Perpetual Reward Pool
FAVE's Intrinsic Value before Dividend System
Many blockchain projects initially offer substantial rewards to boost token adoption and engagement, but this approach often results in the rapid depletion of token reserves, leaving little room for long-term sustainability. For Favrr, sustainability is key to building a thriving and enduring ecosystem. Drawing inspiration from Bitcoin's model, we will implement a continuous reward pool for $Favrr. This pool provides rewards that gradually diminish over time, ensuring that tokens remain available to incentivize platform engagement and user activity well into the future. This mechanism aligns with our commitment to long-term value creation while fostering consistent growth and participation in the Favrr ecosystem.
The reward system operates in phases, known as "epochs," each with a defined daily reward. This daily reward is further divided into rewards per block, calculated by dividing the daily reward by the total number of blocks generated in a day. The reward amount for each epoch is determined by the remaining tokens in the reward pool. Here’s how the system works:
Starting Pool: The reward pool begins with a total of 2,000,000,000 tokens.
First Epoch:
The daily reward is set at 0.050% of the total tokens, equivalent to 1,000,000 tokens per day.
Each epoch lasts for 45 days, so a total of 45,000,000 tokens are distributed during the first epoch.
Second Epoch:
At the start of the second epoch, the remaining reward pool is 1,955,000,000 tokens.
The daily reward remains at 0.050% of the remaining pool, which equals 977,500 tokens per day.
Over the next 45 days, a total of 43,987,500 tokens are distributed.
This gradual reduction in daily rewards ensures the reward pool depletes slowly and supports long-term sustainability.
In summary, the variables determining the reward distribution are::
0.050% of the outstanding tokens in the pool will be used as a basis for the daily epoch rewards.
Epoch duration of 45 days.
The 0.050% number is picked as targeting an annual inflation rate (based on the total token supply) of around 3.5% in the first year and gradually reducing it from there on. This gives the pool a half-life (the time it takes for 50% of the remaining tokens in the pool to be depleted) of 1,386 days or 31 epochs.
From there, the daily reward is split between users who perform the following actions:
Stock NFTs (until dividends can be distributed)
Provide liquidity for the $Favrr/USDC pair on UniSwap v2 and stake the resulting LP tokens
Stake the Favrr token ($Favrr)
Additionally, in order to offset a large amount of tokens entering the circulating supply at once, any rewards received, would have a cliff of 12 months, before they can be withdrawn and sold. This approach has been implemented by multiple projects and explored by leading researchers in the space. Users have to manually request the triggering of the cliff, during which time the reward tokens are staked and receive APY. While vesting the user will receive an NFT that represents his rewards. The user then has the option to sell this NFT at a discount on a secondary market, in case they do not wish to wait until the tokens fully vest.
The rewards are further split down between the various rewarded actions with higher rewards for stock NFTs initially, when dividends *cannot* be issued for them. After the dividend license is obtained, other rewards for stock NFTs are reduced as follows:
The above translates to the following yearly and daily distributions (for the first 60 days):
Using the above, we can also show the expected APY per staked token in year 1 (based on the total staking activity):
APY cap: since the APY on the platform is variable, the APY could vary greatly, especially if a very low number of tokens is staked. For this reason, and to avoid exploits, the APY for each individual position is capped as follows:
The rewards will be distributed based on the following formula:
Which represents the percentage of the daily rewards that a particular user (X) gets
The nominator is the participation weight of users X for the particular day
The denominator is the sum of the participation weight for all users
We can define the participation weight, as per the actions, which are eligible for regards, as follows:
Number of LP tokens staked
Number of tokens staked
Disclaimer: Perpetual Reward Pool
The perpetual rewards pool mechanisms described in this section are subject to regulatory approval and compliance with applicable laws and regulations. The perpetual reward pool mechanism may currently meet the definition of a security under the U.S. Securities and Exchange Commission (SEC)'s current regulatory framework. Therefore, at this time, this features is not implemented yet.
However, we are optimistic about the evolving regulatory landscape under the leadership of the new SEC head (as of Dec 2024), who has demonstrated a crypto-friendly stance. Should SEC policy or guidance change to allow such mechanisms, we plan to deploy this model in full compliance with future regulations. Until then, these mechanisms are described here as part of our forward-looking vision for $Favrr's role in fostering a dynamic and engaging ecosystem. We will prioritize transparency and regulatory compliance in all token-related activities.
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