Tracer Tokenomics ImprovementsEvolving Tracer's Token Mechanics
The current state of Tracer Tokenomics
In order to bootstrap adoption of our Perpetual Pools product and assist the important process of distributing governance rights amongst our community, the community passed a proposal to allocate 10% of the TCR maximum supply to ‘liquidity mining’ initiatives in September, 2021. As of 26 January 2022, approximately 35.6 million TCR have been distributed to protocol users who staked either their Pool tokens or Balancer LP tokens.
To date, TCR has acted purely as a governance token - however, we have heard feedback from our own community regarding our tokenomics model and believe we have come up with a set of improvements that not only gives the TCR token greater utility but also enhances the utility of other protocols governance tokens and stablecoins by enabling exotic collateral opportunities for all ERC20 tokens.
The proposed improvements articulated below are the first set of changes in what will be an iterative approach to developing our tokenomics. The aim of the changes is to simultaneously improve governance outcomes while also rewarding the long-term believers in the protocol by adding additional utility to the TCR token.
Introducing veTCR (vote-escrow TCR)
We have long been believers that traditional DAO governance processes could be improved by enforcing a stricter alignment of incentives (see our thought leadership pieces on convertible allocations and the commitment voting research conducted by Tracer’s academic advisors).
The first major change we wish to implement is to employ a vote-escrow mechanic inspired by Curve’s model and adopted by other protocol’s like Frax. Once implemented, holders of TCR, tTCR and other TCR derivatives will be given the option to ‘lock’ their tokens for a period of 1 week to 4 years in return for veTCR tokens. The veTCR received will increase as the lock-up period increases according to the following formula:
1 veTCR represents a non-tradable governance right. This ensures that all participants in governance votes which use this particular token are making decisions with a more long-term perspective of the protocol.
To incentivise participation in governance and reward those who take a long-term interest in the Tracer protocol; veTCR holders will unlock access to several benefits:
1. Control of TCR emissions going forwards – let the Tracer Wars begin.
When we launch V2 of Perpetual Pools we will again seek to bootstrap adoption of the product by distributing TCR to early adopters. Once an MVP version of the voting-escrow (veTCR) mechanic is ready; we will enable holders to direct the majority of emissions to different pools via a regular “gauge vote”.
The combination of exotic collateral and permissionless deployment will introduce new participants to the Tracer ecosystem such as stable-coin providers and protocols seeking to add additional utility to their own governance tokens.
Holders of veTCR will have a substantial amount of power; given their ability to direct TCR incentives to different markets. Stablecoin issuers and other protocols will be interested in having TCR incentives directed to markets settled using their native governance token or stablecoin as collateral.
2. Preferential Access to Vaults aka Tracer “Strategies”
Our mission is to democratise access to risk management and derivative trading strategies. The Perpetual Pool mechanism incentivizes market makers to enter the under-collateralized side of a Pool by offering them an asymmetric return profile. This effectively creates an arbitrage opportunity for sophisticated participants to take a position in the Perpetual Pool and an off-setting position in the spot or another derivative market.
To simplify this, we are building a vault strategies product that will allow users to earn arbitrage profits by performing the skew farm trade automatically. The amount of capital this product is capable of accepting is not infinite, as there is only so much skew that can be farmed. For this reason, access to these products will be tiered based on the amount of veTCR a user holds in their wallet.
As we continue to develop structured product strategies these strategies will be preferentially offered to veTCR holders in varying stages.
3. Whitelist for our upcoming Tracer NFT PFP Collection
We want our community to be instantly recognizable and act as organic marketing for our innovative derivative products. Accordingly, we will be developing an NFT PFP collection for our most active community members and contributors. There will be a variety of ways to get whitelisted to mint these NFTs – including meeting a minimum veTCR balance. The profile picture NFTs will carry with them benefits across the Tracer ecosystem.
These three benefits are only the beginning of what having a veTCR balance will enable for holders. As our product suite evolves we will increase utility and add more perks to reward our long-term supporters by iteratively improving the utility of the TCR token.
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