Concave pToken Model Primer

Policy Jan 14, 2022

Context: I received a number of questions and suggestions from the community and investors post my initial primer release. After spending some time answering questions and internalize some of the suggestions, I am making some minor tweaks to adapt without sacrificing the big potato which is again to maximize all the stakeholders' value and Concave’s long term success.

  • The only thing that is changed is a vesting schedule which is below. Note that we now have a 2-month cliff for everyone and the 2-month cliff is defined as 2 months post the project launch.

Goal: A detailed primer for Community, Investors, and Team who will soon in the future be receiving pConcave to understand (1) essence of what pConcave really is and (2) how and why we are constructing our vesting model in order to maximize all the stakeholders' value and Concave’s long term success.

What is pConcave?

pConcave Holder = Concave stakeholder and owner

On a surface level, just like pOHM, pConcave is a precursor derivative of the Concave Native Token; it gives the holder the option to mint Concave Native Tokens by burning pConcave and providing the intrinsic value of Concave native token. For example, an investor would provide 1 DAI and 1 pConcave to mint 1 Concave Native Token.  So yes, pToken is dope, pToken is more than just a token, it is also a free call option on Concave. Through a more Tradfi lens, you can view pTokens as stock warrants of concave whose purpose is to incentivize future performance and contribution.

Let's use a simple example to illustrate above, if Voke can redeem 10,000 pConcave at the end of 2 years and Concave native token price is $100 each. To redeem, Voke need to provide 10,000 Dai to get 10,000 Concave token which is worth $1,000,000. As you can see, the higher Concave token premium is the better of pToken holders become. Knowing this, Voke and his other pToken holder friends all work super hard, creating awesome USPs which not only generate juicy dividend for stakers but also increase Concave native token value to $1000 per Concave. Now his 10,000 pConcave is worth $10,000,000. WAGMI!

On a deeper level, pConcave represents the claim of a constant % of circulating supply (thus a constant share of market cap) and it is quoted in relation to or as a % of the 333,000,000 “Target Terminal supply” (TTS). Let’s run through an example. Say Sert did a great job building an awesome bonding machine for our treasury, MiaoShi decides to award him with 3,330,000 pConcave. This 3,330,000 is quoted in relation to TTS, which means Sert will always have 3,330,000/333,000,000 = 1% of circulating supply after his pToken becomes fully vested. Let’s look at 3 cases:

  • At the end of year 2 when all of his pConcave are fully vested, circulating supply is 200,000,000. He can basically cash out 200 million X 1% = 2million Concave Native Tokens by providing 2 million DAI, assuming he hasn’t redeemed any pConcave before. Once he redeems the 2mil which is equal to his entire pConcave ownership %, he cannot redeem any more pConcave in the future.
  • At the end of day 900 when Concave reaches TTS and all of his pConcave are vested, circulating supply is 333,000,000. He can basically cash out 333 million X 1% = 3.33million Concave Native Tokens by providing 3.33million DAI, assuming he hasn’t redeemed any pConcave before.
  • At the end of year 5, circulating supply is 1,000,000,000.  He can basically redeem 1000 million X 1% = 10million Concave Native Tokens by providing 10million DAI, assuming he hasn’t redeemed any pConcave before.

On a subtle level, your unredeemed pConcave will grow at the same rate of the circulating supply growth, which means it is 100% dilution protected thus a better version of gConcave (staked Concave Native Token). See the table below for a simple illustration. The context is that Coud has all the pTokens which is 10% of the circulating supply, the table below shows how many pToken he ends up having after two years under 3 scenarios, namely Paper Hand (redeem and sell), Wooden Hand (redeem everything and stake), Diamond Hand (no redeem till the end), assuming his pTokens are fully vested for the entire time.  So yes, on a superficial level in terms of total number of Concave Native Tokens, it makes sense to redeem your pConcave as late as possible. I will touch on the deeper level game theory in the next section.

Vesting Schedule Explained

See below for vesting schedule

FAQs

  • How does this work? The amount of pConcave redeemable at time T = Circulating supply at T * Vesting % at time T * Your pToken ownership as a % of circulating supply. Let’s just run an example, say Akarin owns half of all pTokens, which is 5% of the circulating supply. At the end of year 1, circulating supply is say 20,000,000 and he can vest 50% of his token, thus he can take out up to 20mil * 50% * 5% = 0.5mil of Concave Native Tokens by providing 0.5mil DAI. If he chooses to redeem all of it, he will be left with 5% - 50%*5% = 2.5% claim on the circulating supply. Then at the end of year 2, circulating supply becomes 150mil and his vesting % becomes 100%. Now he can redeem up to 150mil * 100% *2.5% = 3.75mil pConcave by providing the same amount of DAI.
  • The Concave model seems to be different than the legacy model. Which one is better? Yes you are right, they are a bit different. Let me do a deep dive analysis and let you judge which one is better. The legacy model doesn’t have a vesting schedule, if your pToken allocation is 10% of the total supply, you can start redeem up to 10% of the circulating supply every single month and then stake it. For example, at month 1 when circulating supply is 100k, you can redeem 10k and stake it, then at month 2 when circulating supply becomes 150k, you can redeem another 15k-10k = 5k and stake it. As you can infer, the redeemable payout is extremely front-loaded under this legacy model because you can start staking 10% of circulating supply at the very beginning. As such, your motivation is front-loaded as well… Also as illustrated below, the winning strategy from an individual pToken holder perspective is to Wooden Hand all the way (redeem max amount whenever you can and stake it).

More scarily, Wooden Hand is also the Nash Equilibrium on a group of pToken holders level (see below). But as illustrated above, if everyone is being Wooden Hand, the 10% pToken allocation will become ~45% of circulating supply in two years, flooding the market with Token inflation and causing rapid decay of our Token premium (which is NOT what everyone wants as established in previous proposals and articles, especially for a pToken holder). In this case, everyone loses.

Now let me show you why the Concave model pushes the Nash Equilibrium to Diamond Hand and is also beneficial to the long term value of investors and success of the Concave Native Token. Again you shouldn’t measure success by the number of Tokens you have in your hand, instead it should be the total value of your equity.


On a very subtle note, if one of the pToken holders redeem early, especially before they become full vested, the share of pie for the other pToken holders becomes slightly larger (I can show you the math if you pay me pTokens haha). Hence, the table below represents the new game theory dynamic under the Concave pToken model.  In summary, the Concave pToken model back-loads payouts and incentivizes late redemption which is beneficial to the long term success of the project.

  • Has Concave thought of the implications of its pToken model in the context of other policy frameworks? Ofc, we did. Just to give you two examples, (1) the pToken vesting schedule is part of the reason that MiaoShi constructed a smoother APY/supply growth curve which further disincentive super early redemption; (2) part of the reason that MiaoShi wanted to remove the supply cap is to further sustain the incentive of holding your pToken unredeemed for longer.
  • Will pToken holder get dividend distribution? Yes, ofc otherwise what is the point right? But special dividend will be a topic of another day.

Speaking of special dividend, as an Alpha tease, the reinforcing forces and the final utility numbers under the new Nash Equilibrium above can be further boosted in light of the incentive structures embedded in the special dividend program. This will be introduced in the next community proposal, stay tuned.

  • Last but not least, what is the pToken distribution like? See the pie chart below, but the TL;DR is most of the pTokens will be distributed to the community. At initial stage of the project, a relatively small part of total community pTokens will be soon given to distinguished early contributors, early supporters (e.g. NFT holders), and a few highly active community builders. The majority of the community pTokens will be reserved for future distributions. Detailed mechanisms and frameworks (e.g. Sxxxxx Xxxxxxxd) on how we plan to distribute these will be unveiled gradually. As many fellow DeFi comrades agree, well/poor-designed tokenomics can usually make/break a project. pToken is for sure dope but it could also be very dangerous if misused. Therefore instead of pouring out all the pTokens at once before the project even launches, we plan to ration it (even for the core Team members), structure the distribution schedules and frameworks in a smart way in order to maximize the long term success potential for Concave and long term value for everyone in our community. Stay tuned.

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