The Future of Token Incentives

Token incentives aren’t sustainable. Protocols can improve how they distribute token incentives with this new incentive model.

It’s been two years since DeFi summer and we’ve only seen a handful of incentive models. Aligning incentives between protocols and users is key. More choices gives a protocol more tools to refine their distribution.

Sustainability is how a protocol’s token stays relevant. If it’s dumped to oblivion, no one will want to buy it. This is why teams focus on aligning incentives between involved parties.

Current Models:

• Liquidity Mining

• Token Staking

• ve-Token Locks

• Buy and Burn

• Real Yield

• etc.

No model is perfect. Each has a time and place and can be seen throughout DeFi. The new model will be using call options as incentives. Brought to DeFi by Dopex, this paves the way for a new model that protocols can utilize alongside other initiatives.

Instead of distributing tokens directly to users, a protocol can distribute purchased call options to users. Since it’s a derivative, dumping is no longer a worry. This is a major problem with the Pool2 structure which has its flaws.

Dumping is the simple choice for farmers. Sellers get to reap their payday instantly. No waiting around and hoping for token appreciation. Tz explains it best:

Key Characteristics:

• Prioritizes Protocol Usage

• More Cost Effective

• Flexible - Exit When Desired

• Reduces Token Volatility

Conclusion

This DeFi novelty should draw the attention of any protocol looking for a new incentive model. Once OLPs are built out, this will be a prime choice for protocols looking to be long term sustainable.