A brief analysis of Pickle Finance’s new token mechanism: DILL and smart funds
Original Title: “Pickle’s New Token Mechanism”
Author: Blue Fox Notes
Pickle suffered heavy losses after the hacking incident last time, but with the merger with Year (YFI), things turned around. In this Yean merger, in addition to the merger of PJars and YFI’s Vaults, for PICKLE token holders, the most concern may be the change of its token mechanism. For the merger of Pickle and Year (YFI), you can refer to the previous article “ The Merger of Pickle and YFI “ by Blue Fox Notes .
In this merger, a new token DILL appeared in Pickle’s token mechanism. DILL is similar to VeCRV in the Curve protocol. DILL is generated by locking PICKLE tokens (similar to using CRV to generate VeCRV). It will give users corresponding rights and interests based on the length of the lock-up time and the number of locks. These rights include:
- Voting rights in Pickle protocol governance
- Increase reward coefficient
- Get part of the agreement profit
In other words, the DILL token is closely related to the development of the Pickle protocol. Why do I need DILL after I have PICKLE tokens? Why is the PICKLE token not directly used as a governance token? DILL itself is actually derived from the PICKLE token, which is equivalent to PICKLE with time weight. The advantage of DILL lies in its governance services. The length of PICKLE holding time and the number of holdings represent the degree of binding between the holder and the development of the Pickle agreement. To a certain extent, it is equivalent to tokenizing the PICKLE with time weight, resulting in DILL.
Therefore, in the future Pikcle ecosystem, DILL is the most direct measurement token for obtaining protocol income. In addition to DILL having the governance power of the Pickle protocol, DILL is also related to the rewards for users (PICKLE additional issuance rewards) and the profit distribution captured by the agreement. Related.
Token model of smart fund library
Smart Treasury is a concept to be implemented in the Pickle Project, which is derived from Placeholder capital. Smart Treasury attempts to propose a way to increase the value of tokens: decrease the supply of tokens as income increases.
The Smart Treasury of the Pickle project includes three main functions:
For automatic repurchase
The fees generated by the agreement are used to repurchase PICKLE tokens, thereby reducing the circulation of PICKLE tokens. Note that this is a repurchase, not destruction.
Acting as a liquidity provider
Smart Treasury acts as a liquidity provider, which can earn transaction fees for the protocol while providing liquidity for PICKLE tokens. For example, establish a PICKLE/ETH liquidity pool on Sushiswap or Uniswap.
Token issuance pool
Smart Treasury facilitates the secondary issuance of PICKLE, mainly for things like ecological fund donations. Because the automatically repurchased PICKLE tokens enter the capital reserve, these PICKLE tokens are not destroyed, but become the capital reserve to support its future ecological development. Therefore, it can provide financial support for ecological projects, and at the same time it will not issue new tokens, nor will it cause the dilution of tokens.
With a smart fund library, all PICKLE holders can directly benefit from the profitability of the agreement. Because the cost of the agreement is used to buy back PICKLE tokens, and the repurchase will increase the pressure on the purchase of PICKLE tokens. However, it does not use all protocol fees to repurchase PICKLE tokens, and some will be distributed to DILL token holders to encourage PICKLE holders to lock the tokens.
In the current encryption projects, it is rare to use the “smart fund library” token model. On the one hand, this model can reduce circulation, reduce selling pressure, and increase buying pressure, while also providing sufficient liquidity for its tokens and earning transaction fees. Finally, it can be used to support the long-term development of the ecology.
The token mechanism of the smart fund library is not as radical as the token destruction model. What impact will it have on the long-term development of token holders and agreements? As more and more protocols adopt this token mechanism, its advantages and disadvantages will gradually be revealed.