Tokenomics Overview
Last updated
Last updated
The Pilgrim Token ($PIL) is designed to serve as the primary liquid trading pair of PilgrimPair pools, capture a portion of protocol-level trading fees, and reward users for interacting with the Pilgrim Protocol.
The Pilgrim Token is designed to achieve the following, with a fixed supply cap of 1 billion PIL:
thus effectively having a deflationary tokenomics model.
Pilgrim Protocol calculates PIL rewards distributed based on parameters controlled by the Pilgrim DAO, which are re-calculated every rewardEpoch.
On every round trade on a PilgrimPair, the protocol updates the following values within rewardEpoch number of blocks:
total trading volume within this PilgrimPair
minimum base token reserve held by this PilgrimPair contract
minimum round reserves held by every user within this PilgrimPair contract
At the end of every rewardEpoch, PIL rewards given per round emitted for this particular PilgrimPair pool given to a user is calculated as follows:
rewardParameter is an emissions control parameter set per base token type by the Pilgrim DAO, which should be adjusted based on market conditions. Some external parameters that should be taken into consideration are:
relative oracle value ratio between supported base token pairs
PIL denomination reward amplifier
PIL market price
Protocol Treasury depletion ratio
The above calculation is executed by whoever calls the PilgrimPair contract for the first time after the last rewardEpoch have passed. To compensate for this, the protocol rewards gasRewards PIL to the user who have paid gas for the reward calculation operation for this rewardEpoch.
A set of incentivization amplifiers applied for certain Uniswap v3 position NFTs, defined as uniV3ExtraRewardParams, is also applied before distributing PIL rewards. For details, see PIL Liquidity Incentives on Uniswap v3.
While Pilgrim eliminates the need for constant liquidity, maintaining a higher valuation relatively against the pre-set starting price requires corresponding base tokens locked. This is especially true for pairs with aribitrage opportunities available, such as Uniswap v3 liquidity positions or other nonfungible DeFi positions.
While Pilgrim provides PIL token incentives for any PilgrimPair for any base token supported, the protocol provides significantly higher PIL token incentives for those who choose to list their NFTs with a PIL base token pair. For PIL-demoninated pairs, in order to achieve higher valuation of rounds and its underlying NFT, round traders must buy PIL tokens from the market to buy more rounds and lock them with its corresponding PilgrimPool. This process is accelerated as more NFTs are listed on Pilgrim Protocol with a PIL base pair. Therefore, value growth of the Pilgrim Token follows TVL growth of the entire protocol.
In cases of economic contraction, as long as the corresponding NFT is not backed by PIL, there exist arbitrage opportunities to keep an NFT's value on par with its adequate market price. This creates buy pressure from the market to deposit more PIL (i.e. buy more rounds) with its corresponding PilgrimPair, resolving collateral value deviation and absorbing PIL market sell pressure.
Certain partners that collaborate with Pilgrim Protocol or the Pilgrim DAO, such as DeFi protocol integrations or supporting metaNFTs for their application, may receive additional PIL rewards for their NFTs listed on Pilgrim for a predefined period of time from the Protocol Treasury as a result of a DAO governance proposal, similar to the Curve Gauge.
Partnership proposers and governance stakeholders (i.e. xPIL holders) should carefully consider whether the benefits of such a partnership or integration outweighs the potential risks of excessive PIL token emissions.
Pilgrim provides even higher PIL rewards for listers of PIL-based Uniswap v3 liquidity NFTs with a PIL base token pair. Those are:
PIL-WETH-UNIV3-LP
PIL-xPIL-UNIV3-LP
However, rewards vary based on fees tiers and price ranges, as there may be market premiums or discounts that are not determined by liquidity locked; for example, an in-range position would be valued higher than an out-of-range position, and a wider in-range position with higher liquidity provider fees would be valued similarly with a narrower in-range position with lower liquidity provider fees, assuming the market is relatively less volatile.
As PIL rewards follow TVL and trading volume of a given pool, liquidity miners and round traders of Uniswap liquidity tokens should carefully consider market situations to gain the most out of their position. Simply depositing more assets will NOT always result in more PIL tokens being mined, unlike Uniswap v2 or SushiSwap-based liquidity mining programs; you will be required to strategically plan out Uniswap positions based on market movement, and constantly rebalance your portfolio with buyouts and re-listings if necessary.
You do not need to provide liquidity yourself to participate in the PIL liquidity mining program, as PIL is distributed to both metaNFT holders and round holders. If you find the above concepts complicated or do not want to go through the hassle of dealing with Uniswap v3 liquidity positions, you can simply buy rounds with PIL from a position of your choosing from the Pilgrim Interface; this will also distribute you PIL rewards.
For more information on trading fee distribution, refer to the next section and the Trading Fee page.
Protocol trading fees are charged in the following cases:
Trading rounds (both buys and sells)
NFT buyouts
metaNFT buyouts
Note that in the case of round trades, fees are given to metaNFT holders of the corresponding PilgrimPool in rounds, not in base tokens. NFT and metaNFT buyouts incur fees in base tokens.
A portion of trading fees accumulated is used to buy back PIL and are distributed to xPIL stakers. For details, refer to the next section.
A detailed description of how Pilgrim protocol fees are calculated is available here.
PIL holders may stake their tokens to receive xPIL, which is a tokenized ERC-20 representation of PIL staked with the PilgrimTemple contract.
Once a user stakes PIL, the tokens are locked for a year from when PIL was locked. However, as the resulting xPIL is an ERC-20 token, they may be transferred or even sold back to PIL on the PIL-xPIL Uniswap v3 pool.
In order to reclaim locked PIL and any accumulated rewards after the 1 year lockup period, the user must hold xPIL with the wallet that initially executed the lockup transaction. When the position is unlocked, any provided xPIL is burned, and PIL tokens with all rewards accumulated are retuned to the user.
xPIL follows an exchange rate model with PIL, similar with xSUSHI and SUSHI, other than the 1 year lockup requirement enforced with xPIL.
As xPIL lockup positions are contract state separate from the resulting xPIL token, there is no stopping anyone from wrapping this as an NFT in a veNFT-like fashion and listing it on Pilgrim for further valuation. š
xPIL holders:
receive subsidized protocol yield. Any protocol fees accumulated are bought back to PIL, subsidized with additional PIL tokens from the Protocol Treasury pro-rata, and sent to the PilgrimTemple contract -- which is available for redemption after the lockup period.
participate in protocol governance with the Pilgrim DAO. Only xPIL holders may participate in governance proposals and votes within the Pilgrim DAO. The Pilgrim DAO controls protocol upgrades, additional deployments, and other technical issues; additionally, it also has control over additional PIL spending from the Protocol Treasury to other protocols. This makes xPIL similar to veCRV and the Curve Gauge, as it has full control over PIL reward parameters for all NFTs -- including nonfungible DeFi positions -- listed with Pilgrim.
where for the metaNFT owner equals initial round reserves locked with this PilgrimPair contract.