Aelin Tokenomics in Review
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August 29th, 2022

A quick review of Aelins Tokenomics

  • New Tokenomics - An AELIN buy-back mechanism where a 2% protocol fee on each deal token is escrowed for six months, then sold for AELIN tokens which are distributed to AELIN/wETH LPs, single-sided stakers, and the Aelin treasury.
    • 45% to AELIN/wETH LPs
    • 25% to single-sided AELIN stakers
    • 30% allocated to Aelin treasury
  • Aelin's initial tokenomics would've directly distributed deal fees to stakers which wasn't viable. It would've distributed a small number of deal tokens to many stakers, making Aelin's staking cost prohibitive.
  • Because some deals were completed under the initial tokenomics but never distributed to stakers, an interim deal fee distribution (AELIP 31) was implemented. It takes 50% of the AELIN rewards from the initial buyback and sets it aside for historical stakers to claim (those staked during the deals).

Deep Dive of Aelin’s Tokenomics

Old Tokenomics - AELIP 3 (December 13th)

In the initial state of the protocol, deal fees were collected and held by the Council, which would then be distributed to stakers and LPs, with 2/3 and 1/3 of deal fees being distributed, respectively.

While this was an exciting idea, in practice, it would've meant distributing small numbers of deal tokens to many stakers — potentially making it nonviable to stake AELIN in small quantities due to gas fees. In short, there is no point in claiming dust from various tokens multiple times a month.

It is important to note that no deal fees were distributed under AELIP 3, which leads to the reasoning behind the interim deal fee distribution.

Interim Deal Fee Distribution - AELIP 31

The interim deal fee distribution (Aelip 31) covers the deal fee distribution for historical stakers in pools one and two before AELIP 14.

This interim deal fee distribution will take 50% of the AELIN rewards from the initial buyback happening in the future and set it aside for historical stakers to claim. The distribution will be as follows:

  • From the launch of pool one until the initial buyback, 2/3 of the AELIN in the Merkle tree distribution will be awarded across the period proportionally
  • From the launch of pool two until the start of VELO rewards, the other 1/3 will be distributed across pool two stakers.

New Tokenomics - AELIP 14

Going forward, the 2% protocol fee on each deal will be collected in the underlying deal token, escrowed for six months, and then sold by the Aelin council once the escrow is complete to purchase AELIN and distribute it to single-sided stakers, LPs, and the Aelin treasury.

Deal tokens will be sold by the Council directly on an AMM or via an aggregator for AELIN tokens. If the sale of deal tokens causes more than a 1% price movement in the deal token, the sale amount will be spread out in smaller chunks over a longer time interval managed by the Aelin Council. In this case, the Council will either use a TWAMM (sell x tokens per day over y days) or manage the process manually over time.

Suppose AELIN tokens are unavailable via an aggregator or AMM where the deal token has liquidity. In that case, the Council will first buy the native chain tokens (ETH, AVAX, FTM...) and then complete a second transaction to purchase the AELIN tokens.

The resulting AELIN tokens will be distributed to the Aelin Treasury (30%) along with single-sided stakers (25%) and LPs (45%), who will claim them from staking rewards contracts on the network where the deal occurs. The rewards will be emitted over the next quarter for stakers and LPs.

Expected Results of Tokenomics Change

Because of the non-viability of the initial tokenomics, which would've left stakers claiming dust deal tokens on many chains — the new tokenomics hopes to encourage stakers to stake and to provide continued buying pressure for AELIN tokens on the market.

These tokens will be distributed to those that support the protocol and will help to guarantee the continued success of Aelin.

Any Questions?

If you have questions, comments, or thoughts, join the conversation on Discord.

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