Pinto fundamentally derives its value and scalability from its creditworthiness. However, creating stability in perpetuity is a significantly more complex problem than simply issuing debt in a sustainable fashion. The Silo, Pinto’s Deposit facility, handles everything from bank run minimization to yield distribution, volatility dampening and liquidity management.

The Silo consists of multiple interconnected layers of incentives that each play a part in protocol maintenance. This short article provides a high level overview of each component of the Silo and how it contributes. Subsequent articles will go into detail to explain why each component is designed the way it is.

Anyone can Deposit and Withdraw value from the Silo at any time. There are two types of tokens that can be Deposited in the Silo, Pinto and Liquidity Pool (LP) tokens – which are half Pinto and half non-Pinto – on the Deposit Whitelist. Value Deposited in the Silo earns a portion of all Pinto mints.

The Silo uses the following incentive mechanisms to complement the Field to create low volatility money with competitive carrying costs:

• The Stalk System for bank run minimization and yield distribution;

• Converts for the efficient use of existing liquidity for peg maintenance;

• The Seed Gauge for the management of the distribution of liquidity; and

• The Convert Bonus and Penalty System to complement the Seed Gauge and Converts for fine tuned peg maintenance.

The Stalk System has two primary roles: minimizing bank runs and distributing yield.

Any time someone Deposits value into the Silo, they receive Stalk and Seeds corresponding to the Pinto Denominated Value (PDV) and asset Deposited. Stalk entitles holders to a pro-rata portion of all future Pinto mints, and Seeds yield more Stalk every Season (~1 hour). Upon Withdrawal of the Deposit from the Silo, all Stalk, Seeds and Stalk accumulated from Seeds are forfeited, thereby creating opportunity cost for leaving during a bank run and coming back later.

Converts enable holders of Deposited assets to change their exposure within the Silo without forfeiting Stalk.

When Deposited Pinto is Converted into Deposited LP tokens, the ratio of Pinto to non-Pinto in the liquidity pool the Pinto was Converted into increases, thereby decreasing the price of Pinto. Conversely, when Deposited LP tokens are Converted into Deposited Pinto, the ratio of Pinto to non-Pinto in the liquidity pool the Pinto was Converted from decreases, thereby increasing the price of Pinto. Converts between Pinto and LP tokens enable Depositors to actively contribute to peg maintenance by buying Pinto when the price is below its value target and selling Pinto when the price is above, using value already in the Silo.

Deposited LP tokens can also be Converted to other Deposited LP tokens in a similar fashion. LP → LP Converts do not necessarily affect the price of Pinto, but do affect the distribution of liquidity.

The Silo incentivizes (disincentivizes) Converts by adjusting the Seeds rewarded to a given Deposit type and awarding (applying) a Stalk Bonus (Penalty).

The Seed Gauge has two dimensions: the ratio of Seeds between Deposited Pinto and Deposited LP tokens, and the distribution of Seeds among Deposited LP tokens.

Pinto autonomously adjusts the relative Seed allocation between Deposited Pinto and Deposited LP tokens to incentivize changes in their proportion within the Silo, thereby increasing or decreasing the price of Pinto without altering the overall liquidity in the protocol. In particular, Pinto uses the Crop Ratio to set the ratio between the number of Seeds for 1 Deposited Pinto compared with 1 Deposited PDV of the LP token with the most Seeds.

Pinto also autonomously adjusts the ratio of Seeds among the various Deposited LP tokens to incentivize the value Pinto trades against to be distributed as desired by the protocol. The optimal distribution of liquidity is defined via protocol governance and the protocol autonomously increases (decreases) the Seeds allocated to LP tokens that are underweight (overweight) compared with the optimal distribution.

The Convert Bonus and Penalty System is the newest component of the Silo and remains a work in progress. It allows the Silo to fine-tune the incentives to perform a given Convert within the Silo by awarding (or applying) a Stalk Bonus (Penalty), enabling more granular peg maintenance than is possible merely with the Seed Gauge.

There are four subcomponents to the system: Convert Up Bonus, Convert Down Bonus, Convert Up Penalty and Convert Down Penalty. Whether a bonus is awarded or a penalty is applied depends on the state of the protocol and direction Converted.

To date, only the Convert Down Penalty is live. This was implemented first because of the overwhelming preference demonstrated by participants to hold Deposited LP tokens over Deposited Pinto resulted in the protocol spending the majority of its time below the value target, even when the price was often very close to it.

The next subcomponent to go live in the coming weeks will be the Convert Up Bonus, which will complement the Convert Down Penalty to create more regular oscillations across the value target in instances where the price is relatively stable and close to the value target and the protocol has a healthy amount of liquidity.

A Convert Up Penalty and Convert Down Bonus can be implemented in the future once data indicate such subcomponents would make meaningful contributions to peg maintenance.

The Silo has multiple layers of incentives, each with a meaningful role to play in peg maintenance. The Stalk System creates the foundation, minimizing the duration and magnitude of bank runs by creating an opportunity cost for leaving and coming back, and rewarding Depositors with Pinto mints according to the amount, type and duration of their Deposit.

Converts allow Depositors to seamlessly respond to price action and the Seed Gauge using value already Deposited in the Silo. The Seed Gauge allows the protocol to autonomously incentivize Converts towards the value target and ideal liquidity distribution by adjusting the relative incentives to hold any particular assets in the Silo.

Lastly, The Convert Bonus and Penalty System allow the protocol to fine-tune the incentives – or disincentives – to Convert, given the state of the protocol, to complement the Seed Gauge and maximize the efficacy of the peg maintenance mechanism.

Together, these mechanisms foster peg maintenance and liquidity management by aligning Depositor incentives with the well-being of the protocol.-ben

see the original post on X here:

https://x.com/bwein_/status/1966501007531364469

Pinto fundamentally derives its value and scalability from its creditworthiness. However, creating stability in perpetuity is a significantly more complex problem than simply issuing debt in a sustainable fashion. The Silo, Pinto’s Deposit facility, handles everything from bank run minimization to yield distribution, volatility dampening and liquidity management.

The Silo consists of multiple interconnected layers of incentives that each play a part in protocol maintenance. This short article provides a high level overview of each component of the Silo and how it contributes. Subsequent articles will go into detail to explain why each component is designed the way it is.

Anyone can Deposit and Withdraw value from the Silo at any time. There are two types of tokens that can be Deposited in the Silo, Pinto and Liquidity Pool (LP) tokens – which are half Pinto and half non-Pinto – on the Deposit Whitelist. Value Deposited in the Silo earns a portion of all Pinto mints.

The Silo uses the following incentive mechanisms to complement the Field to create low volatility money with competitive carrying costs:

• The Stalk System for bank run minimization and yield distribution;

• Converts for the efficient use of existing liquidity for peg maintenance;

• The Seed Gauge for the management of the distribution of liquidity; and

• The Convert Bonus and Penalty System to complement the Seed Gauge and Converts for fine tuned peg maintenance.

The Stalk System has two primary roles: minimizing bank runs and distributing yield.

Any time someone Deposits value into the Silo, they receive Stalk and Seeds corresponding to the Pinto Denominated Value (PDV) and asset Deposited. Stalk entitles holders to a pro-rata portion of all future Pinto mints, and Seeds yield more Stalk every Season (~1 hour). Upon Withdrawal of the Deposit from the Silo, all Stalk, Seeds and Stalk accumulated from Seeds are forfeited, thereby creating opportunity cost for leaving during a bank run and coming back later.

Converts enable holders of Deposited assets to change their exposure within the Silo without forfeiting Stalk.

When Deposited Pinto is Converted into Deposited LP tokens, the ratio of Pinto to non-Pinto in the liquidity pool the Pinto was Converted into increases, thereby decreasing the price of Pinto. Conversely, when Deposited LP tokens are Converted into Deposited Pinto, the ratio of Pinto to non-Pinto in the liquidity pool the Pinto was Converted from decreases, thereby increasing the price of Pinto. Converts between Pinto and LP tokens enable Depositors to actively contribute to peg maintenance by buying Pinto when the price is below its value target and selling Pinto when the price is above, using value already in the Silo.

Deposited LP tokens can also be Converted to other Deposited LP tokens in a similar fashion. LP → LP Converts do not necessarily affect the price of Pinto, but do affect the distribution of liquidity.

The Silo incentivizes (disincentivizes) Converts by adjusting the Seeds rewarded to a given Deposit type and awarding (applying) a Stalk Bonus (Penalty).

The Seed Gauge has two dimensions: the ratio of Seeds between Deposited Pinto and Deposited LP tokens, and the distribution of Seeds among Deposited LP tokens.

Pinto autonomously adjusts the relative Seed allocation between Deposited Pinto and Deposited LP tokens to incentivize changes in their proportion within the Silo, thereby increasing or decreasing the price of Pinto without altering the overall liquidity in the protocol. In particular, Pinto uses the Crop Ratio to set the ratio between the number of Seeds for 1 Deposited Pinto compared with 1 Deposited PDV of the LP token with the most Seeds.

Pinto also autonomously adjusts the ratio of Seeds among the various Deposited LP tokens to incentivize the value Pinto trades against to be distributed as desired by the protocol. The optimal distribution of liquidity is defined via protocol governance and the protocol autonomously increases (decreases) the Seeds allocated to LP tokens that are underweight (overweight) compared with the optimal distribution.

The Convert Bonus and Penalty System is the newest component of the Silo and remains a work in progress. It allows the Silo to fine-tune the incentives to perform a given Convert within the Silo by awarding (or applying) a Stalk Bonus (Penalty), enabling more granular peg maintenance than is possible merely with the Seed Gauge.

There are four subcomponents to the system: Convert Up Bonus, Convert Down Bonus, Convert Up Penalty and Convert Down Penalty. Whether a bonus is awarded or a penalty is applied depends on the state of the protocol and direction Converted.

To date, only the Convert Down Penalty is live. This was implemented first because of the overwhelming preference demonstrated by participants to hold Deposited LP tokens over Deposited Pinto resulted in the protocol spending the majority of its time below the value target, even when the price was often very close to it.

The next subcomponent to go live in the coming weeks will be the Convert Up Bonus, which will complement the Convert Down Penalty to create more regular oscillations across the value target in instances where the price is relatively stable and close to the value target and the protocol has a healthy amount of liquidity.

A Convert Up Penalty and Convert Down Bonus can be implemented in the future once data indicate such subcomponents would make meaningful contributions to peg maintenance.

The Silo has multiple layers of incentives, each with a meaningful role to play in peg maintenance. The Stalk System creates the foundation, minimizing the duration and magnitude of bank runs by creating an opportunity cost for leaving and coming back, and rewarding Depositors with Pinto mints according to the amount, type and duration of their Deposit.

Converts allow Depositors to seamlessly respond to price action and the Seed Gauge using value already Deposited in the Silo. The Seed Gauge allows the protocol to autonomously incentivize Converts towards the value target and ideal liquidity distribution by adjusting the relative incentives to hold any particular assets in the Silo.

Lastly, The Convert Bonus and Penalty System allow the protocol to fine-tune the incentives – or disincentives – to Convert, given the state of the protocol, to complement the Seed Gauge and maximize the efficacy of the peg maintenance mechanism.

Together, these mechanisms foster peg maintenance and liquidity management by aligning Depositor incentives with the well-being of the protocol.-ben

see the original post on X here:

https://x.com/bwein_/status/1966501007531364469