Value Accrual For ALD Token and AladdinDAO Through PCV

Aladdin Improvement Proposals
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I have been thinking about how value can be accrued for the ALD token and AladdinDAO as a protocol and decentralized organization. And here are some thoughts:

Protocol Controlled Value
Protocol controlled value is essentially a treasury that works for the protocol. It is becoming an ever-increasing important concept in DeFi. Protocols with heavy treasuries:

  • Have the option to create its own liquidity instead of renting LP from users at high interest.

  • PCV enables value capture to the protocol itself, which is fundamentally different from protocols without PCV. (Functions more like a company with a revenue stream).

  • Protocol with PCV is “thick” in comparison to protocols without, and is more likely to survive through turmoil much like a company with cash on hand.

Aladdin can utilize PCV to capture protocol value into the ALD token, and therefore the DAO itself.

Aladdin PCV Growth Potential
In order for a protocol to adopt PCV, it needs to have continuous income streams to feed the treasury. Some examples of existing protocols are the FEI genesis (while not continuous, it was large enough to sustain liquidity for FEI), the OlympusDAO through bonding, LP fee generation, and treasury yield in the lending protocol.

AladdinDAO is in an especially ideal position to grow its PCV due to the nature of the protocol; A long-only farming aggregator of high-quality boule curated assets. For Aladdin, PCV growth can come from:

  • Farming (a portion of farming profits goes into the treasury). This is already in place, though the percentage is quite low right now. This COULD theoretically be increased to 100%, and in which case, AladdinDAO becomes a DAO mining machine, where users unit to mine different protocol tokens into AladdinDAO’s treasury, and ALD token becomes the governing and index token of potentially one of the largest DeFi token treasury.

  • Potential price increase of farmed assets. Treasury can be long-only as well.

  • LP for ALD. This grows PCV through ALD trading fees as well as increases protocol-owned ALD liquidity, increasing holder confidence. Once a sufficient amount of liquidity for ALD is gained in PCV, LP mining incentive is no longer needed, and those mining emissions can be better utilized elsewhere.

  • Put treasury assets into +EV strategies, such as LPing for major pairs such as WBTC/ETH, or even trading. A part of the boule could potentially be allocated to just this effort alone, with their main job being to grow the treasury.

  • Deposit into Aladdin’s own vaults to compound yields, afterall, what better place to park your idle assets :wink:

ALD Token Value
By accruing value into the treasury, we also accrue value to ALD token itself, as it will have the backing of the entire treasury in its valuation.

Concluding Thoughts
In a DeFi world where liquidity is non-sticky and users chase APY, I believe adapting a functioning PCV mechanism can transform Aladdin into a “thick” protocol that reduces its reliance on LPs, and potentially reaching a singularity point where Aladdin’s PCV grows large enough that it can function and grow without the need of any external LPs.

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Great thinking. This also reflected my thoughts on the recent DeFi development.

Actually TVL reflects only a instant situation of a protocol. As a result of TVL + time, it could be reflected on the Treasury AUM or PCV. But we also have some other ways to increase PCV.

If we can accumulate enough assets in the Treasury then we can also issue a stable coin based on the PCV. Stable coin is a stable debt of the Treasury. If PCV is significantly greater than the debt, then the protocol would be healthy.

This is even much more important than protocol income or capital efficiency. And it’s also the core value add of the DAO’s wisdom.

With a great treasury management strategy we can significantly improve the value of the protocol.

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Didn’t think about the stablecoin possibility, and I agree it’s definitely doable. Another good reason for PCV!

Once a consistent PCV growth path is established, it becomes a positive feedback loop that if large enough, can be unstoppable.

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  1. original we have the plan to decrease the incentive of risk-free pools, so definitely we can just increase the fee to 100% instead and do not decrease the weight of risk-pools any more.

  2. It also saved the the gas fee since the user do not need to claim it.

  3. We can think if we should use the existing mechanism of OlympusDAO. Using a bond to swap the long-term lp tokens for example.

  4. Timing is also important.

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Agree on 1 and 2.

3 we can do through Olympusdao pro. Though bonding method for PCV growth might not be as effective for ALD as it is for OHM, since there is no demanding buy pressure for ALD for high APY staking, unlike OHM.

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Great post, yuming0x! It mostly matches with what I’ve been thinking too: that PCV is (a) generally a good thing, for all the reasons you mention, and (b) particularly well suited to Aladdin. I agree with you that Aladdin already has the right people and mechanisms to grow and manage the treasury, and all your suggestions there are great. +1. Having the protocol own its own liquidity would be awesome.

I have one minor disagreement, here:

I realize that this is a common attitude about DeFi governance tokens, however, I don’t see why a healthy treasury necessarily bestows any value on ALD (or any token) without some kind of direct claiming or yield mechanism. My attitude is that some explicit connection between ALD and the treasury is necessary, at the very least to strengthen the ALD value narrative. For example, we could give ALD holders some kind of mechanism by which they can claim their share of the underlying treasury, perhaps directly in the prime tokens held by the treasury at the time of the claim.

The ideal mechanism would rarely or never be exercised; ideally the majority of participants will want to continue to keep their exposure to Aladdin’s basket of prime DeFi tokens, and benefit from its future growth, management, as well as the significant gas fee savings compared to diversifying your own profit across many protocols.

EDIT: Thinking about it further, one downside to a direct claim mechanism is that it limits what you can do with the treasury to earn PCV - if 100% of tokens have to be claimable at any time they of course have to be just held in the wallet… hmm.