Funders
This section applies to our v1 Portal -- you can find a Portals v2 funders overview here
Portals are funded by the community
Funding a Portal bootstraps the upfront yield that’s paid to Depositors
Funders receive bTokens in return for bootstrapping liquidity
bTokens can be burned later to receive a share of PSM from the funding pool
When a specific Portal is ready to launch, it’ll undergo an initial funding phase where funders can deposit a pre-set amount PSM tokens. If the maximum amount of PSM needed to fund a Portal is 100k, and funders only deposit 50k, the remaining 50k will be deposited from the PSM Treasury wallet.
In return, funders are given receipt tokens called “bTokens,” which are distributed based on the “rewardRate.” For example, if someone deposits 100 PSM tokens and the rewardRate is 1,000%, they’ll get receipt tokens for 1000 PSM.
bTokens can later be redeemed for PSM tokens via the “funding pool.” You can think of the funding pool as a redemption pool, and it receives 10% of all PSM tokens deposited into a Portal over time (via the arbitrage process explained in the next section).
Consider the following scenario:
1 million PSM tokens deposited into a Portal
1,000% rewardRate
10 million bTokens total held by depositors
5 million bTokens (50% of supply) can be burned for 50% of the funding pool’s PSM
This redemption mechanism brings game theory into play, as the actions of each bToken holder impacts all other bToken holders.
Game Theory of bToken Redemption
In Portals v1, bToken holders own a claim on a certain % of the PSM tokens within the funding pool. As bToken holders claim their PSM, the remaining holders' claim in % terms grows, which can make it advantageous to wait, as described below.
Continuing the above scenario, imagine that time has now passed and there are 100k PSM in the funding pool. The depositor with 5 million bTokens decides to burn them for 50k PSM, or 50% of the pool total.
Now, the 5 million burned bTokens are gone. That means there are 5 million left, and 50k PSM in the funding pool. This is actually advantageous for remaining bToken holders. For example, a depositor who still has 1 million bTokens can now claim 20% of the funding pool instead of their original 10%.
As the funding pool grows, they’ll accumulate rights to more deposited PSM. Thus, funders are incentivized to wait to burn their bTokens, which means that the PSM in the funding pool will likely remain there for a long time.
This provides deeper liquidity to the Portals.
As mentioned earlier, the initial bootstrapping phase is one of two primary ways that Portals will accrue PSM tokens. The other way is through arbitrage opportunities.
If you’re interested in reading more information on bTokens, we also cover them in our blog post here.
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