We, the team, have been discussing the token economics of ICE. We have come to a crossroads where change should most likely occur. The simple reasoning being that:
Popsicle.Finance has reached a level where Sorbetto Fragola works and is earning an incredible amount of fees for both users and the protocol. Furthermore features are being built on top of this and Sorbetto Limone is also being developed.
Now, let’s remember the initial plan of the Popsicle Tokenomics: We wanted to have a variable tokenomics which changes based on the need for incentivization in order to increase TVL. We can think about it as a sort of marketing budget of ICE for Popsicle.
What we have now discussed and realized is that the incentivization amount that we still have is huge, in comparison to the success we are currently having. Of course Popsicle does however still need a DAO allocation in order to be able to run servers, hire devs, as well as have some treasury money.
The current layout of tokens is as follows:
Looking at the table above, we can see that there are 53,635,733 ICE tokens left to mint. Meaning that 77% of the tokens still need to be minted, and the vast majority of those tokens are destined to be LP rewards.
Are these incentives really necessary? And do we really need to dilute the ICE supply so much?
So now that we know the status of the tokenomics let’s look at 3 things:
- ICE as a marketing budget (incentivization)
- ICE as the governance token (voting power)
- ICE as the protocol ownership (fee accrual, etc)
ICE as the marketing budget:
Popsicle started its community and attracted users via the initial airdrops. This was a great way to get our name out there, create a community that includes cross chain builders/users, defi enthusiasts, and crypto users of all levels of experience. This is exactly what we wanted to achieve considering that Popsicle is a project that is meant to make sure that liquidity is there where users most need it.
Per the table above, 66.9% of all minted ICE tokens were used for attracting new users. (Airdrops+IFO+LP)/(Total Minted Supply) = 66.9%.
Ice as the governance token:
Popsicle Finance, is meant to be a fully decentralized protocol, which currently still runs a bit centralized. We have of course released the governance portal, and are working on finalizing the multisigners. In terms of activity on the governance portal we are seeing between 10k and 20k votes on the important proposal (remember we are using quadratic voting, this is not the number of ICE that are actually voting). This is a relatively strong turn out.
Ice as the protocol ownership:
As we all know, we are soon going to be releasing nICE, which is staked ICE. nICE are the tokens that are earning the fees that Sorbetto Fragola, Limone, and any other future product will be getting.
Considering our current TVLs growth rate, this should become a significant amount.
It is remarkable that we are at a daily fee accrual of $2.678 so early in the deployment. We will have a much better understanding of this fee accrue number within the next 2–4 months. Check the tables below to gain some insight on which pairs are more profitable.
So now that we have a general understanding of the ICE token use cases, what are the key questions?
- How large does our future marketing budget need to be?
- Do we need to attract more talent into Popsicle to take part in governance?
- Will a part of nICE fees also go towards developer funds etc?
How much marketing spending do we still need?
This is something that will be variable, but we should not need nearly as many ICE tokens emissions as we have spent already on marketing. The project’s features should speak for themselves. As an example, Fragola has had no incentivization and is seeing constant growth. As long as the product performs well, it will attract new users without a need for incentives. Taking all of this into consideration, we believe that a marketing budget of around 7% of the mintable supply should be held in reserve by the DAO. Furthermore, we believe that drastically reduce the number of tokens that will be minted for LP rewards for one more year since the launch of Popsicle to 3,218,144 will be optimal. Bear in mind that this means that the rewards will still be the same for one more month and the be drastically reduced, but extended up until we reach the 1 year anniversary of Popsicle!
Do we need to attract more talent into Popsicle to take part in governance?
The current community has brought us to where we are today, our voice calls have been extremely beneficial and important for product development. We do not believe however that we need further ICE distribution to attract talent. People that see our product working and being the best, will want to take part in its future and they can do so by actually purchasing ICE tokens from the market.
Will a part of nICE fees also go towards developer funds etc?
This is a question we have been discussing a lot as of recently. Roughly speaking, Popsicle has a running cost of $80k a month which is expected to stay relatively constant for the next year. This cost includes servers, developers salary, and other expenses. However, it may increase as we increase our product suite.
So this is where tokenomics should also be considered.
We believe that 3.4% of the mintable supply that is already allocated to the Devs budget will be enough to cover this expense in the short term. Thereafter it would make sense to only run off actual income from the project, coming from part of the nICE fees. Think of it as a startup that spends funding on developers and thereafter only runs on the company earnings. Going down this route the DAO could run on product performance, rather than dilution.
So with this information lets go into what we have thought about in terms of the total ICE token supply.
The Team’s Proposal
Considering the use case of ICE, being the marketing/governance token we need to reconsider whether we really need to add 77% more power to either new or existing users.
In a situation where a company raises funds, it does not raise funds unnecessarily.
Let’s recall, from above, that we still have a budget of 53,635,733 ICE tokens to mint.
- We will allocate 7% of this mintable supply to the Popsicle DAO treasury for governance to decide on its use. This will be executed by all multisigners. This will bring the DAO final allocation to 3,754,501 ICE tokens.
- As mentioned above, 3.4% of the mintable tokens will be allocated towards the Team/Devs in order to make sure further operating costs and required hiring can be covered, while we wait for nICE fees to start paying for this. This would maintain the Team/Devs token allocation of 6,900,000 ICE tokens unchanged.
- Extend the LP rewards with 6% of the total mintable supply for one more year. The amount minted will be 3,218,144 ICE tokens.
We propose to therefore burn the remaining 44,842,141 mintable ICE tokens which equates to approximately 64.98% of the pre-burn total supply. This will leave the new total supply at 24,157,859 ICE tokens.
The new token distribution would look like this: