Funding the Future: a look into the new Polis Reward Distribution

Abstract

The movement to the Binance Smart Chain represents an opportunity to properly fund these endeavors through the optimization of the reward structure, as Masternodes will cease to exist and will be replaced by Liquidity Providers.

The DAO, being handed the responsibility of guiding the project by the community, has decided to perform analysis into the current cash flow available for funding the project’s development, and propose an initial solution for funding that will be effective as once the governance smart contract is deployed in the Binance Smart Chain. The distribution allocates funds for the DAO Operational Expenses (25%), Community Treasury for Proposal Funding (10%), Liquidity Providers (40%), and Stakers (25%).

The community, through the new governance, will always be able to change the distribution should there be a need to.

Background

This comes as a result of both market conditions, and a block reward system that was not designed (at its inception in 2017) to cover operational expenses for The Polis Foundation (created in late 2020). With the new plan to migrate the Polis Blockchain ecosystem to the Binance Smart Chain, the opportunity to amend this design flaw arises, with the challenge of creating a reward system that allows for more aggressive spending in project areas that will drive demand for our token and create value to our current and future stakeholders. To this end, we need to analyze the Return on Investment (ROI) of where The Polis Foundation is currently spending its income in order to determine where we can optimize spending, and adapt the reward system to account for this optimization.

ROI of Staking/Voters/Governance Term

This isn’t a scalable system nor does it add value to the existing coins. This also puts us into the category of a discount provider and once one is in that category it is challenging to break out of that perception into the category of premium provider.

ROI of Liquidity Providers

Liquidity providers on the Binance Smart Chain will be providing a valuable service to the ecosystem. They will guarantee market conditions and liquidity to a degree that will make the Polis markets attractive to new investors, of course, this type of activity carries some inherent risks as described by Binance.

The possible losses may be caused by:

Fluctuations in token prices or fiat exchange rates affect the value of shares. To further understand the risk situation, please refer to Impermanent Loss Explained.

When a large amount of a single token is added or redeemed, the value of the share will be affected and lost due to excessive slippage.

Frequently adding or redeeming tokens.

In exchange for this risk, they earn a yield from the commissions of the trading that takes place in the pool. However, given the increased risk it seems reasonable to compensate them with a percentage out of new coin emissions.

ROI of Everything Else

Exchange listings and investments into marketing and advertising generate sort of a snowball effect where after a few initial and costly investments, hype, demand, and new opportunities start presenting to the project almost every day, allowing for a faster expansion and adoption, that eventually drive up demand and price for all stakeholders.

This begs the question why isn’t it appropriately funded? Appropriately funding expenses that generate the most value are a key tenant of cash flow management in successful businesses.

Cash Flow

Current Income

The table below only accounts for chain-based new coin creation revenue and not any revenue generated from external services such as PolisNodes, PolisPay, or farming if any.

Current Block Reward Distribution of the Polis Blockchain

Operational Expenses

DAO Recurring and One TIme payments.

Recommendation

It is worth noting that some of these large expenses such as tier 1 exchanges that might cost $100,000 USD are going to be one-time expenses. Success on these generates cheaper listings on other exchanges as they vie for a share of the commissions by offering discounts or free listings on their sites. Once trade volumes and market value are up then the DAO operational expenses can be reduced in the future, and this will always be up to the community to decide. The DAO Operational Budget can and should be reduced in the future.

Expected Outcomes

After performing a business and financial analysis on the currently available cash flow, we are convinced the proposed reward distribution will kickstart the project’s development into areas we have not been able to tap into yet, and on an unprecedented scale. Ensuring the long-term viability of the project and capital returns for our investors. A business with cash flow issues is doomed to failure. Most stakeholders will recognize that the long-term impact of being able to afford more developers, advertising, exchanges to name a few expenses will have a huge impact on the ability to build new products and create brand awareness that leads directly to an increase in demand.

I am a masternode owner, why would I want to earn fewer rewards?

Example using real numbers.

  1. January 1st, 2020 purchase 1000 Polis for a masternode for $958
  2. Earn estimated 30% in rewards between then and now for a total holding of 1300 Polis
  3. Today sell 1300 Polis for $624
  4. Net loss of $334

Clearly, in this example, it didn’t matter that 30% sounded like a good return at the time of purchase because, in reality, the inflation caused a net loss even after the rewards.

The solution is to use the funds for expenses that will generate demand. Increased demand drives prices up. Instead of ending up with 1300 coins worth less than what you invested, you should earn in capital gains instead. Meaning the same 1000 coins in the example above might be worth $2000 instead of $624. That is of course a better outcome that benefits everyone.

By accepting lower rewards you are helping fund large expenses that the DAO believes will greatly benefit your existing holdings.

The DAO sells most of its coins over the counter (OTC) and therefore doesn’t affect the prices on exchanges.

Conclusion

The community is always able to change the rewards distribution through the governance smart contracts and locked staking votes at any point in time. In fact. the Polis Foundation encourages this distribution to be changed to favor the community once some key results are achieved in the areas this distribution is designed to help develop.

We thank you for your support, and please voice your thoughts on all of our community channels.

DAO Management

It has been exciting to see the participation from our community, that is why we want to provide a way for you to access the team directly and specifically, depending on the department you wish to approach.

DAO Technology Manager.
Luis Correa — helios@polispay.org

DAO Marketing Manager.
Maria Sidorova — maria@polispay.org

DAO Adoption Manager.
Frank Servedio — frank@polispay.org

DAO Community Manager.
Marc Rapf — marc@polispay.org

DAO Business Manager.
Andreas Meyer — andreas@polispay.org

If you have any questions, don’t hesitate to ask.

Let us remind you that you can follow us on the following Social Media Networks:

Polis is a cryptocurrency for communities. We use advanced decentralized blockchain technology and secure transactions. Polis empowers people $Polis

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store