C.o.R.E. Spotlight - AMA with Paladin
The C.o.R.E. Spotlight AMA series highlights our upcoming C.o.R.E.3 candidates, giving Pilots an inside look at why they are interested in a Tokemak Reactor.
With C.o.R.E.3 beginning next week, the Tokemak team has lined up a series of AMAs ("Ask Me Anything") with various Reactor candidates.
The Spotlight Series will allow the Tokemak community to familiarize itself with the protocols that are interested in securing a Reactor of their own, and get a peek into why these DAOs are so interested in moving away from liquidity mining in favor of sustainable liquidity.
Next up is Paladin, a.k.a. the "influence protocol," a service designed to allow users to lend and borrow governance voting power on-demand.
Paladin hosted an "Intro to Tokemak" community call earlier this week aimed at educating their own community on the benefits of a Tokemak Reactor. The team also penned a "Love Letter" outlining the value they can share with the Tokemechs.
"Looking past what is already live and compatible, we believe TOKE is one of the few governance tokens with enough power to create governance wars. We have built our whole roadmap around the belief that building synergistically with them would propel Paladin into the leading influence market. Led by this conviction, today, we’d like to offer an invitation to the Tokemechs to help us build an influence market for Tokemak. Not a bribe platform, but a fully fledged protocol enabling optimal use efficiency while shielding holders from slashing risk." – A Love Letter to the Tokemechs
For more information about Paladin:
C.o.R.E. Spotlight Schedule
- StakeDAO - Monday April 25, 9:30am PDT
- Angle Protocol - Tuesday April 26, 9am PDT
- Silo - Wednesday April 27, 10am PDT
- Redacted - Thursday April 28, 10am PDT
- Rook - Friday April 29, 11am PDT
- Immutable X - Tuesday May 3, 5pm PDT
- Paladin - Wednesday May 4, 10am PDT
- Badger DAO - Thursday May 5, 11am PDT
- Goldfinch - Thursday May 5, 3pm PDT
Alternatively, the recording is available on SoundCloud.
"DAOs are actually much more mature financially speaking than organizationally speaking. And that's a big problem because people can actually come in and abuse the organizational weaknesses that actually exist." – Figue
- Alejandro is the head of communications and growth. He joined in September of 2021.
- Figue is the founder of Paladin. He started building the protocol at a hackathon last July as a dapp to allow users to loan out their AAVE governance power with no counterparty or liquidity risk.
- The Paladin team believes that incentives compromise the long term vision in return for for short term gains.
"We see [CoRE] as a very watershed moment for Tokemak, in the sense that it should be the moment where the community actually picks up the most strategic partners for Tokemak – in the sense: what token swap should we need for the best development of Tokemak today? Tokemak has funding, has resources, has a really good community. The only thing that you guys need is execution." – Figue
- Paladin strongly encourages vote delegation as a solution for improving DAO efficiency and voter turnout.
"Every single political and organizational model has delegation to solve the fact that the most active people – the ones who are most visible – should actually be the speakers, the representatives of the others. Because if not, the system will just not be pushed forward." – Figue
- Paladin wants to build a custom influence market for Tokemak to enable users to collateralize their incentive token which would get slashed in the event of impermanent loss.
- Paladin Chest is an upcoming product designed to crystallize governance influence into a single token.
"How do we make them stay? By helping them basically express their voice. Because, you know, there's always an equilibrium between people who are not happy and want to express it for change, and people who are not happy and will just leave and see a competitor instead." – Figue
- The Paladin team believes that Tokemak will eventually be abstracted away by integrations.
- In a conversation with Bancor, the Paladin team discussed how most projects are so illiquid that they could never reach main adoption.
- Winning a Reactor would allow Paladin to improve the liquidity for the PAL token, as well as bootstrap a TOKE influence market.
"Our goal is simple. With Paladin, we want to become the mechanism that's going to enable the largest and most promising DAOs to become sustainable for the next hundreds of years." – Figue
[00:00:00.430] - CJ
Okay, cool. Let's kick things off here. So, Figue, Alejandro, thanks for joining us today. We're continuing our CoRE Spotlight series, talking to a number of interesting protocols that are participating in our event to possibly win another Tokemak Reactor as voted upon by TOKE stakers in the community. And so we're setting up these conversations to learn a little bit more about the protocols that are participating, talk about liquidity, talk about the problems that you're trying to solve, and give our community a chance to ask some questions for core members of other projects. So I really appreciate you two joining us here today.
[00:00:38.690] - Figue
Thank you for having us.
[00:00:40.790] - Alejandro
[00:00:41.850] - CJ
Should be fun. So to kick things off, Alejandro, Figue, can you quickly introduce yourselves and give us a sense of what Paladin is building, how long you have been working on it, and maybe some of the genesis ideas, like what led you to work on this project?
[00:01:02.210] - Figue
Do you want to start, Alejandro?
[00:01:05.460] - Alejandro
Sure. Well, so I'm the head of communications, and I handle it along with Figue and the rest of the core team — the social medias, community management articles, press releases, anything to do with comms and growth. We recently brought someone on board with marketing, so we're expanding on that front, and it's really great. I joined in September 2021. But I know the concept — the conception of Paladin started in January at EthCC 2021. Is that correct, Figue?
[00:01:34.950] - Figue
EthCC is in France in July. But yeah, we started working like 16 months ago on Paladin. Time has been passing. We can say it basically started on a provocative idea during the hackathon: what if we could loan out our AAVE votes? And yes, it's scaling from there.
The Curve Wars didn't really exist at that time. We started by building the first protocol — first dapp — in September last year by enabling people to loan out their AAVE governance power. Just the governance power, not the actual governance token. So the difference is that you have no counterparty risk, no liquidity risk, and you don't need any collateral to actually borrow the voting power. So it created some interesting dynamics.
And then we traded on Curve by releasing a boost marketplace that enables people to basically sell out their boosted Curve that they didn't use and acquire gauge. So that's something that's coming very soon. And the next thing we'd like to work on is basically…how do we think about this and liquidity direction for Tokemak and for TOKE in general? What I just described are what we call influence markets. So our general idea at Paladin is: how do we make more people participate in crypto in general, in the governance systems?
[00:02:52.920] - Figue
Because this is actually insanely important. If people don't participate in…building the centralized system…people won't be really using them. And the second part is: how do we structure it in a way that people can use them much more easily? One of the biggest problems we're seeing is that people have like 5, 10, 20 different governance tokens. So it's impossible for them to follow and participate in all of these tokens. So we have to push the utilities by reducing as much friction as possible. These are basically the topics we've been focusing on lately.
[00:03:26.870] - CJ
Got it. And when you began building Paladin, can you describe what you think about governance has worked and has not worked for protocols in the past?
[00:03:39.890] - Figue
Yes, for sure. So let me start by saying that the reason we built this is that we've seen DAOs having exponential growth in terms of size, in terms of valuation, and in terms of revenue…the example of Tokemak…
However, the biggest problem we have is that we do not know how to do a good organizational structure for DAOs. There is no plan. There is no one that has outstandingly succeeded, right? You have some very good hints by people like Index Coop…by people like MakerDAO. But we don't actually have a game plan.
So DAOs are actually much more mature financially speaking than organizationally speaking. And that's a big problem, because people can actually come in and abuse the organizational weaknesses that actually exist. This can be, for example, what we call governance experts. It has to be this, too.
So I would say what has worked is the community-building by far. It's impressive what we're able to build with a community today. Just look at Tokemak…what you guys have built with Tokemak, right? And what hasn't worked, I think, is: how do you structure people to actually be incentivized to work on the long term for projects?
[00:04:52.670] - Figue
Because if we're actually building projects that are going to be able to be sustainable for hundreds of years, well, we're going to need more than just a cool thing that lasts less than three years. We're going to need employees or contributors who actually have long-term alignment with the DAO. We're going to need people to be able to take over from someone that actually leaves the reign. And we're going to be able to need to have an anti-fragile organization.
And all of these, we don't have them. There's very few projects that actually are planning for the long term. I could mention Curve who actually have tokenomics that are planned for the next 300 years. That's one very interesting point. But right now and if you look at Tokemak, it's something that should be able to become some kind of financial block for the future, right? And all the challenge is going to be: how do we build Tokemak to be here in 100 years?
[00:05:43.070] - CJ
Certainly, yeah. We want to build something for the long term. And so a governance process that allows us to build for the future is really important to us. And I know there have been issues with straight token voting in the past. Large whales or VCs can have too much outside influence on decisions, and it could be the case that there's hostile governance attacks. So governance is still something we're trying to figure out; it hasn't been solved for.
I know quadratic voting is a topic that I think Vitalik has been in favor of, if I recall correctly, as a way to just counter the sheer weight that majority token votes can have. I'm curious if you can weigh in on that topic. Like what is the best way to ensure that a project's longterm future is being built and people aren't just focused on short term profit-seeking, rent-seeking type of behaviors?
[00:06:40.610] - Figue
That's actually a very good question. I think there are certain topics on which bribes should not be allowed, or at least should be minimized…in the sense that when you're offering people to accept incentives for a very strategic decision that's actually playing out for the future of a project, you're compromising the long term for short-term gains.
And to be honest, that's one of the reasons why we haven't done anything for the CoRE events. That's one of the reasons why we haven't actually tried to build anything for the CoRE events…we see them as a very watershed moment for Tokemak, in the sense that it should be the moment where the community actually picks up the most strategic partners for Tokemak…what token swap should we need for the best development of Tokemak today?
Tokemak has funding, has resources, and has a really good community. The only thing that you guys need is execution, right? It's going to the permissionless route, and have liquidity direction and having the Toke Wars picking up. Right. And that's actually very little for it to work compared to a lot of products. But this has to be nailed.
[00:07:47.930] - Figue
And I do think that the CoRE events are a really important part in that set because they're like the knighting — the choosing of the right partners. So I don't think there's a perfect model.
Quadratic voting has a lot of mistakes. For example, it's very easy to parasite a vote with square votium. Instead of having one million TOKE in one wallet, you could just put the one million tokens in one million wallets. Just need a script to do it, and you have the right funds. In terms of gas, it's quite easy to do. So I don't think quadratic voting really solves anything right now. There's a lot of experimentation with reputation-based systems that could be very interesting. But there's a whole bunch of things that are driven by economic refraction — for example, emissions — and that could be totally adapted and have incentives behind them, like price systems. I'm not sure I will need to be convinced about that. The CoRE event should be in that category.
[00:08:42.050] - 70k3m3ch
Yeah. It's very interesting that you bring this up…like the whole convo, because if you take a step back, right, there's a lot of overlap, but you could generally say there's two types of participants in a protocol. There's one group that's basically just interested in the economics of it — of price appreciation token. That's just basically the speculative aspect of it. Which is also very important; I'm not saying it's not an important player.
And then you have other people that are more focused on the protocol itself and the growth that are more incentivized to participate…in governance. And I think one of the challenges is to kind of bring these two groups together — to align interests there. And what I think is interesting now…what you just brought up with the CoRE vote is, for example, in all liquidity direction voting. It's been designed in a way that…the best decision for the protocol itself equals basically the highest economic incentives for the liquidity directors. Right. So there it's kind of easy to align these interests. We've kind of jokingly said a little bit like “greed is good” in that sense, right?
[00:10:01.200] - 70k3m3ch
Like, the more greedy you are for high APRs, you will vote accordingly…which is also then in line with what is best for the protocol, or for the liquidity direction in general. But on the CoRE side, it's interesting because there's definitely, like, partner protocols or potential partner protocols that…from a strategic perspective for the system, are more interesting than others. But it requires way more activity on the side of the voter, basically, to inform themselves. And you're right. And that's kind of the difficulty, right? To truly get these things all into one way that serves the best for everyone involved.
[00:10:50.950] - Figue
Yeah. So I can actually link this to something that's being discussed in the CoRE chat. At the same time, it's simply that a lot of people don't care about governance. That's actually the case broadly. Like, there's almost 95% of the votes that are not being used. And if you look at the number of users that are voting, it's usually less than 1%. So, for example, you have 320,000 addresses that actually own UNI tokens, but there's less than 3000 actually voting.
And it's going to be the same for everything. It's simply the fact that a lot of people are not actively participating in the governance system, or in the system in general, right? It's probably going to be the same for TOKE holders. So that's why we advocate a expanding a lot on delegation, because it's something that's absolutely not new. Every single political and organizational model has delegation to solve the fact that the most active people — the ones who are most visible — should actually be the speakers…the representatives of the others. Because if not, the system will just not be pushed forward, right? That's why we focus our tech on delegation, by the way, because we're convinced this is mandatory for any organization that's going to scale.
[00:11:57.270] - Figue
What gets really interesting is when you mentioned what you guys call greed-onomics. I remember reading one of Liquidity Wizard’s articles when he was talking about that. And there's a bit that saddened me a bit because he was explaining that, mathematically speaking, at some point, if TOKE was doing well, which it is…a lot of them would sell out the TOKE. And we would see a concentration between whales, funds, et cetera, and sophisticated investors who would see the value long term. And the others…they'd reach a mark where they're like: I should sell it because I'm making profit. But they would basically be ignoring the fact of the long-term value that TOKE is potentially creating, right?
I think that's something we're trying very hard to solve with Paladin, in the sense that we're trying to find a way for shrimps not to sell — to see the cash flow value they can make with the governance premium, which is the value they get purely from using the governance inside of their token, and…assigning a solution for it to be more beneficial than literally just selling. Because the problem…is, if we build the centralized tech and we're based on this with the economic facts, we're basically going to re-concentrate everything we've taken the time to distribute.
[00:13:07.400] - Figue
So why not just do this in traditional finance? Why bother in crypto? There's a few arguments — like composability and transparency, right? But we should actually strive to distribute as much as possible, because this is what's going to make the system more resilient…can be pretty stupid, right. But if all of your investors are in Wall Street and in Sand Hill Road, well, if there's a problem in the US, for example, your protocol is done in terms of utility, right? So distribution is a matter of resiliency. And I think we shouldn't just do it at the beginning — distributing the token — but also keep striving to have the correct distribution while we're building and developing the product. To recap on everything that I just said.
[00:13:52.210] - Alejandro
I came before DeFi. I was in the political field. Eeven in meat space in real life, the participation rate — at least from my American perspective — is very low. It's low for general elections, lower for midterm elections. So of course, in DeFi, the main question is…how do we boost those rates, but also: what's the best incentive? Of course, it would stand to reason that's economic.
At the same time, what Figue was saying, that — just calling a spade or spade, that there aren't many people interested in governance — you have to find the right people. In Paladin, we've been building relationships with certain governors from other protocols, trust teaching new people, but it's difficult to divide between the speculators and the true governors. And I'm sure TOKE has also experienced that issue as well.
Not saying that CoRE speculation in Tokemak, as you said before, is a bad thing. It's actually good. It's healthy for the economy. But at the same time, it's just important to keep those players separated, and ensure the stability of the protocol in the long run.
[00:14:53.170] - 70k3m3ch
And I also think delegation is important. The whole concept of delegation is important, because I think one of the main challenges with decentralization is…execution speed. If you were to truly fully have it decentralized…for everything. There's like a vote that goes through the entire community, right? Without any delegation, it becomes very slow, just from a process perspective. And there's also a certain amount of fatigue in the general community of having to vote on things three times a day.
[00:15:32.650] - 70k3m3ch
On every decision.
[00:15:34.290] - Figue
Yeah. So I think there's two things that are interesting with this. The first one is, as you mentioned, at these very few protocols are actually not tearing decision making things. They're like…everything should be decided by the DAO. That's ludicrous. It should never happen. You should have strategic decisions made by the DAO: Should we accept funds? Should we create a new subdivision? How much should we allocate to this sub-DAO? Who should we elect to manage a certain aspect of the protocol?
Then you could have optimistically governed decision making, like: should this sub-DAO make this important choice? And then they would have their daily operation where they shouldn't have to ask the DAO on a daily basis, because that's simply inefficient. I think Fei has been doing that in a very interesting manner. We've been trying to transition into that model.
The second part that's interesting is…as you mentioned, this…voter apathy, especially at the beginning of a project. Right. That's why we actually created the influence market, in a sense. Because having this vote-lending economy enables us to create liquidity democracy, which is going to enable a more liquid way of actually interacting with the governance system.
[00:16:38.590] - Figue
So I'm not saying it's the best solution long term. It's not our long-term solution. I'm saying it's a very good transitive solution from a blooming project into a fully bloomed actual DAO and governance system. And we think it can kind of compensate the actual lack of activity, because it's going to enable anyone who has an idea to very frictionlessly come in and be able to do that. So we've done that on AAVE.
We're doing that on Curve, and we actually want to build a positively looped one for Tokemak. On AAVE. We've been very careful in the sense that our successful pool is the past staked AAVE one. So people deposit staked AAVE. And we're noticing that a lot of people who are depositing right now are people who actually haven't deposited into the safety module yet.
So what they're doing is that by using Paladin, they're also protecting on…they’re depositing into the safety module the actual funds for AAVE. So it's a net positive for the project. Similarly, for what we've been building on Curve, we're pushing people to actually log on the vCRV layer. So it's pushing the distribution and the decentralization of the protocol further.
[00:17:42.750] - Figue
And what we want to do for Tokemak is a custom influence market. So it's not just buying access to liquidity direction. We think that there's going to be huge reckoning if this actually generates in a permissionless way, simply because stockholders are actually responsible for impermanent loss. Right.
So if you just bribe someone very high and then there's a huge impermanent loss, they're going to get wrecked…because they're going to get a bit of bribe, but they're going to also lose a lot of TOKE, which is probably the worst-case scenario. So our solution is actually to enable people to collateralize their incentive mechanism for liquidity direction, and the collateral gets slashed depending on the impermanent loss.
[00:18:21.090] - CJ
[00:18:24.100] - CJ
Let's dig in on that. So as a protocol, does Tokemak need to do anything in order to use your service, or is it a place our users or TOKE stakers would go and use your protocol? What would that actually look like?
[00:18:37.360] - Figue
It would be permissionless in the way that…TOKE holders can come in and use it. It's not anything before Tokemak. It's really designed for, as we mentioned, the small holders who don't really understand TOKE, but they're like: "I want to bet on that. I think Tokemak is a great project. I don't understand, or I don't have time to do liquidity direction. So I'm just going to put it in a vote where people are going to be able to use my vote. I'm going to be paid for doing that because it's actually a service." Right.
You're giving up value to them, so you shouldn't do it for free unless you believe in their project. And on top of that, for example, auto-compound the TOKE…it should just be like a growing thing. And instead of having these greed-onomics where basically all of the small TOKE holders are selling on the market, they could just put it in there, say that's my retirement plan, and wait like 5, 10, 25 years…and having them just auto-compounding and doing a service. One, helping Tokemak actually run. Two, helping people who don't have the right TOKE to actually grow.
[00:19:31.520] - Figue
And we haven't talked about the utility of TOKE, but we can talk really deeply about that later on. And how about it? And three, just enable us to have healthier distribution for Tokemak in general.
[00:19:42.150] - 70k3m3ch
So it would basically…include, from a user perspective, this advantage of having this auto-compounding. Right?
[00:19:51.690] - Figue
Yeah. Auto-compounding is like the cherry on the cake. Sorry, go ahead.
[00:19:55.240] - 70k3m3ch
Yeah, that was my main question.
[00:19:58.710] - Figue
Yeah. So the auto-compounding is like the cherry on the cake. It's what allows everything to flow very easily. What we're seeing is something that I think people are not discussing enough. I would say the potential that TOKE has…because very abstractly, what Tokemak creates is that…we're replacing liquidity by actual governance.
So you just need to vote in order to direct liquidity somewhere. So instead of needing actually the liquidity, you just need TOKE. So I chatted with actually someone who had a large TOKE holding in Tokemak a few hours ago, and I was telling him that he should use that as an incentive for the next portfolio companies he wanted to pitch to invest. That's the truth, because having Tokemak is an advantage. You can come into a portfolio company and tell them: look, I have a lot of TOKE — I can direct liquidity to repair at the beginning of your token life, which means that you don't need to worry about actual liquidity for your project. And that's a really good strength because, in abstraction, what TOKE might allow is optionality on the liquidity layer. Which means that instead of just needing cash to do it, your utility can just think of it in an abstract manner with the TOKE I have.
[00:21:15.240] - Figue
So if we have TOKE, what we would use it for is what we call liquidity ops, which is something that has never existed before. Talking about it means that…if I want to deploy something on time and I think there's going to be a lot of activity, knowing that there's a lot of unique Fantom users that are not from Ethereum, I should be able to deploy…part of my liquidity that's through Tokemak, from Ethereum to Phantom, just with Tokemak. And this enables me to support the volume of trade that's going to happen for the few weeks or the few months that are going to happen then. And that's a very simple thing we can do. But in general, I think liquidity apps is something that is totally underrated that basically a TOKE market is creating. Yeah.
[00:21:54.720] - 70k3m3ch
There's a lot of use cases, so to speak…kind of a target audience that I think most people don't think about. And just like you mentioned, right? It's also like for an investor — like a VC, for example — it's also…a big value proposition to be able to not only offer funding (for example) to a protocol, but also to be able to say…we can basically easily support liquidity for you in the beginning. Right. By just directing that liquidity via Tokemak.
[00:22:30.610] - Figue
Yeah. And we haven't even talked about all of the hedging mechanisms that could be built on it. Right. But there's a lot that can be like…the way I see it — and there's like two different ways…that are interesting — is that just by transforming liquidity from a cash problem to a governance problem, we're abstracting the fact that we can think with much more optionality about governance.
And the second thing that's super absolutely all crypto is that once you actually remove transaction fees — if you go on other chains on roll ups — there's a lot of things that can be done with liquidity that we haven't thought of before. The example is…like I know there's a lot of projects working on that Balancer, Mangrove we're thinking of…while my liquidity is on an AMM, as long as people are not trading then the liquidity is wasted. So we could do something else with it. And these are all things we could think about.
Like it's like an infinite rabbit hole in a sense, about how far you can go with how much you want to use the liquidity. So we're talking about…first of all, we decided…where do we want to put the liquidity in which pair, for example, on Curve.
[00:23:36.710] - Figue
Then talking about re-centers the debate and say not even in which pair you want to put it in, which AMM, you have all of this choice that you're making because there's going to be a war between AMMs.
[00:23:46.200] - Figue
It's obvious…you can see…what, Balancer, Curve. They're all going to do something, right? And on top of that, you can think: okay, but what's the liquidity going to do when it's not used in these AMMs? And that's even an abstraction layer. And that's why you have to think of talking about nothing like even 2, 3, 5, 10 years endeavor by 25 to 100 years because it creates optionality and speed for the way we want to distribute liquidity.
[00:24:10.930] - 70k3m3ch
Yeah, exactly. And you just hinted at something with these…AMM wars, which I think has been kind of gearing up now for a little bit. And I think it's becoming more and more obvious that there's something brewing.
[00:24:26.110] - Figue
Yeah, for sure. I saw the discussions about Balancer saying that we choose to actually bribe for a Reactor. But they…we would actually be willing to pay TOKE holders to actually get liquidity in Balancer. It's going to be interesting because you have two dynamics that are playing the Metro projects who are thinking…customer acquisition logic, and we're going to use TOKE as a customer acquisition system. And on the other hand, like the new products, the next version of AMS, were going to be like: we're VC strapped, we have a lot of cash… and they're going to burn it into Tokemak.
So as long as Tokemak has the right liquidity and they're providing more optionality than any other project, it becomes interesting. And what's cool is that this is just infrastructure, right? Everyone has to build on document. It hasn't happened yet because it's too early. But once permissionless liquidity will be live, projects will start building on it. Actually, it has started with Hidden Hand. It's the first thing that was built on Tokemak. Right. But there's going to be others, and we strive to be another one of these.
[00:25:31.700] - Figue
And the idea is that people come in, they'll deposit their funds, and it's going to be automatically managed for Tokemak. Some will manage themselves, but it's too complex for most, right? Tokemak should be like an abstract layer. And most people don't even know they're actually using it.
[00:25:47.410] - 70k3m3ch
Very good point. I just wanted to kick off a little bit and switch gears a little bit into your tokeconomics, because I've read a little bit. It’s super interesting, and I'm going to gear up towards a specific question. But if you could just go into a little bit into the differences of the HPAL and then locking it, and then the cherry on top on my end. Then I would love to hear you explain a little bit more in detail is talent and chest.
[00:26:15.910] - Figue
Yeah, for sure. We're probably going to change the name of the chest. We're discussing about this. We've been thinking a lot about tokenomics, and I know the veCRV model has been very successful. There's a lot of things that I think work for Curve that won't work for other projects.
So the idea behind our project was let's build a unique token that's going to fit the mentality and the vision we have with our product. So the vision of our product is for Paladin to become the governance protocol in the sense that people who want to participate in governance will come around pounding.
So how do we make this? Well, these people…they're after influence. So our idea was: how do we crystallize influence into one token? That's what we wanted to do with the chest. So the way we did it is that we structured who are the different stakeholders in the protocol. Speculators, for example — funds, and people who speculate. And then true governors — people who really want to participate. And what we saw was that we could leave out the speculators, exactly like CRV. So there's going to be a layer that's just a token that can be traded on the market.
[00:27:21.360] - Figue
It's the power token. Then you're going to be able to stake it. It's going to look a bit like staked AAVE, and you'll be able to participate in governance, and you just have a 10-day cooldown. And that's like the…pure governance layer. And then if you want to go deeper, you can lock it. When you lock it, you get extra governance power and you'll get access to the chest, which we're…currently in development. And this is the crystallized inference thing.
So what is the crystallized inference concept? We're basically taking all of the fees from the protocol — at least 50% to begin with. And we're saying to users: instead of just taking fees directly, what you're getting is the right to use our depths. So the right to borrow voting power, the right to buy gauge power or boost power on Curve, the right to buy liquidity direction with these fees. So as a governor, depending on your need, on your emissions, on what the projects you're working on are going to need…your incentive is to have locked HPAL — Holy PAL — just to basically benefit your mission. So it's either going to be free voting power, or discounted on the total you're actually getting.
[00:28:21.810] - Figue
But we're pushing people to use more of our projects, and at the same time, we're dramatically reducing the friction to actually get access to these governance tokens. So that's the concept of the chest. It's a bit abstract, but what becomes really cool is that as time goes, we're going to broaden the spectrum of our dapps by including more protocols — by including more governance representations of influence in crypto — and the lock token is just going to become more powerful by itself just with time.
[00:28:53.510] - 70k3m3ch
(Sorry, I was just on mute.)
And then for the chest, you would have these protocols fees that accrue in there, right? So there is kind of this concept of, so to speak, like…ever growing like this. Got it. Like crystallized influence, right? That this would be, like, ever-growing? So the benefit of locking up with overtime as well.
[00:29:15.510] - Figue
Right. So that's actually a controversial talk we've been having with some community members — and I see one or two of them here in the chat, so they know what I'm going to talk about.
I'm actually against PCV for Paladin. I think we have a huge question today in crypto — if we want to build companies or if we want to build crypto projects, and nature behind crypto project, and for certain projects Tokemak is not included. Actually having PCV is going to be a net negative versus the value that the protocol wants to get.
We want the power and depth to become a neutral layer of governance, and of reducing friction of governance. And directly having a liquid treasury is going to attract stakeholders who are just going to be here to benefit from directly the treasury that's been made. And that's actually something that's very truthful in today's market. The market is seriously bad. I think as stockholders, most of you guys know it, right? But it's bleeding without any reason, right? In theory, when you see a big announcement, most of the projects are not picking up anymore, just because what people are doing is that they're selling the emissions to actually cover for the liquidation they have, or to cover the losses they have.
[00:30:23.730] - Figue
And trust me, my losses are very big. What's really interesting that we're seeing is…people are coming in and looking at the treasury of protocols and saying: wow, the market cap is actually lower than the treasury they have. It's what we've seen with a lot of Olympus forks, for example, but it didn't happen just with this.
For example, there's a protocol last week that was called Congruent. Someone just bought for seven days on the market, and at some point just called for liquidation of the treasury, killing the DAO, basically. And they won. They won because people were able to make money on that. And a lot of the people who bought it for the past month who were actually in the green by doing so, but all of the people who were before that basically got screwed.
And when you have a project, for example, like Tokemak, that's going to accumulate a lot of PCV…you have to be very careful about the actual valuation of the project on the market, because when you get under a certain threshold, people will be like…it's hard for me to come in and dismantle the project just to make a benefit.
[00:31:20.630] - Figue
And we are in finance. We can call it decentralized finance, but this is finance, and people will come in as an opportunity. So it creates an additional burden of things we have to think of that we cannot entirely control. This is not something we want to work with pausing. So we're probably going to externalize our fund management. We have a few ideas in the works that we probably need to…by the way…to make it happen. But I think the actual question of sharks and dismantling crypto projects…and this is happening and there's a lot of people working on that…is a question we don't talk enough about, because it kind of seems scary and taboo and where activity is not like that. But it is.
[00:32:01.550] - 70k3m3ch
Yeah, it's very true. You've seen this actually happen a couple of times in the past few months, right? That these liquidations, there's always the question of what this specifically came from, because often from the outside it looks like it kind of organically (so to speak) failed. Right? And then just got split up. But ultimately the question is always: is there some other driver behind it?
[00:32:32.080] - Figue
Right, yeah, but that's the thing. It's what you mentioned with greed-onomics, right? We need to find the right equilibrium…between people who want to push forward the project and people who…don't care, we're just here to make a profit. We have to be sure that these people are diluted enough for everything to happen. And that's why I think influence markets are a good measure of all of that.
And tokenomics are another, because they enable you to sample the mood of the project and what the stakeholders are actually doing. If a lot of stakeholders are actually going to deposit into an infrastructure that…there's a lack of incentives for them to participate, for example…another way to look at it, for example: with our three layered system — with the liquid version, the stakers and the locked version — is that basically because people need time to unlock or to take, we can see people who want to exit the project and we can see the people who are not ready to keep participating anymore. And I think it's a good measure because you have this time — like 10 days or six months, for example — of vision.
[00:33:30.360] - Figue
You can think of it this way: okay, we're not doing something correctly right now. The metrics are showing us people want to exit. How do we make them stay? By helping them basically express their voice. Because, you know, there's always an equilibrium between people who are not happy and want to express it for change, and people who are not happy and…we'll just leave and see a competitor instead, It's stickiness, basically.
[00:33:56.450] - CJ
So putting a bow on this conversation: Figue, can you talk about what the most successful version of Paladin is? If your vision comes true, what would crypto, what would DeFi look like? And then I'm curious what you think it would take for you to get there.
[00:34:15.050] - Figue
Oh, that's interesting. Our biggest vision for DeFi is to redefine the spectrum of decision making for holders. So it's just being able to look at the wallet and tell them: okay, these are all the proposals we have, or the value you can get. Do you want to participate or do you want to sell it? You want to make profit on it and then have the DAOs build the right incentives to become sustainable.
Our goal is simple. With Paladin, we want to become the mechanism that's going to enable the largest and most promising DAOs to become sustainable for the next hundreds of years.
[00:34:47.030] - CJ
I love it. I think it's a great goal. Yeah, it's been a fun one to ask just to see what people want to ultimately try and achieve the best bull market version of their protocol coming true. So thanks for weighing in on that one.
Moving back briefly, just a second…can you talk about why you're interested in trying to win a Tokemak Reactor? I'm curious if you can talk about liquidity for your token, which looks like it launched relatively recently. Any challenges or struggles you've had trying to acquire liquidity, and ultimately why you think a Reactor would be beneficial for Paladin.
[00:35:26.390] - Figue
So there are so many depths to this question. The most obvious one is just within liquidity…as with most projects, too, especially because we're going to release quite a few things in the next coming weeks. So we actually want to have more available liquidity. And because we're thinking of cross-chain expansion eventually, once liquidity direction is there we'd like to use it for us to direct our question and liquidity. That's the first part. We need more liquidity like most projects. We always do.
I was talking with one of the Bancor guys, and he was telling us that most crypto projects were actually so illiquid that they could never really reach main adoption right now. And they're totally right. Today, if you do a token swap of over, I think $30,000 on Paladin, it's going to be over 2% slippage, which is simply not the case, and we don't have the funds for projects to go further. So what we're doing is that…we just want a Curve gauge. We’re going to incentivize that Curve gauge to basically attract more people to come with us…or hoping to do that in other protocols, too. But more than the Curve gauge, the other thing we're interested in is that…CoRE Reactor.
[00:36:34.050] - Figue
You're basically doing, from what I understood, an OTC swap — a token swap with Tokemak — to collateralize the Reactor. We think that to basically bootstrap the influence market we have in TOKE that we want to build on Tokemak. We would actually need initial liquidity, which would come from the token swap. So that's the second reason why we wanted it: to basically give us a head start to build that market. Because I think that it's hard to actually build the right infrastructure if you don't have the initial liquidity to actually show this is working.
[00:37:06.770] - CJ
[00:37:07.240] - 70k3m3ch
[00:37:07.620] - CJ
We've proposed treasury swaps with previous CoREs, so that would be an option available to you if you do place top five in this CoRE events. So yeah, more than happy to talk shop on that assuming you do win one. So hopefully today's conversation sways you some votes.
[00:37:27.290] - 70k3m3ch
I hope so. This is a great one.
[00:37:30.050] - CJ
Cool. I'm trying to think what else we haven't covered. Looks like CoRE three channels pretty active. I'm looking for specific questions.
[00:37:43.590] - 70k3m3ch
[00:37:43.990] - CJ
If anyone has any final questions, go ahead and drop them in CoRE3 really quick. Figue, Alejandro, this has been really interesting. Where could someone go to keep tabs on your progress?
[00:37:56.310] - Alejandro
Yeah. So the most open, obvious space is on Twitter, so that'd be at Paladin_vote and in the bio as well. On Twitter, we have our Discord link. You can join through there. We currently have a growing Telegram community and are also on LinkedIn as well. But those are the two main options, and that's where you can get all the alpha. The Discord gets all the information slightly earlier than everyone else.
[00:38:21.390] - CJ
Got it. And will you both be there in Paris in July for EthCC?
[00:38:28.170] - Alejandro
[00:38:29.370] - CJ
Excellent. Looking forward to that one. We're going to have a few of the team there.
[00:38:33.450] - Figue
We're finding the biggest tenants in EthCC, so look forward to it.
[00:38:36.940] - CJ
All right. I hope I can get through the line, so I'll be standing outside trying to get in. Just let me know.
[00:38:43.770] - Figue
[00:38:44.140] - 70k3m3ch
[00:38:44.350] - CJ
Gentlemen, this has been a pleasure. Thanks again for joining us. Really glad you guys are participating in CoRE. Super excited about the ways we can collaborate together. And good luck. I hope your conversation gets you some votes today.
[00:39:00.210] - Figue
[00:39:00.660] - 70k3m3ch
Thanks so much. Good luck.
[00:39:03.150] - Figue
Thank you very much, guys. And keep killing it.
[00:39:05.840] - Alejandro
Thank you for having us here. Thank you.
[00:39:08.070] - CJ