With VaporDEX now in public beta, our reward program Stratosphere in pre-enrollment, and our node evolution in full swing, it’s time to begin the transformation of VPND and the deployment of the highly anticipated VAPE token!
Design Philosophy
As we walk through the design of the VAPE token and its surrounding token economy, there are several important things to note in order to fully understand our token economy design strategy. We are building in a bear market, not for the next bull market — but for the next 10 bear markets as well.
Tokens used for paying the development team, securing partnerships, airdrops, or exchange listings are dilutive in nature and undermine the mechanics and value experiences built around the remaining allocations. When those value experiences are undermined, the token economy will stagnate and fail to grow long-term
Tokens used as incentives are dependent on their value stability. If the token’s value (real or perceived) declines — it’s power to function as a meaningful incentive is greatly reduced. Compensating for reduced value requires increased emissions, which in turn — exacerbates price declines. The result is a death spiral that eliminates opportunities for incentives, stripping away a critical growth lever for a platform
Assets easily gained are just as easily parted with. If tokens are handed out and received easily, at no cost, or don’t require any real commitment to acquire — there are low-to-no psychological or financial barriers to selling them for whatever value they can be exchanged for
One-dimensional economies have a single point of failure and lack diversity in value experiences. This lack of diversity gives way to everyone employing the same strategy — and ultimately oversaturating an experience, causing its ultimate demise. Multi-dimensional economies, while more elaborate and complex — offer adaptability and insulate value experiences from obsolescence by unleashing game theory in full force
While other DEX’s have used their native token to pay their team, fund their journey, or secure partnerships — we have elected to remove this common practice from our design. Eliminating these dilutive and irresponsible practices is a critical step in ensuring that VAPE starts as, and always remains as… our community’s token.
VAPE’s economy is not designed to incentivize — it’s designed to reward and recognize. VAPE is a reward for taking specific and purpose-driven actions that add value back to the VaporFi ecosystem and community. You won’t earn VAPE just for showing up, but when you use our products, help grow value for the community, and participate in our curated value experiences — VAPE will be there to say thank you.
And finally, but most importantly — while other DEX tokens have distributed their token like candy on Halloween, VAPE will be very difficult to acquire. Getting it will not be easy. VAPE is not a participation trophy, it’s a medal for going above and beyond. When you earn VAPE, it means that you’ve created value for your fellow community and the community is increasing its investment back in you.
Throughout our introduction to VAPE, you’ll see the above philosophies put on full display and brought to life. When building VaporDEX, simplicity and ease of use is paramount, as seen in our UI/UX. However, when it comes to the principles and mechanics of VAPE’s token economy, we have constructed an economy that has traditional mechanics, as well as more elaborate ways to acquire value.
Simple designs will require less effort but will be less rewarding. Those who take the time to engage with our most challenging value experiences will always be rewarded disproportionately.
Getting Started & About this Introduction
We’re going to walk through a variety of foundational topics that are important in order to contextualize the role of VAPE and how it impacts our growing ecosystem and community. Over the next several months, we will have a steady stream of additional details and deeper dives into some of the most exciting facets of VAPE.
For now, we’re going to walk through the broad strokes on as many of our most exciting, planned features of the VAPE token and its surrounding token economy. When you’re done reading this you will have learned about all the following:
What is VAPE and what’s its role in the VaporFi ecosystem
How does the existence of VAPE impact VPND
Why we chose to build a 2nd token versus bolting on more utility to VPND
What our north star is, and how we’re building differently from prior DEX tokens
What our design and evolution guiding principles are
The different ways to earn VAPE through each of its primary markets
The maximum supply of VAPE and its innate rarity
How the initial supply of VAPE is being allocated and emitted
An introduction to node-powered manufacturing and how the node economy is now expanding
Disclaimer: All details shared within this publication and future publications are not final until they are deployed. VaporFi Labs strives to provide maximum visibility and perspective to our community for planning purposes but reserves the right to continually pressure test and refine previously shared details between publication and deployment. Post-deployment refinement is subject to our community governance protocol.
What is VAPE?
VAPE is the governance and utility token for VaporDEX, our decentralized exchange on the Avalanche network. As VaporDEX grows and evolves, VAPE will be an increasingly integral part of our DEX and ecosystem. Holding VAPE gives you access to participate in governance measures related to VaporDEX and VAPE itself — as well as giving you access to incremental value experiences that require VAPE to participate or benefit from.
As VaporDEX and our ecosystem grows, VAPE will play a critical role in enabling our community to benefit from the value experiences that are available through our products, solutions, and services. With the VAPE token, we’re designing a token economy that is ideally suited to continually adapt and evolve with our macro ecosystem. VAPE’s role grows in the direction that the ecosystem grows.
When you earn VAPE through one of its primary markets, it’s evidence and a celebration of you contributing value to your peer community through one or more ways. VAPE is not an incentive, it’s a reward. VAPE is not for everyone, its for anyone who adds value through our carefully designed products and value experiences.
Revisiting the expanded role of VPND
With the deployment of VAPE, the exciting transformation of VPND from a node token to a mining token will officially be complete. As we continue to grow the services, solutions, and products offered in the VaporFi ecosystem, VPND plays a new and critical role. It functions as both a governance token for VaporNodes as well as now also functioning as a mining token.
What is a mining token?
VPND as a mining token means that it will be taking on a specialized role as a token that can be used to mint, mine, and earn other tokens from and native to the VaporFi ecosystem. VPND’s value over time will evolve and adapt relative to what tokens it can help you unlock, and what the transitive value experience is for you through the acquisition of those tokens you mine using VPND.
Above and beyond this huge new role, VPND will continue to be emitted as rewards to VaporNodes — ensuring that node owners reap the benefits of our expanding ecosystem for years to come. Success for VAPE means success for VPND, creating a symbiotic relationship between their respective token economies (and the adjacent node economy).
Role of VAPE in our ecosystem
VAPE’s token economy is being designed to grow, adapt, and evolve with our ecosystem — but the initial design and deployment will serve multiple initial functions for our community, specifically relative to VaporDEX.
Governance for VaporDEX and VAPE
VaporDEX Fee Harvesting
It’s also important to note that this is just the initial integration of VAPE into VaporDEX and VaporFi. We expect to continue to integrate VAPE into other critical and memorable value experiences (e.g., Stratosphere). These additional integrations will come organically as our services expand.
Let’s look at both initial integrations.
Governance for VaporDEX and VAPE
With governance, holders of VAPE will be able to participate in community votes centered around VaporDEX and the VAPE token itself. Participation in these community events is both exciting and beneficial — as it allows our community the opportunity to design its destiny and chart its course forward.
VAPE governance events include but are not limited to token economy & mechanic design policies. VAPE is the community’s token, and we want our governance scope and standards to go above and beyond what has come to be expected from similar or comparable tokens.
Stay tuned for additional details on VaporDEX and VAPE governance mechanics.
VaporDEX Fee Harvesting
Our community is always the fiercest advocate for our mission and our products — and VAPE allows the community the opportunity to reap the rewards of their advocacy.
Holders of VAPE will be able to stake their VAPE on VaporDEX to earn their fair allocation of fees that we harvest from VaporDEX usage. This includes but is not limited to fees generated from our Aggregator and Bridge, along with future monetized features coming to VaporDEX.
Stake VAPE, earn USDC. The more we grow, the more value that VAPE can directly access for you.
Why a new token?
If you haven’t asked yourself this question, pause. Ask. We’ve become desensitized to everyone creating a token for everything. Why are we introducing a new token? Does it have a truly distinct purpose? And most importantly, why not just expand the role of VPND indefinitely to fill this new role?
The VaporFi ecosystem already has a well-designed token with VPND, and with the recent transformation to its emission mechanics — it’s ready for the next chapter in its constantly evolving role and value proposition. So why did we elect to build a new token and its economy from the ground up instead of extending the role of VPND?
Most projects launch a token, or additional tokens for one or more reasons. Some selfish, others more functional or practical in nature. Typically, when a token is launched, the project team conducts an initial sale of the token — using the funds to generate capital to build and operate. They will then also allocate a percent of the total supply to themselves to be used as payment or incentives for their team. We believe both are tremendously flawed and ultimately hurt the community. We’ll talk more about these fundamental flaws in our next section.
So why not build a new layer of utility around VPND?
Simply put, VPND is not designed in an optimal manner for what we want the economy around VaporDEX to look like and how we want it to function. It is designed and optimized for its role as a mining token, but not for what we need it to do with VaporDEX and our growing ecosystem.
VPND has four specific elements to its design and history that make it impractical to use as our DEX governance token.
High maximum supply
Full supply already in circulation
Branding aligned specifically and explicitly to our original product, VaporNodes
Challenging marketability due to the prevailing sentiment around the original NaaS token economy model
With this in mind, we determined that launching a new token for the community, but not in the standard fashion, would be best for VaporDEX and the community. Let’s explore how we’re breaking the mold on DEX tokens and how we hope to inspire the next generation of governance and harvest tokens for DeFi products.
Breaking the mold
As we began designing our new token economy for VAPE — we explored the broader market. We looked at high performing comps, as well as low performing comps. What we saw made it clear that for us to continue to be a community-centric protocol, we need to throw out the DEX-token playbook and reimagine it for what it should be… and not what it is, has been, and continues to be for other participants in the DeFi space.
We immediately sought to eradicate the following concepts and industry standards from our design:
High supply
Lacking scarcity
Easily earned and acquired
Unrealistic or hyper-inflated initial valuation
Initial token sale to raise capital
Large team allocations of initial supply
Allocations set aside for marketing or partnerships
FOMO-based initial trading action
Unfair launches favoring insiders
Excessive or spam-based whitelist and whitelist checklists
High or accelerated emissions
One-dimensional utility without room to grow
Tokenomics that pigeon-hole and type-cast a token into a single function or value experience
Dilutive emissions or allocations that place value in the hands of parties that are focused solely on quick and absolute ROI vs. long-term value creation
As we unveil the initial view of VAPE’s token economy, we’re proud to say that we’ve successfully eliminated these traditional and “normal” concepts from our token architecture — and have instead, opted for a design that we believe is capable of inspiring and influencing a new generation of community-centric token designs in the DeFi space.
Our design north star
When we set out to design a token our north star and rally cry was very clear and simple. Yet in an age of copy/paste DEX tokenomics, our mission is also quite aggressive and different compared to what others who have come before us.
We want to build a token and token economy that our community can be immeasurably proud of.
Getting to our north star requires strict adherence to the guiding principles that inspire our design. No design was started or completed without being pressure-tested under each of our guiding principles. They evolved over time, and we even added to the list as we progressed in our research and design stages. What you see in our next section is the culmination of self-reflection on what our own gold standard should be.
Our design and evolution guiding principles
At the beginning of this article, we talked about our design philosophies and how important they were in informing how we thought about our mechanics. Now we’ll look at hyper-specific principles that were born from those design philosophies.
Our new token economy was inspired by designs and concepts that held these key guiding principles in the highest of regards. Everything we’ve included or excluded in our final economy design was because of its alignment relative to these principles.
Decentralized finance needs a new gold-standard in token economy design — one that focuses on sustainability, adaptability, longevity, and the ability to transcend macro and micro trends
We are building, designing, and establishing a token economy, not a token
Start with community, end with community. Community is everything
Responsible emissions are the bedrock that we build our economy up from
A successful token economy requires consistent opportunity cost to enable appreciation, and exceptional yet practical marginal cost mechanic design to protect against perpetual depreciation
A token economy should have no single point of failure and it should have the ability to continuously evolve and adapt to grow the number of value experiences available to its community
The token economies of VAPE and VPND are independent, but adjacent. They should function like allied nations, helping each other grow and develop — giving their respective and collective community opportunities to benefit from the existence of the other
Participation in the VAPE token economy requires the creation of new value or ongoing responsible management of existing value within our broader ecosystem
A successful economy will have an immovable foundation built on mechanic design and future growth enabled by game theory, including but not limited to an expansion of our node economy
We can learn from and be inspired by the some of the greatest fundamental philosophies and successes of Bitcoin, but adapt and refine some areas that will enable our economy to grow into an increasing number of different value paths and experiences
Primary markets
The initial supply of VAPE will be able to be acquired solely through four different primary markets. The establishment of four markets is a key enabler of game theory concepts that we believe setup this new token economy for long-term success, resilience, and longevity.
We’re excited to introduce four exciting and diverse ways to earn VAPE:
Genesis Pool
Liquid Staking
Enhanced Staking
Stratosphere Rewards
The establishment of four markets ensures a multi-dimensional economy can grow and thrive around the VAPE token. Four distinct value experiences, each with their own sets of rules, mechanics, and potential strategies.
The more distinct strategies that can be devised, the more resilient an asset is to negative market forces. As one strategy turns unprofitable or over-crowded, another strategy offers a better experience — helping offset negative forces with demand driven by the remaining relevant strategies.
To this end, we have designed the Genesis Pool and Liquid Staking markets to be our simplest and least mechanic-heavy markets. While they require less time, attention, and strategy to participate in — they will not be quite as rewarding as Stratosphere and Enhanced Staking, which offer a whole new way to experience and enjoy DeFi.
We’ll walk through each of these primary markets in short order later in this article — as well as a detailed dedicated article for each market shortly before it’s brought online to the community.
Let’s explore supply.
Maximum supply
The maximum supply of VAPE that can ever exist is preset and limited to only 21,000,000 tokens. VAPE is designed to be extremely rare from the very beginning and become increasingly challenging to acquire as time passes.
How did we end up with a final design that incorporated such a specific supply?
Cryptocurrency enthusiasts will immediately see the significance of a finite supply of 21M tokens — a nod to Satoshi Nakamoto and the supply philosophy of Bitcoin. Regardless of personal beliefs, biases, or priorities — Bitcoin is the gold standard for cryptocurrencies in long-term value creation made possible by scarcity and increasingly complex and challenging hurdles required to acquire it.
Bitcoin has become a phenomenon that successfully transcended national borders, time zones, religion, and continents. The global awareness of Bitcoin has exploded in recent years, and every day more and more global citizens come to understand Bitcoin beyond what the price-action focused headlines state. Each day, people are beginning to understand that the genius behind Bitcoin was how effectively it has weaponized human desire for value acquisition to create a system of checks and balances on its own circulating supply — and therefore, also its long-term value potential.
We think that decentralized finance can and should be a foundational pillar in our global society and should also be able to transcend or improve upon all human-made constructs as needed, just as Bitcoin has been doing for years. For this to occur in a meaningful manner — DeFi needs to take the globe by storm just as Bitcoin has. So as we embark on our mission to bring decentralized finance to every corner of the planet — we want a token economy that embodies and perpetuates the same concepts and opportunities that have allowed Bitcoin to disrupt an antiquated industry and give way to innovative new ideas, concepts, and realities.
Let’s look at how the initial supply will be allocated for distribution.
Allocation of initial supply
The total supply of 21M tokens will be allocated across each of the four primary markets in a very prescriptive manner. Each market will have its own independent supply and emissions schedule. These are the only allocations for the initial supply. There will be no tokens allocated to the team, project, or even partnerships.
2.0% for the Genesis Pool, equaling 420,000 tokens
8.0% for Liquid Staking, equaling 1,680,000 tokens
30.0% for Enhanced Staking, equaling 6,300,000 tokens
60.0% for Stratosphere Rewards, equaling 12,600,000 tokens