VeradiVerdict - Issue #110
What is PowerPool?
PowerPool originated in July 2020 as an innovative protocol for pooling governance tokens, improving decision-making, and expanding value distribution in the Decentralized Finance (DeFi) space. PowerPool enables GT stakeholders to pool and coordinate the use of governance tokens (GTs) such as COMP, AAVE, YFI, and UNI to accumulate governance power and create additional value in Ethereum-based protocols. Since the launch of PowerPool in August, the PowerUniverse ecosystem has expanded with four products all supporting meta-governance. PowerPool’s main product is PowerIndex, a community-governed smart ETF. PowerIndex also acts as a liquidity pool for exchanging GTs, and an instrument to pool numerous GTs into the PowerPool protocol.
The Problems with Traditional GTs
Governance tokens play a vital, directional role in the operation of DeFi protocols. However, the traditional design and implementation of GTs pose challenges for user engagement, participation, and satisfaction. PowerPool aims to address two prominent issues related to GTs:
Minority token holders cannot influence votes. As a result, most protocols governed by token holders face Voters’ Apathy and declining engagement, common on-chain governance problems.
The majority of tokens don’t provide token holders any income. Lacking cash flows, the fundamental monetary value of governance tokens for minority stakeholders is negligible.
The PowerPool Solution
PowerPool’s vision is to empower minority token holders, provide additional utility for GTs, and support the growth of the DeFi ecosystem. PowerPool delivers 3 key advantages for end-users and DeFi protocols:
Influence Farming – PowerPool allows stakeholders to pool GTs and accumulate governance power, and earn additional GTs from their holdings. As a result, the user’s stake continually grows as the interest rate is paid in the base asset (the GT itself) – a new feature PowerPool calls “Influence Farming".
Elimination of Voters’ Apathy – PowerPool incentivizes passive token holders to pool GTs with the yield and liquidity mining, increasing vote participation.
Accumulation of Voting Power – PowerPool’s digital asset is the Concentrated Voting Power (CVP) token, used to accumulate voting power (and the actual value of this voting power) from multiple protocols into a single asset. CVP holders decide how pooled GTs into PowerIndex will directly vote at every vote occurring in listed DeFi protocols.
CVP holders have complete control over a basket of governance tokens: they can add/remove GTs and change the values of other index variables via governance proposals. CVP holders can also vote to change the composition of tokens that comprise the index, their percentage share within the index, and their fees.
The distribution of fees among active CVP holders acts as an incentive to be involved in governance. These fees are determined by community voting.
PowerPool began as a simple lending market for GTs but has since expanded through the development of products to implement CVP token value creation patterns efficiently. PowerUniverse is PowerPool’s current ecosystem of products, all united around a mission of meta-governance and improved decision making in DeFi.
PowerIndex is a DeFi ETF-like index that uses pooled tokens for meta-governance and fund management strategies. Consisting of 8 governance tokens, all with voting rights, PowerIndex is entirely community-governed and curated (token set, token weights, and fees can be changed by the community). An MVP version of PowerIndex was released in mainnet in October 2020, with the ultimate PowerIndex launch set for November 2020.
PowerIndex charges several “community fees” (entry, exit, and swap fees) which are transferred to a special treasury contract called “Permanent Voting Power”. All pooled tokens stored in the contract are used by CVP token holders for voting on proposals and possibly can be used as future rewards for active CVP holders (frequent voters).
GT Lending Market is a lending market for Power Index Pool Token (PIPT).
User share in PowerIndex is represented by PIPT, which allows users to operate and represent 8 tokens with a single, interest-collecting token. As PIPT contains CVP in its composition, it can be used for voting on proposals issued in any PowerIndex composite protocol and in the PowerPool governance system as well.
PowerPool Governance system is a modular system that integrates different sources of votes: CVP tokens, PIPT tokens, LP tokens for PIPT-USDC, and CVP-ETH Uniswap and Balancer pairs. Thus, PowerPool users can vote on proposals in PowerIndex composite protocols and PowerPool itself, being in any role – LP for CVP Uni/Bal trading pairs, LP for PowerIndex, PowerOracle worker, or holding PIPT for investment purposes. The system attracts significant liquidity to all PowerPool products and helps maintain high participation in governance.
PowerOracle is another PowerUniverse product, released in October 2020. PowerOracle is a decentralized price oracle based on Uniswap Time-Weighted Average Prices (TWAP) data.
As an autonomous, cross-chain oracle, PowerOracle provides price feeds and reports to networks including Ethereum, xDAI, and Matic. PowerOracle operates by using built-in economic incentives for independent price reporters, allowing stake CVP as a security deposit and receiving rewards for correct operation.
Why is PowerPool compelling?
PowerPool has immense potential to revolutionize meta-governance value creation patterns, shareholder value, and community experiences with different DeFi protocols. Accumulating voting power of several protocols into a single token, PowerPool aims to resolve token holders of Voters’ Apathy, increase participation and engagement in governance, and empower minority stakeholders with voting rights and distributed rewards. As an uncapped version of PowerIndex gears up to launch this month, PowerPool has immense potential to disrupt traditional GT value creation and community governance for the better.
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Hi, I’m Paul Veradittakit, a Partner at Pantera Capital, one of the oldest and largest institutional investors focused on investing in blockchain companies and cryptocurrencies. The firm invests in equity, pre-auction ICOs, and cryptocurrencies on the secondary markets. I focus on early-stage investments and share my thoughts on what’s going on in the industry in this weekly newsletter.