Parasset Tokenomics Breakdown, a Comparison between Major Lending Protocols

Background

Tokenomics has many different designs, which can make the protocols very effective or unhealthy. A successful project not only needs to consider aspects like efficiency, user-friendly interface but also well-designed token metrics. In this article, we will dive into the popular and well-known lending protocols in the DeFi space.

Protocols like MakerDAO, Liquity, and Parasset, their native tokens play a unique role in the system. MakerDAO, users using collaterals (not including MKR) to mint DAI, and MKR are used for governance to change parameters and for the system to collect revenue (Stability Free, buyback to burn MKR). Liquity, the LQTY token does not empower governance but serves as the medium to receive revenue. Parasset, ASET token works similarly to the LQTY, gaining stability fees from the protocol.

Token Metrics

Parasset (ASET)

Token Name: ASET

Total Supply: 100Million

Liquidity Providers: 70%

Private Round: 15%

Public Sale with IDO: 5%

Team: 10%

According to the release schedule, the ASET token will be linearly released for four years. ASET is distributed quarterly, this creates a constant selling pressure, which is very steady and healthy considering the 70% of the token is distributed to the miners.

The 5% public sale should give the protocol enough participants in the initial stage. Not to mention, Parasset has the NEST ecosystem’s support, which contains many NEST holders and pricing quote miners to use Parasset immediately.

Liquity (LQTY)

Token Name: LQTY

Total Supply: 100million

Community: 33.3%

Investors: 33.9%

Team & Advisors: 23.7%

Endowment: 6.1%

Community Reserve: 2.0%

Service Providers: 1.0%

LQTY’s community issuance (outside of LP incentives and the Community Reserve) follows a yearly halving schedule, described by the following function: 32,000,000 * (1–0.5^year). The purpose of this issuance curve is to favorably incentivize early adopters while also maintaining incentives for the long term.[1]

With this structure, the token for the community will be all mined within two years, in other words, users will want to participate in the system as early as possible, and due to the fact the LUSDs mainly inflow into the stability pool, early participants are accumulating LQTY quite fast.

The design of Liquity is not including DAO, which means the holder of LQTY does not have the power to change the system.

Investors, Team & Advisors, and service providers in total gain 58.6% out of all the LQTY. The structure is much less decentralized compares to many other protocols.

Similar to Liquity the ASET token captures the value inside the system. However, if you compare Parasset’s distribution to Liquity’s, it is almost the opposite, because only about 30% of the tokens go to the community.

As the team considers, the Team and advisors in Liquity take almost 1/4 of the total supply, and for Parasset it is only about 10%.

MakerDAO

MKR

Total: 1million (In case of system bearing the loss like in 3.12 black-swan event, extra MKR was minted to be auctioned in exchange for DAI, to repay the system debt. )

Worth mentioning that MakerDAO had 2 rounds of funding, the first round is lead by Andreessen Horowitz and Polychain Capital, the rest includes Distributed Capital Partners, Scanate, FBG Capital, Wyre Capital, Walden Bridge Capital, and 1confirmation raised 12million dollars. This round was completed a couple of days before DAI was launched. The second round was from a16z, which raised 15million dollars. Also, a16z received 6% of MKR’s total supply of 60,000 tokens.

MKR never had an ICO before, the token distribution is very hard to break down, but this project has been going on for a very long time, and early developers were paid in MKR.

Despite the utility and governance MKR offered, the distribution itself is not decentralized compared to Parasset.

Conclusion

All three protocols use the dual token system, while Parasset can mint more types of p-tokens. The utility token captures the value of the system by collecting the fees. For Liquity, one of the biggest differences is that LQTY does not has the power to change the system’s parameters. On the other hand, the token distribution shows that LQTY and MKR are more centralized than Parasset. Within almost double the amount of ASET distributed to miners compare to Liquity, Parasset should be able to get constant attention and capital inflows.

Worth mentioning that MakerDAO’s MKR holders have the power to change the system in their favor, and Liquity attracts whales to accumulate the LQTY quite fast. The Parasset on the other hand distributes its tokens over a long period, making the system healthy and active over the long run.

Reference:

[1] https://docs.liquity.org/faq/lqty-distribution-and-rewards