Automated Reallocation Mechanism (AutoRM)
Understanding the AutoRM
TL; DR
Automated Reallocation Mechanism (AutoRM) reduces NPT's circulating supply and increases its value by automatically reallocating tokens based on protocol fees and node validation revenue. The NEOPIN community can participate in AutoRM initiation proposals and voting based on their staked NPT, aiming to make NPT more attractive and ensure its long-term sustainability.
NEOPIN Tokenomics 3.0
NEOPIN protocol announces its most progressive tokenomics update yet which can effectively reduce the circulating supply of NPT and strengthen the value of the native token by leveraging the protocol revenue.
NEOPIN protocol is a centralized decentralized finance (CeDeFi) platform that provides a variety of DeFi services, including yield farming, AMM, PoS staking, and liquidity mining. The NEOPIN protocol’s native token is NPT.
The NEOPIN Automated Reallocation Mechanism(AutoRM) is designed for its native token, NPT. It works by taking a portion of the protocol fees generated on the NEOPIN and using them to retrieve and reallocate NPT tokens from various pools on the NEOPIN. The amount of NPT reallocated is determined by a number of factors, including the volume of trading activity on the platform, and the whole process is done automatically through smart contracts, without human or third-party intervention.
In addition to protocol fees, node validation revenue from nodes on multiple NEOPIN-operated blockchains are also used to retrieve and reallocate NPT tokens. The total amount of NPT reallocated each quarter is determined by the volume of trading activity on the NEOPIN protocol and the total node validation revenue. The more trading activity and node validation revenue, the more NPT will be reallocated from its swap pools to the protocol reserve.
Two Pillars of the NEOPIN Auto Reallocation Mechanism (AutoRM)
It consists of two sub-protocols, Autonomous Swap and Deflationary Auction.
1. Autonomous Swap: Phase 1, Q1 2024
Autonomous Swap works as follows:
A portion of the node validation revenue generated on the NEOPIN platform is collected.
The collected node validation revenue is used to autonomously retrieve NPT tokens from different pools on the NEOPIN platform through smart contracts.
The retrieved NPT tokens are then reallocated to the protocol reserve by smart contracts.
The Autonomous Swap mechanism will be triggered every quarter and will provide front-running opportunities for the NEOPIN community to regularly take advantage of increased reward rates across its yield farming pools.
The amount of NPT to be reallocated is determined by the total node validation revenue generated by NEOPIN.
2. Deflationary Auction: Phase 2, 2024
The Deflationary Auction works as follows:
A portion of the protocol fees is collected from the blockchain networks operating on NEOPIN.
The collected protocol fees are used to allocate for an auction through smart contracts.
NEOPIN users can bid on this auction using NPT. The highest bidder will be able to own an asset portion of the auction.
The NPT tokens paid for the auction are immediately reallocated to the protocol reserve by smart contracts.
The Deflationary Auction mechanism will be triggered every quarter, providing arbitrage opportunities for the NEOPIN community.
The amount of the asset portion of the auction will be determined by the volume of transactional activity on the NEOPIN platform and market price of NPT token at the moment of the auction launched.
Token Reallocation Resources
The NEOPIN protocol token reallocation mechanism is funded by a combination of protocol fees and node validation revenue.
Node validation revenue: The NEOPIN protocol operates nodes on multiple blockchains. Revenue from these nodes is used to fund the autonomous swap mechanism. The current percentage of node validation revenue used for token reallocation is 50%.
Protocol Fees: A portion of the transaction fees generated on NEOPIN is collected and used to fund the deflationary auction. The current percentage of transaction fees dedicated to the deflationary auction is 40%.
The total amount of NPT tokens that is reallocated each quarter is determined by the volume of trading activity on the NEOPIN protocol and the total node validation revenue. The more trading activity and node validation profits, the more NPT will be reallocated from the circulating supply to the protocol reserve.
This ensures that the token reallocation mechanism is sustainable and that it can continue to operate even if the volume of trading activity on the NEOPIN protocol decreases due to a market downturn.
It also helps to ensure that the token reallocation mechanism is fair, as it is funded by both community users and the protocol itself.
Benefits of the Auto Reallocation Mechanism (AutoRM)
The NEOPIN protocol's AutoRM mechanism has a number of benefits, including:
It reduces the supply of NPT tokens in circulation, making each token more scarce and valuable.
It increases the demand for NPT tokens, as users are more likely to retrieve tokens that they know will be reallocated on a regular basis.
It helps ensure the long-term sustainability of the NEOPIN protocol by reducing the risk of inflation.
AutoRM Initiations under the NEOPIN Community Governance
Members of the NEOPIN community will be able to participate in the AutoRM initiation proposal each quarter and vote for the initiation with their voting power based on the amount of NPT staked by each member.
Roadmap
All NPT stakeholders were invited to engage in the NIP-1 proposal, which was open for voting from December 6, 2023, until December 19, 2023, at 09:00 UTC. We are pleased to announce that the proposal has successfully passed the community governance vote with an overall voting rate of 51.84%, comprising 51.81% in favor and 0.03% against.
Following the endorsement from the NEOPIN community, the Autonomous Swap mechanism is set to be activated on-chain in Q1 2024, with subsequent quarterly operations. Additionally, the Deflationary Auction mechanism is scheduled for on-chain launch in 2024. For further details, the core development team will provide comprehensive information at the time of smart contract deployment.
Conclusion
The NEOPIN protocol AutoRM mechanism is designed to make NPT a more deflationary token and increase the value of each token. Deflationary tokens are scarcer and therefore more valuable. The NEOPIN community believes that this new reallocation mechanism will help make NPT a more attractive crypto asset for its community and help ensure its long-term sustainability as a decentralized, community-governed financial protocol.
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