PMTP
Protocol Monetary Trade Policy

Introduction

  • PMTP makes ROWAN valuable to hold, earn, and stake.
  • PMTP is a breakthrough invention in the DeFi and crypto-economics space that’s poised to bring large benefits to our community & the greater DeFi ecosystem
  • PMTP is the evolution of liquidity mining.
  • Users don’t need to do anything to benefit from PMTP. They’ll notice that their rewards & swaps using ROWAN will reflect increases in ROWAN’s purchasing power, meaning their ROWAN has become more valuable!
  • We will be the first protocol to implement a protocol monetary trade policy, which was invented by our team of expert cryptoeconomists and expanded upon in collaboration with our community of investors who are pushing boundaries in DeFi with us.
  • At Sifchain, we are inventors, technologists, and economists. We're comfortable pushing boundaries and we believe in the power of innovation to drive markets. We were the first team to connect Ethereum to Cosmos IBC, we are the inventors of protocol monetary trade policy, and we will soon be the first team to enable deep margin trading with uncapped gains. We’re not stopping there.

High-Level Summary

  • PMTP is a tokenomics innovation that increases ROWAN’s purchasing power and can eventually eliminate the need for inflation.
  • PMTP is a breakthrough mechanism that will drive tremendous value to ROWAN. ROWAN holders benefit by simply holding, staking, or pooling ROWAN with another asset.
  • PMTP presents a unique opportunity for new projects and investors to add liquidity for their projects on Sifchain, because they will be able to make data-driven predictions about the return on their investment.
  • We’re launching PMTP with the goal of drastically increasing the TVL on Sifchain in order to make it the most attractive place in DeFi to pool assets and trade. Eventually we will offer a complete suite of powerful financial tools for users to take advantage of our innovative economic environment which will include tokens from all of the top 25 EVM chains and deep margin trading features in combination with a variety of other technological innovations such as algorithmic PMTP, dynamic circuit breakers, and more.

PMTP’s Goal

  • Protocol Monetary Trade Policy’s primary goal is to attract external liquidity and increase TVL by making ROWAN an attractive token to earn rewards in, hopefully driving demand to pool assets and purchase / stake / hold ROWAN to reap the benefits of PMTP. This is a novel approach to incentivize users to pool their assets invented by Sifchain.

Benefits of PMTP to the protocol & to our community

  • PMTP benefits current ROWAN holders because it enables ROWAN to buy more of other assets. This means it makes users’ liquidity held in ROWAN worth more, and it makes all rewards earned from providing liquidity and from staking/delegation worth more. It also has the likely potential to start a TVL snowball reaction (price increase, TVL increases, which makes price increase, and on and on it goes).
  • PMTP also makes it exciting for NEW projects & NEW users to add liquidity for their project on Sifchain, because they can directly influence their returns. And by the way, our seamless, super-fast omni-EVM system allows users to do cross-chain swaps with ease, making onboarding a five-minute process.
  • Governance Participants/Economists: Very interested in participating in economics and putting new ideas in action. And being a part of the evolution of micro-economics.

PMTP is an upgrade to liquidity mining/inflation

  • Liquidity mining is also a way to incentivize people to pool external liquidity with ROWAN to earn rewards in ROWAN. This is an example of how monetary policy can be used to attract liquidity.
    • PMTP upgrades this by increasing the power of liquidity mining by making as-is ROWAN more valuable to accumulate. In this way, it’s possible to reduce inflation in correlation with the purchasing power increases of the mined token.
  • PMTP improves the value proposition for ROWAN hodlers & Sifchain community members too. It seeks to reduce inflation by increasing the value of ROWAN, so less tokens will be needed to buy the same stuff. Without taking into account game theory, Inflation just decreases purchasing power because it makes more of an asset. So, with inflation purchasing power decreases because there are more available assets. We are all familiar with this scenario. With PMTP you can use less assets to buy more, so inflated assets are more useful, and therefore we need less of them to have the same effect.

How does PMTP work

  • PMTP is native to the Sifchain protocol, and only influences ROWAN purchasing power for swaps done on Sifchain. It works by making small changes to the swap algorithm every block, which will reflect the agreed upon changes to ROWAN’s purchasing power.
    • The purchasing power adjustment will be decided through standard on-chain governance using three simple variables that can be easily analyzed by anyone within the community.
      • SifDAO will vote to implement or reject PMTP policies that include a starting block height, an ending block height, and a per-epoch purchasing power adjustment.
  • What PMTP does and does not do:
    • PMTP does:
      • adjust purchasing power of ROWAN on Sifchain very subtly within a time period.
    • PMTP does not:
      • fix the price of ROWAN at a certain level
        • If a lot of ROWAN is sold on Sifchain, the price will go down.
        • If a lot of ROWAN is bought on Sifchain, the price will go up.
      • restrict ROWAN trade
        • ROWAN is still free to trade anywhere
      • require you to “do” anything to benefit from it, PMTP policies are automatic. Of course, we encourage the community to participate in SifDAO governance to shape PMTP policies.
    • Ultimately, free markets determine the efficacy of any monetary policy.
  • PMTP Policies can work because ROWAN is most liquid on Sifchain
    • PMTP will help to INCREASE Rowan’s liquidity by making it a hot token for new projects/investors.
  • PMTP-Specific Examples:
    • If PMTP is set for a 2% purchasing power increase per day:
      • 1 Rowan buys 1 USDT in block 1
      • 1 Rowan buys 1.00005787037 USDT in block 2
      • 1 Rowan buys 1.00011574074 USDT in block 3
        • You can experiment with the effects of purchasing power adjustments by making a copy of this spreadsheet.

FAQs

  • Is PMTP market/price manipulation?
    • No. PMTP is not market manipulation because it is not deceitful and because it does not interfere with the ability of supply and demand to set prices in cryptocurrency markets. The precise definition of “market manipulation” varies by jurisdiction, but the term generally refers to practices that distort security prices or trading volume with the intent to deceive people or entities that rely on information in the market. Legal prohibitions on market manipulation exist because manipulation generally involves fraudulent conduct and because it disrupts the orderly function of markets and thereby reduces investor confidence. Common forms of market manipulation include either spreading false information designed to affect the price of an asset (as in so-called ‘pump and dump’ schemes) or engaging in manipulative transactions that are designed to impact prices rather than to acquire or sell an asset, such as matched trading, wash sales, layering, spoofing, and marking the close. PMTP is not market manipulation. There is no fraud or deceit involved because PMTP is completely transparent: PMTP is described in detail in the materials posted here, the entire Sifchain code including PMTP is open-source, and the current PMTP setting is prominently displayed on the Sifchain DEX. PMTP does not involve spreading false information or engaging in any type of transaction, let alone transactions designed to manipulate prices. PMTP is also not market manipulation because it does not interfere with the ability of supply and demand to set prices, either on the Sifchain exchange or in cryptocurrency markets more generally. First, Sifchain’s own pricing algorithm still uses supply and demand to set prices in a manner similar to other exchanges, and then PMTP makes small adjustments to those prices. The resulting prices are still anchored to prices set by the fundamental market forces of supply and demand. Second, Sifchain is not the sole marketplace for any of the assets listed on the exchange. If individuals are not satisfied with the prices listed on the Sifchain exchange, they can utilize other exchanges. If asset prices on Sifchain diverge from asset prices on other exchanges, that divergence will create an arbitrage opportunity and market forces will naturally bring those prices into balance based on supply and demand. A helpful analogy might be to a fiat currency exchange, such as one you would find in any international airport. The fiat currency exchange, like Sifchain, will list a series of prices for various foreign currencies that can be exchanged for the domestic currency. As with Sifchain, a customer can swap any two foreign currencies by first acquiring the domestic currency and then exchanging it for a different foreign currency. The exchange may adjust foreign currency prices upward or downward as compared to the domestic currency based on factors other than market forces, typically in order to generate revenue. These price adjustments, like PMTP, do not constitute market manipulation because they are not deceitful and do not interfere with the market’s ability to set prices based on supply and demand – either at the exchange or in the market more broadly. Note: This does not reflect the opinion of a national financial regulator. Please seek your own legal counsel for further analysis.
    • Economics Examples
      • Fiat currency managers use monetary policy to influence the interest rates for short term borrowing or the supply of money.
      • They use trade policy to influence the rate at which goods in their sovereign domain are exchanged.
    • Cryptoeconomic Examples
      • Inflation:
        • Osmosis uses inflation to give people OSMO to use by:
          • bonding it with external assets to earn rewards (also in OSMO)
          • purchasing other assets.
        • The Cosmos hub uses inflation to incentivize validators and delegators to secure the network, earning them more ATOM that they can use to:
          • purchase other assets
          • stake
          • provide liquidity
        • The goal of cryptoeconomic inflation is to incentivize behavior.
      • Deflation:
        • ETH’s purchasing power increases when a portion of gas fees are burned. The result of this is that there are less ETH circulating, meaning that 1 ETH becomes worth more of the total market cap of ETH.
        • The goal of deflation is to increase the purchasing power of an asset
    • TradFi Examples
        • In traditional finance, corporations sometimes buy back stock shares to increase the value of outstanding shares.
        • This means that a share can be sold for more money – increasing its purchasing power against the dollar, or in other words, decreasing the dollar’s purchasing power against the outstanding shares.
        • The goal of buybacks is to increase a stock’s outstanding share value.
        • Dividends are payments made by publicly listed companies to reward investors for putting their money into the venture.
        • Paying dividends is a policy that attempts to attract investors by rewarding them for holding a stock.
          • The goal of dividends is to encourage people to buy and hold stocks.
  • Will PMTP drain external liquidity by making pools asymmetrical?
    • No it won’t.
    • The goal of PMTP is to increase TVL and the amount of external liquidity on Sifchain.
    • PMTP policies are flexible and decided by governance.
      • Governance will be tracking metrics such as external liquidity on the DEX before making any decisions. If external liquidity is low, governance would likely create a policy to draw in external liquidity.
    • The idea is that positive price movement attracts liquidity.
      • As ROWAN’s purchasing power increases, TVL on the DEX will rise as well, creating a cycle that draws liquidity providers and more liquidity as people seek to use their existing assets to earn ROWAN.
  • What’s the catch? Why isn’t everyone doing this?
    • Nobody else is doing it because we’ve invented it.
    • We’re one of the only protocols out there with a team of cryptoeconomists who run modeling and build these frameworks full-time. Our team and community of investors already love being involved in the cutting edge of DeFi, and help us brainstorm and iterate on these ideas. In total, it was a perfect environment to foster DeFi changing innovation.
  • Will PMTP cause imbalanced liquidity pools?
    • What is perceived as an imbalanced pool is actually an arbitrage opportunity and PMTP increases the frequency of these opportunities.
  • Isn’t PMTP experimental? And we don’t know what’s really going to happen?
    • Not only have we done extensive testing on this with a very advanced team of economists, but PMTP governance is flexible and tracking key metrics for policy creation will drastically reduce risk.
    • We’ve also introduced a 7-day bonding period of ROWAN to ensure we have time to make any necessary changes.
    • We are spending significant time in community education initiatives to educate people about how to benefit from PMTP.
    • We will be making key statistics related to PMTP policies, and its effect on the DEX, open for the community to see and analyze.
    • All PMTP proposals will include contingency plans.
  • What's the worst-case scenario here, and how are we mitigating it?
    • Due to lack of understanding, people could potentially dump in mass to avoid uncertainty. We’re currently mitigating the risk of this outcome through all of our conversations with the community and ensuring users have key talking points and statistics at their disposal.
    • SifDAO could get too greedy and set pricing points too aggressively that leads to massive selling for once-in-a-lifetime profits in a short amount of time. This is mitigated through education around reasonable rate setting at <15% per day max and substantially lower over longer periods of time.
    • People could do large trades around specific purchasing power increases. This is mitigated because PMTP purchasing policies are carried out by doing equal-sized increases per block
    • People unpooling or not pooling liquidity to just hold Rowan with no other asset. This is mitigated by liquidity mining rewards, and a lockup for rewards withdrawals. Also, traders and investors generally diversify their holdings with another token.
  • Do we have any fail-safes in place in case governance goes awry?
    • Sifchain can freeze Peggy and IBC relayers quickly (in a matter of minutes or hours after something goes wrong or any other hack for that matter).
    • Sifchain will follow up PMTP with a dynamic circuit breaker so that any large sell-orders are automatically spread over a larger range of blocks. SifDAO governance will control how much Rowan can be sold on Sifchain in any given duration of time, further pushing Sifchain and SifDAO governance ahead in terms of economic innovation and powerful governance for ROWAN holders.
    • Specialized cryptoeconomists will advise against any potentially harmful policies during the voting process (which takes several days), and provide alternatives to these policies.

Additional Resources