching max supply earlier than planned, Aave instead reduces the emission of the Aave token on the ETH network from 10 to 5, decreasing the net APY reward from 5% to 2.5%.
- 3.This decrease in the ETH network will then allow Aave to also offer 5 Aave tokens per block on Fantom, netting lenders on Fantom the same 2.5% APY reward.
The scenario above shows that as the Aave protocol continues to expand onto other networks, they will have to dilute their liquidity mining rewards and be outcompeted with other lending protocols that are native to that network, hindering the growth of Aave.
This can be seen in the AAVE vs. Geist scenario during FTM season in late 2021, where Geist was able to out-compete AAVE in attracting TVL growth — simply from the fact that Geist was providing higher, non-diluted token rewards for their liquidity mining program.
In fact, Geist Finance is still the leading Lending protocol on Fantom today with $60M in deposits while Aave with less than $1M in deposits — the power of a solid liquidity mining and tokenomics structure.
This proves that even though Geist and Aave are literally the same product, as Geist is a fork of Aave, but by having a single token on a single network, Geist was able to outcompete Aave and dominate the Fantom network as the leading lending protocol.
At the end of the day, DeFi participants look at how much they can be incentivized — which leads us to Pinjam's innovation on flipping the playbook with the aim of gaining market dominance on, every, network.
Pinjam Ecosystem Token on each Blockchain
With each chain that Pinjam is on, Pinjam will be creating a chain-specific, ecosystem token that cannot be bridged elsewhere.
For example, for the Pinjam protocol on Ethereum (ETH), we will be using the $PINETH token. The same concept applies to every chain.
By applying this concept, these are the benefits:
- 1.Chain-Specific Liquidity Mining Programme
With this approach, we will have an ample amount of non-diluted ecosystem tokens on each chain to use for liquidity mining programs.
This allows us to compete with other lending protocols on each chain Pinjam launches on — allowing us to attract users and over time, keep them sticking in the Pinjam ecosystem.
- 2.Removes Unnecessary Dilution & Isolates Risk
When an ecosystem collapse such as Terra Luna or when community interest dwindles such as Harmony One, the risk is isolated and only chain-specific tokens are affected while others remain safe.
There will also be zero dilution of the token emissions when we launch a liquidity mining programme on other chains, where if that chain ecosystem fails, the rest of the Pinjam ecosystem will remain healthy and safe from parasitic farm & dump.
- 3.Aligned Governance From Ecosystem Participants
These chain specific tokens will also serve as governance tokens for that specific network and Pinjam whales from a single chain will not be able to influence decisions made on other chains.
That way, holders of a Pinjam token from a specific ecosystem will have greater participation and have a more meaningful say on how the project is governed in a network.
Pinjam Index Token (PINDEX)
The Pinjam Index token will be the main token that represents the average of the Pinjam protocol. It will collect 20% of revenue from all Pinjam products from each protocol, allowing users to have a balanced stake and growth in Pinjam without taking on 100% of an ecosystem risk.
The Pinjam Index ($PINDEX) token is not a governance token. It will be bridgeable although there might not be many use cases for doing so and it will be this token that will be tradeable on CEXes.
There will be no liquidity mining program for the Pinjam Index token, it will only be purchasable from secondary market sales or via an airdrop.