Token Utilities

[Azrangar]

With many protocols falling victim to poor tokenomics, I propose we plan ahead of launch to ensure the Friktion Token is robust, needed and integrated with the protocol.

Utilities to achieve demand:

1. Governance
2. Revenue sharing
3. Vote on Vault Emissions- Friktion Wars
4. Premium Vaults- Example: ETF Vaults
5. Composability
6. Partnerships

1. Governance
   Each token should have a voting right of 1:1. This can be boosted through staking. For example, Lock staking for 1 year and this raises to 1:1.5. Lock staking for 2 years and this raises to 1:2. Receipt tokens can be issued with further compossibility with other platforms such as lending protocols. Lock staking NFTs can further boost voting rights which would be an added utility for the NFTs. Team to decide voting rights given to Gen1 vs Gen2 NFTs.

   Aims: To engage community; allow community to have a vested interest in the protocol; reduce circulation; receipt tokens to increase capital efficiency.

   Reference: Inspired by QiDAO’s boost.

2. Revenue sharing
   Revenues generated by protocol to be divided amongst token holders. Treasure, team and holders/stakers would benefit.

   Aim: Allow token holders/stakers to have direct benefit to the protocol

   Concept:
   A) Dividend concept where fees generated can support Treasure and Team in USDC while a portion is converted to the Native Token to buy back and distribute to lock stakers.

   B) Revenue generated that goes into the treasury would help to build a liquidity owned pool.

   Cons: Long length of time taken to build pool to sustain all tokens outstanding. Lock staking can reduce pressures on liquidity owned pool.

   Pros: Set floor price for token

3. Friktion Wars
   Concept: Vault Emissions can be a means to boost return and compensate for losses when options are exercised. Token holders/stakers would vote for % allocation to each vault.

   Pros: Further incentive TVL growth, community participation and growth as well as partnerships.

   Cons: Selling pressure on token after vote.

   Mitigations:
   i) Liquidity owned pool (LOP).

   ii) Emissions can be in the form of receipt tokens to a Native Token vault where the tokens can only be accessed if a specific revenue target is hit. This can be a way to ensure that enough TVL is present so that the LOP receives enough revenue to keep the floor price. It can also have a positive cycle where more TVL is locked in the protocol which would generate more fees.

   Another alternative is to have a vesting period for the emitted tokens such as 1 month.

   iii) Emitted tokens can be placed in product vaults (Vaults 1 to n) so as to generate more yield. This may mitigate the need the sell. Withdrawal of native tokens emitted before X time forfeits yield earned on the native token. This will further disincentivize premature withdrawals and sell pressure.

   Note: If not balanced sufficiently, emissions can be a double edge sword.

4. Premium Vaults
   Lock staked tokens/NFTs can give access to premium vaults such as an ETF CSP Vault or an ETF Crab Vault

5. Composability
   Tokens that have a buyback or dividend mechanism tend to do well in composability due to the inherent yield. This prevents “dead end” value where a token cannot offer more capital efficiency. Composability with platforms such as Hubble will allow users to take out stable coin loans on Friktion’s token. The receipt token from Friktion, that is gained from staking, which is yield bearing by nature, will increase the loan to collateralization ratio over time, pushing users further from liquidation.

   Reference: Inspired by Beefy Finance’s composability with QiDAO on Fantom.

Risks: Mass liquidation events for assets lent out during downside volatility.

6. Partnerships
   Linking to composability, partnerships provide opportunities for integration with other protocols and channeling further demand. For example, Friktion’s token be used as a commodity/currency in GameFi protocols.

It would be best to develop utilities before launch. The team has already demonstrated a work ethic of product first, hype later approach.

Thoughts and counter thoughts are welcome! Let’s design the most useful token on Solana!

Let’s build the best Frikin Friktionomics, together.*

[dobby]

I think there are some good ideas here - thank you @Azrangar!

I’m particularly interested in composability and would love to see integrations with protocols such as Hubble and Ratio Finance. Can we think of any others that would be worth pursuing?

I also understand that Friktion has a strong relationship with Realms / SPL Governance, but I wonder if Tribeca would be better suited to handle certain things like “Friktion Wars” and the longer-term lockup / voting power boost ideas mentioned above. (I have no strong view either way, just saying it could be worth exploring, if it’s not already being considered. I also realize that Friktion is featured on the Tribeca website too, just unsure what the status is there.)

Stay safe out there!

[Uddhav]

Fantastic list. Sorry for the delay in respond, thinking a lot about this.

1. Nice, will need a curve for “voting power” vs time and holdings, what do you think of quadratic voting (Quadratic Payments: A Primer) vs ve-economics? Used to use QiDao a bunch back in the day do you have a good link for how they implement this?

2. Seems like a medium-term decision, but all revenue isn’t being touched rn as it’s owned by the DAO.

3. Fan of making the system competitive - who do you think the key players in this “war” would be? I think TokeMak has an interesting approach which relies on DAO/Protocol level support rather than only individual users (Tokemak - C.o.R.E.)

4. Exclusive products and features for NFT holders (‘utilities’) are in the works now - @Zlex7 and I will be making a post on this shortly, likely the first FIP (Friktion Improvement Proposal)! Looking forward to getting community feedback on this.

5. Integrations currently in the pipeline: Investin.Pro should be live within next 2 weeks with Friktion Volts accessible to their users, 2 Wallets native integrations, Paradigm (CeFi liquidity network). Once the Credit Volt launches, I think we’ll have a good chance at collateralizing fTokens through that since it’ll be a much more reliable network of counterparties. Would you have any protocols you think we should be working more closely with?

6. GameFi has been smth we’ve been mulling over - it seems we’re 6-8 months out from any serious game launching on Solana but we’re already in talks with 1-2 of the larger ones for an integration as early as possible. This is quite a drawn out process unfort, since development is their first focus and then they’ll start to add in DeFi opportunities.

[Azrangar]

1. I did some research on Quadratic voting. Giving it some thought, I’m seeing synergies between NFT and the token. If issues are important to users their preference can be expressed via a time cost. By locking tokens in x NFT for x Period, they receive x Voting power.

   Benefits

   A) No one is going to lock their tokens for extended time unless the issue they voting on is very important to them.

   B) This eliminate whales using 1:1 voting to their advantage. This was the issue I had with the “skin in the game” concept. I have seen whales destroy good projects just for short term mercantile gain. Imagine that whale going up against someone who is willing to lock their tokens for 4 years just to gain the voting power to pass an issue. This definitely allows for thought and cost benefit analyses by users.

   C) Of course, by locking the tokens it controls the supply but it also adds deeper value to NFTs. NFTs can literally store value. One attribute now being how many tokens are locked in them. By locking these tokens in an NFT, it further improves the aim of making them yield bearing.

   Minting NFTs by locking tokens can allow for personalization of NFTs. It would be great if something like DALL.E 2 could be used to generate the art by using descriptive text from users. (Ref.: DALL·E 2 and How This A.I. Draws Anything You Describe [DALL-E 2] - YouTube). This will revolutionize the field and bring us closer to what DeFi truly is. Albeit some standardization might be warranted to keep protocol representation visible.
   Here is the link behind QIDAO QiPowah concept: QiDao Announces Qi Powah Boost. TL;DR: This article describes Qi Powah… | by Lao Zi | Medium. While locked, users also receive QI emissions: Qi Staking - Mai Finance. Again, I’m cautious about emissions.

2. First voting decision right here .

3. I do see it being DAOs and Protocols being the main drivers. I imagine a growth strategy would be to vault Alt Coins as well, so as to offer alternative yield opportunities for them. So these vaults will attract their interest.

4. Looking forward to it.

5. Hubble Protocol. Their stability pool reduces the need to sell the collateral on the open market as the collateral themselves are distributed to stakers in the pool. Also, considering the length of the Epochs, this will allow Frik users to gain access to liquidity while locked in an Epoch.

   Also, I’ve been thinking about an isolated pool on Solend a while back. Trying to wrap my mind around the practicality of lending and borrowing fTokens, as well as lending fTokens to borrow USDC or vice versa.

6. I was thinking exactly this. GameFi would be a good opportunity to deepen the token utility. The opportunities are great for uses in the metaverse especially if the tokens can be locked as NFTs. Imagine Friktion token and AURY being locked to create x Aurorian NFT with x Attributes and with x Gaming abilities. NFT Fusions . Ground work on this could be laid by vaulting the top game projects.

[dobby]

I really like where this conversation is going! Wanted to offer a few thoughts on quadratic voting & ve-economics.

I’m a big fan of quadratic voting systems and believe that they can be quite effective in practice. I also think that it would be really cool to see some combination of NFT(s) + tokens considered in the calculation of total voting power. Relative weights can be hashed out with the ultimate goal of rewarding whichever user segment(s) are most aligned with the long term success of the protocol and therefore most valuable with respect to governance.

As far as veTokens & ve-economics go, I’d like to call out one thing to consider. Although veToken systems can be effective in increasing voter participation rates and lockup boosts/penalties can effectively limit “just-in-time voting”, they cannot be relied upon to make up for a lack of token utility or poor tokenomics. Figuring those things out first is critical.

Flipside’s Raph Spannocchi researched the topic at length in “To ve or not to ve”. Check it out if you’re really interested in the topic!

[Azrangar]

I agree, while veTokens are good mechanism for reducing circulating supply, only strong fundamentals will keep a protocol going.