Seeds yield more Stalk every Season (i.e., each hour). Stalk entitles Depositors to a portion of future Pinto mints based on their pro rata ownership at the time of minting. By changing the distribution of Seeds among whitelisted assets in the Silo, Pinto incentivizes Depositors to change their exposure.

There are two dimensions over which the distribution of value within the Silo is evaluated: Pinto vs LP, and the distribution of LP tokens.

Pinto vs LP: The Crop Ratio

The Crop Ratio is the ratio between the number of Seeds per Pinto and 1 Pinto Denominated Value (PDV) of the LP token on the Deposit Whitelist with the highest number of Seeds. The Crop Ratio enables the protocol to adjust the distribution of Seeds between Pinto and LP tokens Deposited in the Silo.

A Crop Ratio of 50% means the top LP (by number of Seeds) receives half as many Seeds per 1 PDV as 1 Pinto. At 100%, it receives the same number; at 200%, it receives twice as many, and so on.

By using the LP with the highest number of Seeds as a proxy for all LP tokens on the Deposit Whitelist, the protocol is able to directly control the attractiveness of holding Pinto vs any LP token. This enables the protocol to clearly incentivize Converts between Pinto and LP tokens.

When the protocol wants more Converts from Pinto to LP, it increases the Crop Ratio. Conversely, when the protocol wants more Converts from LP to Pinto, it decreases the Crop Ratio. At the beginning of each Season, the protocol changes the Crop Ratio based on its desire to change the distribution of Deposits between Pinto and LP.

The protocol has parameters for a Minimum and a Maximum Crop Ratio. The current Minimum Crop Ratio is set to 50%, and the current Maximum Crop Ratio is set to 200%.

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Previously, the Maximum Crop Ratio was set to 100% such that the protocol never incentivized holding Pinto in the Silo more than all LP tokens. However, due to the overwhelming preference demonstrated by Depositors to hold LP tokens over Pinto, the Maximum Crop Ratio was changed to 150% and then 200%. A future upgrade to the protocol may remove this Maximum Crop Ratio altogether.

For specific information on how the protocol changes the Crop Ratio at the beginning of each Season, see the Crop Ratio Changes.

LP Distribution: Seed Gauge Points

Amongst LP tokens on the Deposit Whitelist, the distribution of Seeds in a given Season is proportional to the Seed Gauge Points allocated to each asset.

Seed Gauge Points are an internal protocol metric adjusted for each whitelisted asset at the beginning of each Season based on the actual distribution of LP tokens within the Silo compared with the optimal distribution. The further the actual distribution is from the optimal distribution, the more aggressively the Seed Gauge Points are changed. Anyone can see the Pinto Dune to view the current vs. optimal LP allocations and distribution of Gauge Points.

If the Pinto denominated value (PDV) of an LP token as a portion of the total PDV of LP within the Silo is within 10% of its optimal distribution, its Seed Gauge Points remain constant. If it is more than 10% but less than 33% above (below) its optimal distribution, its Seed Gauge Points decrease (increase) by 1 point. If it is more than 33% but less than 67% above (below) its optimal distribution, its Seed Gauge Points decrease (increase) by 3. If it is more than 67% above (below) its optimal distribution, its Seed Gauge Points decrease (increase) by 5.

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By letting the number of Seed Gauge Points allocated to each LP token fluctuate freely, the protocol is able to respond flexibly to market conditions (e.g., Depositors’ preferences with respect to LP token exposure, changes in the value of non-Pinto assets in the liquidity pools) to continuously incentivize the actual distribution of LP tokens in the Silo to approach the optimal distribution, which is ⅓ value in each of the three whitelisted pools.

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The Seed Gauge, Step by Step

At the beginning of each Season, the number of Seeds allocated to each asset on the Deposit Whitelist is recalculated. Pinto takes the following steps to calculate the appropriate number of Seeds for each asset.

First, the protocol sets the total number of Stalk for the Season. For more information on how the protocol calculates the total Seeds, see "Time to Catch Up" in the Stalk System or the Pinto whitepaper.

Next the protocol adjusts the Crop Ratio and Seed Gauge Points.

Finally the protocol calculates the Seeds for each asset in a given Season by solving a system of equations such that the Crop Ratio and Seed Gauge Points distribution, as well as the total number of Stalk are all honored.

Thus, the Seed Gauge dynamically adjusts the incentives to hold various Deposits in the Silo in response to the protocol's and participants' preferences.

At a high level, there are three primary incentive structures in place within the protocol.

1. The Stalk System creates an incentive to Deposit value into the Silo and leave that value Deposited.

2. The Field creates an incentive to lend to the protocol to reduce supply.

3. The Convert System layers additional incentives on top of the Stalk System to incentivize participation in protocol maintenance with value that is already Deposited in the Silo.

What is a Convert?

Simply put, Converts take one form of value Deposited in the Silo and Convert it into another form of value Deposited in the Silo.

Converts don’t change the overall liquidity in the Silo, but can change the price of Pinto or the distribution of the liquidity. The effects of a given Convert on the state of the protocol depend on the type of Convert.

There are four types of Converts within the Silo.

1. LP → Pinto Convert

2. Pinto → LP Convert

3. LP → LP Convert

4. Lambda → Lambda Convert

Primer on AMMs

If you already understand automated market makers (AMMs), feel free to skip ahead to ‘LP → Pinto Convert (i.e., Convert Up)'.

The price of Pinto is derived from the value that it trades against in various 2-sided AMM liquidity pools (LPs). The most basic way to understand pricing in 2-sided LPs is that at all times, half of the value in the pool is Pinto, and half of the value in the pool is the non-Pinto asset that Pinto trades against.

Therefore, in order to derive the USD price of Pinto from a liquidity pool, the number of the non-Pinto asset multiplied by its USD price is divided by the number of Pinto.

Anyone can buy Pinto from and sell Pinto to Pinto LPs at any time. When someone buys Pinto, they add non-Pinto assets to the pool and receive Pinto in return, resulting in the price going up. Conversely, when someone sells Pinto, they add Pinto to the pool and receive non-Pinto assets in return, resulting in the price going down.

Anyone can provide liquidity to Pinto LPs. When one adds liquidity to an LP, one receives an LP token that represents pro-rata ownership of all the liquidity in the LP. At any time, one can redeem one's LP for the underlying liquidity in the pool. Liquidity can be added or removed in (1) equal proportions to the value already in the pool (i.e., a 2-sided deposit or withdrawal), (2) just one of the assets in the pool (i.e., a 1-sided deposit or withdrawal) or (3) any proportion in between.

In practice, a 1-sided deposit into the pool has an identical outcome to trading the single asset into the proportion of assets in the pool, and then adding 2-sided liquidity. Similarly, a 1-sided withdrawal has an identical outcome to withdrawing 2-sided liquidity and then trading one of the assets into the other.

For more information about Pinto's AMM's refer to the Pinto Whitepaper.

*LP → Pinto Convert (i.e., Convert Up)*

During an LP to Pinto Convert, a one-sided withdrawal of Pinto is made from the liquidity pool, and the Pinto that are received are left Deposited in the Silo as pure Pinto (i.e., not in any pool).

For the individual Depositor that Converted, the exposure of their Converted assets changed from LP (i.e., half Pinto and half non-Pinto) to 100% Pinto. For the protocol, the total amount of liquidity remains constant.

However, while the liquidity in the system is constant, the price of the Pinto in the liquidity pool increases as a result of the LP → Pinto Convert because of the removal of Pinto from the pool.

Depositors who Convert the price of Pinto back to $1 make money.

*Pinto → LP Convert (i.e., Convert Down)*

Pinto → LP Converts are the mirror of LP → Pinto Converts.

During a Pinto → LP Convert, a one-sided Deposit is made with Pinto that was already in the Silo into the liquidity pool selected by the Convertor.

For the individual Depositor that Converted, the exposure of their Converted assets changed from 100% Pinto to LP (i.e., half Pinto and half non-Pinto). Similarly to LP → Pinto Converts, the amount of liquidity in the system remains constant.

Opposite from LP → Pinto Converts, the price of Pinto in the liquidity pool decreases as a result of the Pinto → LP Convert because of the addition of Pinto into the pool.

LP → LP Convert

During an LP → LP Convert, a two-sided withdrawal is made from the source liquidity pool, the non-Pinto portion is sold into another non-Pinto asset, and a two-sided deposit is made into the destination liquidity pool. All three parts of the LP → LP Converts occur atomically.

For the individual Depositor that Converted, the exposure of their Converted assets changed from having the non-Pinto element of the source liquidity pool to the non-Pinto element of the destination liquidity pool. The same has occurred for the protocol.

LP → LP Converts do not change the overall amount of liquidity in the protocol, nor do they affect the price of Pinto (except for very small loss in value due to slippage from the sale of one non-Pinto asset into another).

Lambda → Lambda Convert

Due to volatility in the price of Pinto and non-Pinto assets in liquidity pools, the Pinto Denominated Value (PDV) of a Deposit can change over time. Lambda → Lambda Converts reevaluate the PDV of a Deposit to update its Stalk and Seeds.

There are technically two types of these Converts: Lambda → Lambda Converts and Anti Lambda → Lambda Converts. For simplicity, neither are explicitly available on the pinto.money UI.

Lambda → Lambda Converts allow a Depositor to update the PDV of her Deposit and combine multiple Deposits of the same asset into a single Deposit. Lambda → Lambda Converts never decrease the PDV of a Deposit, and they happen automatically when farmers claim Stalk.

Anti Lambda → Lambda Converts ensure maximum efficiency of the protocol by enabling anyone to eliminate a Deposit’s excess PDV. Anti Lambda → Lambda Converts remove the negative incentive that would otherwise prevent Depositors from Converting if it caused the PDV of their Deposit to be reevaluated lower. These Converts do not happen automatically. Instead, they exist as public functions at the protocol level that can be called permissionlessly by anyone on-chain at any time, instead of imposing excess computation on the protocol to regularly check and update the PDV of every Deposit.

Why Might Someone Convert

There are a variety of incentives to Convert at any given time. Some of the incentives are created by the protocol while some naturally occur due to the nature of the system.

Seeds

Seeds yield more Stalk over time. The protocol changes the numbers of Seeds allocated to different Deposited assets each Season based on the current distribution of value Deposited in the Silo compared with the optimal distribution of liquidity.

Farmers are incentivized to Convert from one Deposited asset to another due to the difference in Seeds between the assets. By Converting, farmers can increase their Seeds to earn more Stalk over time, thereby increasing the portion of mints they receive when the protocol grows.

Change Asset Exposure

In addition to optimizing the number of Seeds, Converting allows a Depositor to change their exposure to various assets within the Silo.

Depositors holding LP tokens have Pinto exposure and exposure to a non-Pinto asset. Converting from LP to Pinto enables them to increase their Pinto exposure and decrease their exposure to the non-Pinto asset.

Conversely, Converting from Pinto to LP enables the Depositor to decrease their Pinto exposure.

Converting from LP to LP enables the Depositor to change their non-Pinto asset exposure depending on market conditions.

*Price (i.e., Buy Low and Sell High)*

An individual Depositor Converting from LP to Pinto is effectively buying Pinto. Because LP → Pinto Converts are only allowed when the price of Pinto is below its value target, LP → Pinto Convertors are effectively buying Pinto when the price is low.

Similarly, an individual Depositor Converting from Pinto to LP, is effectively selling Pinto. Because Pinto → LP Converts are only allowed when the price of Pinto is above its value target, Pinto → LP Convertors are effectively selling Pinto when the price is high.

In short, Converts to and from Pinto allow Depositors to buy low and sell high, respectively, actively making money as they participate in protocol maintenance.

Stalk Bonus (SOON)

With the introduction of the Stalk Bonus, Pinto will start to offer a Stalk Bonus for performing Converts that improve the health of the protocol.

Once this system is live, an efficient Stalk maximization strategy will have to factor in the potential to earn a Stalk Bonus for Converting in addition to optimizing for the maximum number of Seeds.

Why Might Someone Not Convert

Waiting For Better Prices

Given the ability to buy low and sell high, if a Depositor believes that the Pinto price is going to move further away from the value target, it may be in their interest to wait for a better price before they Convert.

PDV Reevaluation

At the time of a Convert, the PDV of the Deposit is reevaluated. In instances where the PDV of an LP Deposit has decreased since the last time the PDV was updated, the loss of Stalk and Seeds due to updating the PDV may discourage Depositors from Converting.

Anti Lambda → Lambda Converts were introduced to minimize the instances where PDV reevaluation is a disincentive for Depositors to Convert.

Waiting For a Bigger Stalk Bonus (SOON)

Similarly to how a Depositor might wait for better prices to Convert – or in the instance of the Field, wait for higher Temperatures to Sow – Depositors may wait for a bigger Stalk Bonus to Convert.

Stalk Penalty

Certain Converts (e.g., Pinto → LP if price < 1.005, LP → Pinto if price > 1) are discouraged by the protocol via a Stalk Penalty of 100% of Stalk accumulated from Seeds. Depositors may not Convert to avoid this penalty.

In instances where price > 1.005, the Stalk Penalty changes dynamically depending on how many Seasons the time-weighted average price has been above the value target. Similar to the Stalk Bonus, Depositors may wait to Convert for the penalty to decrease.

In Summary

Pinto rarely intervenes in the market directly through forced sales – it shapes incentives to encourage participants to actively contribute to protocol maintenance. Converts are one of Pinto’s three core incentive mechanisms, allowing Depositors to shift between different assets within the Silo without changing overall liquidity, and rewarding participants for their contributions in the form of additional Stalk and Seeds.

Thanks for reading this comprehensive explainer for Converts. Happy farming!

Join the Farm:

Discord: pinto.money/join

Website: pinto.money

Timekeeping

Time in the Pinto protocol is measured in Seasons. Every Season lasts ~1 hour. Pinto uses Base blocks as a proxy for time. Due to the consistent time between Base blocks, the protocol can accurately calculate the time based on the Base block number. Once the Base block number has eclipsed the threshold indicating the passage of the top of the next hour, anyone can call the gm() function to trigger the Sunrise that begins the next Season.

Incentivizing The Sunrise

In order to incentivize the gm() function call while minimizing the cost to the protocol for each Sunrise, the protocol offers a reward in the form of newly minted Pinto for successfully triggering the Sunrise. The award starts at 1 Pinto and increases by 1.0201% for each successive block beyond the threshold that elapses without a successful gm() call, ensuring that the protocol pays as little as possible without the Sunrise occurring more than a short period of time after the top of each hour.

Changes to the Protocol

Upon each Sunrise, the protocol:

1. Increments the Season counter;

2. Calculates TWA∆P, the sum of the time weighted average shortages or excesses of Pinto across liquidity pools on the Minting Whitelist;

3. Updates the Maximum Temperature;

4. Updates the Crop Ratio;

5. Updates the Gauge Points;

6. Updates the Silo to issue Stalk that grows from Seeds;

7. Starts or stops the Rain, if applicable;

8. Starts or stops the Flood, if applicable;

9. Sets the supply of available Soil;

10. Mints Pinto based on TWA∆P to the appropriate Shipping Routes; and

11. Awards Pinto to the address that successfully called the gm() function.

The Sun powers the constant dynamism of Pinto, enabling the protocol to autonomously respond to market conditions quickly and cheaply.

If you found this article interesting or are interesting in the development of algorithmic stablecoins, join the Pinto Discord and participate @ pinto.money.

-ben

see the original post on X here:

https://x.com/bwein_/status/1971266830980223464

Bank runs are inevitable: because there is always less liquidity than value in the system, there is no way for every participant to exit the system without the value of their assets decreasing. The more people who leave, the less value available for others to do the same. Therefore, if some people leave, it can scare others into leaving as well, kicking off a bank run.

In other words, algorithmic stablecoins are highly reflexive. When the going is good, people pile in to participate in the yield generated by the growth of the protocol. But, when the momentum shifts in the opposite direction, a trickle can quickly turn into a rapid outflow.

Therefore, a properly designed algorithmic stablecoin must have a highly effective and anti-reflexive bank run minimization mechanism.

TO RUN, OR NOT TO RUN

That is the question every holder of an algo stable faces once a bank run starts. In order to survive, the protocol must create sufficient incentives for people to stay.

The main incentive algo stables are able to offer participants is yield in the form of more currency, which increases supply. However, during a bank run the protocol is trying to reduce supply, not increase it. If it increases the supply during a bank run, it will only exacerbate the run.

The key insight of the Stalk System is that while the protocol cannot mint more currency during the bank run, it can offer higher yields in the future when the protocol is minting for those that stuck around during the run.

In more traditional economic terms, the Stalk System creates an explicit opportunity cost of future mints for people that participate in the bank run and then rejoin the system later.

STALK SYSTEM 101: STALK AND SEEDS

The Stalk System uses two assets, Stalk and Seeds, to create this opportunity cost. Stalk entitles users to a pro rata portion of all mints. Seeds yield more Stalk every hour.

Upon Deposit, Depositors receive Stalk based on the Pinto Denominated Value (PDV) of the Deposit, and Seeds based on the asset Deposited and the PDV of the Deposit.

The opportunity cost for participating in bank runs is created because upon Withdrawal, all Stalk and Seeds, including Stalk accumulated from Seeds, associated with the Deposit are burned.

During a bank run, Depositors must decide between staying put to keep all of the Stalk from Seeds they have accumulated since they initially Deposited – and continuing to earn Stalk until the printing resumes – or leaving and burning their Stalk that has accumulated from Seeds during the duration of their Deposit.

ANTI-REFLEXIVITY

An effective bank run minimization scheme must be anti-reflexive: the deeper into the bank run the protocol gets, the more the bank-run minimization scheme must incentivize staying put.

In the case of the Stalk System, as other Depositors Withdraw from the protocol and burn their Stalk, the marginal benefit of each remaining Depositor's Stalk from Seeds increases because it represents a larger and larger portion of the total Stalk.

SHORTER BANK RUNS

The Stalk System is designed such that if a Depositor decides to participate in the bank run, they are incentivized to run as soon as possible, because their Stalk from Seeds are worthless to them anyways.

This naturally segregates participants into two categories: bank runners that leave immediately once a bank run starts, and long term Depositors that stick around.

While this leads to short periods of high volatility during which short term holders leave the system, it has the benefit of ending the bank run sooner so the system can then swiftly return to its value target. In other words, given that bank runs are inevitable, the protocol creates the conditions to get them over with and then efficiently return to a healthier state.

FAIR TO NEW PARTICIPANTS

The original Stalk System had a fixed number of Seeds for each asset on the Deposit Whitelist, which had a drawback: it was essentially impossible for newer Deposits to ever catch up to the Stalk of older Deposits of similar size. This problem made it unattractive for new Deposits to enter the system, and was exacerbated during extended periods without any mints, which is exactly when the system wants to attract new Deposits most.

The solution was to upgrade the Stalk System to include a parameter in the protocol – currently set to 6 months – that makes it such that a new Deposit with an average number of Seeds per PDV will catch up to the average Stalk accumulated from Seeds per PDV across all Deposits, at the time of the new Deposit, in that time frame.

Properly setting this parameter is a balancing act. If the time to catch up is set too high, then it discourages new Deposits; if it is set too low, then the opportunity cost created by the Stalk System may be insufficient to discourage participation in bank runs.

In practice, this solution dramatically decreases the friction for new Deposits to enter the system, more equitably distributes new supply when the protocol is growing and facilitates more decentralized ownership.

SUMMARY

Bank runs are unavoidable for algorithmic stablecoins, but they can be managed. Pinto’s Stalk System does this by turning reflexivity on its head: those who exit realize an opportunity cost in the event of the protocol's future success, while those who stay see their share of future mints grow. This design shortens bank runs, rewards long-term participants, and ensures new entrants can still compete for yield, making the system more resilient and equitable over time.

-ben

see the original post on X here:

https://x.com/bwein_/status/1968305310180966448

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.

The Silo: Pinto’s Liquid Deposit Facility

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

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

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

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

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.

Summary

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

One of the two primary problems that an algorithmic stablecoin must solve is how to reduce supply in an efficient fashion without compromising the utility of the currency (e.g., through rebasing).

Every time the price of the stablecoin is too low, there is excess supply on the market. The protocol needs a way to remove supply from the market in order to return the price to its value target.

Pinto uses the Field – its protocol-native credit facility – to efficiently attract lenders and reduce supply.

Pinto must offer an interest rate high enough that a prospective lender views it in her interest to lend to the protocol and is incentivized to lend immediately rather than wait for a higher interest rate.

There are two key components to incentivizing a prospective lender to do so: the first is to create risk for waiting, and the second is to minimize the benefit of waiting.

PODS: FIFO DEBT FOR COMPETITIVE LENDING

The first component is achieved through the introduction of a novel debt structure: Pods. Pods become redeemable for Pinto 1:1 when Pinto issues new supply in response to excess demand (i.e., the price being too high) on a first in, first out (FIFO) basis.

The FIFO structure introduces risk for potential lenders who wait to lend to the protocol because others may do so first, getting in line and thereby increasing the supply growth needed for the later lender to be paid back.

Even if the interest rate for lending to the protocol may increase in the future, offering a better return on an absolute basis, if the risk due to the potential increase in the amount of Pods that must become redeemable before their loan will be paid back is greater than the potential benefit of a higher interest rate, lenders are incentivized to lend to the protocol.

SETTING THE INTEREST RATE PROPERLY

The second component to properly incentivizing lending to the protocol is to minimize the marginal benefit of waiting to lend to the protocol.

Pinto needs a way to efficiently find the minimum interest rate at which it can attract lenders. On the one hand, the protocol wants to attract lenders in a timely fashion, so it is incentivized to raise the interest rate quickly to discover demand.

However, the faster the protocol raises the interest rate, the higher the benefit each potential lender receives for waiting to lend to the protocol. Counterintuitively, raising the interest rate too quickly actually delays lender participation and results in worse loan terms for the protocol.

Therefore, the efficient way for the protocol to raise the interest rate during periods of time in which the protocol struggles to attract lenders is to do so slowly and steadily. Generally, the protocol would rather experience longer periods of time below its value target in order to pay a lower interest rate to its lenders – and therefore more sustainably borrow from the market – than to rapidly raise the interest rate in a misguided attempt to quickly attract lenders.

IN SUMMARY

Pinto's Field combines two components to create a competition between lenders to efficiently reduce supply without undermining the currency’s utility. Pods, redeemable on a FIFO basis, introduce risk to waiting and incentivize lenders to act immediately. The protocol raises interest rates slowly and steadily, minimizing the benefit of waiting and allowing the protocol to discover the lowest sustainable rate at which lenders will participate. Together, these components ensure supply is reduced in the maximally sustainable fashion.

-ben

Fiat: A Double Edged Sword

The money printer is the most powerful force in the modern economy. Since 1972, when Nixon closed the gold window following a multi-year depletion of the United States gold reserves, the global economy has officially run on fiat (i.e., credit backed) currency.

The defining feature of fiat currency is that it can be printed out of thin air. Although it may seem counterintuitive that something producible at will could serve as better money than a scarce, physically grounded asset like gold, it is precisely this freedom from physical limitations that gives fiat its unique utility.

Money is understood to have three primary use cases, storing value across space and time, serving as a medium of exchange between various forms of value, and functioning as a unit of account for value and loans of value.

In both cases of acting as a medium of exchange and as a unit of account for loans, the primary driver of money’s utility is its low volatility. The power of fiat money lies in the ability to use the printer to minimize its volatility.

Unlike gold, the supply of which is almost entirely unrelated to the economy, access to fiat money can be meticulously controlled in direct response to economic conditions (e.g., expanding in response to growth and shrinking in response to contractions) to minimize the volatility of its value and thereby maximize the health of the economy.

Unfortunately, the money printer is currently governed by human judgement that is arbitrarily based on “feel”. Moreover, the use of the printer has been corrupted such that the vast majority of value printed is to the benefit of corporations and other parties that have close ties to the government.

*The preferential and concentrated distribution of freshly printed fiat creates high levels of inflation that erodes wealth, exacerbates massive inequality and distorts the truth discovered through markets (i.e., what people value).*

Friends of the Printer

The corruption of the money printer has broken capitalism’s engine of creative destruction. The traditional pressure on companies to compete in the creation of goods and provision of services has been compromised by unequal access to the money printer. The traditional requirement for lenders and investors to manage risk responsibly has been removed for those deemed “too big to fail”.

These companies offer terrible quality and take dangerous risks, but never have to pay the price because a bailout, whether in the form of a cash infusion, access to cheap credit, or a government contract, is always just a phone call away.

• Boeing dominates the commercial aircraft market despite safety lapses, production issues, and cost mismanagement because government contracts, financing, and support insulate it from competitive pressure.

• Major airlines offer horrible service while maintaining high levels of debt and colluding to avoid competing on price. Because government regulation makes market entry so expensive for new competitors, the only way to afford to play is with government subsidies. Of course, the new company on the block never gets the same degree of assistance from the government as existing companies that can heavily lobby for special treatment, leaving consumers with limited options.

• Big banks are no longer subject to practical risk management. Despite introducing massive leverage into the financial system, they are shielded from the consequences of failure by central banks and government interventions that encourage lending to politically popular, rather than economically productive, ventures and foster heedless risk-taking bound for disaster barring further government intervention.

• Backed by low-cost, government-subsidized financing, private equity firms like Blackstone now own a significant share of single-family homes in certain metro areas – sometimes 5-20%, and increasing – driving up prices and pushing ordinary buyers into the rental market. These firms are paying excessively high costs that are only justifiable given the expectation of the government propping up the value of the housing market.

The corruption of money prevents the market from discovering and serving people’s needs. Instead, people's work and consumption serve major companies that do not care for or about them, and despite the tremendous deflationary effect of the proliferation of software over the past three decades, people are less well off than their parents.

A transparent and unbiased algorithm can control the money supply more accurately, ethically and sustainably than arbitrary human control and correct the perverse incentives created by the corrupted money printer.

Crypto’s Missing Half

Bitcoin was a direct response to the corruption of the money printer, and has started a revolution to create an economy free from capture by powerful interests. Many bitcoiners believe that requires ditching fiat currency altogether. However, Bitcoin’s monetary policy (i.e., predefined minting schedule) makes it much better suited to serve as a store of value across space and time and a unit of account for value than as a medium of exchange between various types of value or unit of account for loans.

A medium of exchange and unit of account for loans is such an important part of a modern economy that even on networks like Ethereum, which have been meticulously designed around the principles of trustlessness and censorship resistance, the dominant media of exchange and units of account for loans are trusted wrappers of good old federal fiat money (i.e. USDT, USDC), which can be easily censored by the companies that issue them or governments that have the ability to control those companies. In reality, there is so much value on the Ethereum network that is dependent on these centralized wrappers for fiat money that the independence and integrity of the Ethereum network itself has been compromised.

Pinto is a response to this existential threat.

Crypto Fiat

Pinto is founded on the beliefs that fiat money is the best money if the printer is used wisely and ethically, and that credit is an infinitely scalable source of endogenous value.

What the Bitcoin (and now Ethereum) community miss is that fiat has outcompeted hard assets like gold as the global currency in spite of the abuse of the printer. To ignore the success of fiat over hard money is to throw the baby out with the bath water.

Pinto leverages the power of smart contracts to create a crypto-native fiat monetary system in which every Pinto is printed directly to the people who have value in the system, thereby decoupling inflation of the money supply from the devaluation of people's wealth.

Because every Pinto printed is distributed deterministically, verifiably and such that participants accrue wealth during the system's growth rather than lose it, Pinto has the benefits of modern fiat currency without the drawbacks.

A variety of novel incentive mechanisms make Pinto possible. Anyone can take their Pinto, or various whitelisted Pinto LP tokens, and Deposit them in the protocol to earn a portion of future prints. Similarly, anyone can lend Pinto to the protocol to earn a portion of future prints. The incentives the protocol offers participants for any given action changes every hour, contributing to a living monetary system that grows and adapts to meet the needs of its participants.

Pinto is an experiment at the frontier of money. It’s still early. Pinto's incentive mechanisms have room for improvement. Pinto's trustless and censorship resistant governance mechanism is still a few months away from implementation. But, Pinto is the foremost attempt to date at delivering the money printer to the people.

If Pinto succeeds, it has the power to restore markets to their proper function and complement BTC or ETH as a base layer currency of the crypto economy.

- ben
20 Aug 2025

BEFORE BEANSTALK – EMPTY SET DOLLAR

Prior to the deployment of Beanstalk, there had been a variety of attempts at creating a credit based algorithmic stablecoin, starting with Basis in 2017. The most successful model through 2021, Empty Set Dollar (ESD), suffered from a number of problems.

1. Instead of letting the market naturally discover the right interest rate, ESD imposed an arbitrary one on participants. The debt issuance mechanism used an interest rate curve that (1) set the interest rate as a function of the debt level, independent of what the market was willing to pay, and (2) had a hard cap, which led to major inefficiencies in the protocol’s ability to borrow excess supply from the market: everyone wanted to wait until the maximum interest rate, but because the interest rate was a function of the debt level, the protocol would go through extended periods of time with a stalled interest rate and no lending.

2. The fungible nature of ESD's debt created perverse incentives which dissuaded people from being the first to lend to it; you could lend to the protocol last and redeem first, if you were the fastest to redeem. This structure, combined with the fact that as others lent to the protocol the interest rate would increase, made the optimal strategy to wait until after others had already lent to the protocol and favored whales with better execution.

3. ESD had no bank run prevention mechanism, which led to excessive downward price swings.

While ESD was a pioneer in its own right, its inefficiencies led to its, and its many forks', quick demise. All ESD forks completely collapsed within ~2 debt cycles and a maximum of a few months.

BEANSTALK - A NEW MODEL

Beanstalk was inspired by ESD, and implemented novel incentive designs that remedied the three main inefficiencies of ESD.

1. The protocol introduced a first of its kind on-chain PID controller that automatically adjusted the interest rate on loans without a predetermined interest rate curve, allowing for natural price discovery. Although slightly oversimplified, in general if there was not enough demand for debt, Beanstalk would raise the interest rate; if there was excess demand for debt, Beanstalk would decrease the interest rate.

2. The first in, first out debt repayment mechanism, Pods, leveraged the trustless nature of smart contracts to create a novel type of debt that created a radically improved lending market that fostered the protocol successfully borrowing from the market during periods of excess supply. Because those who lent to Beanstalk first were the first to be paid back when the protocol grew, once someone felt like the interest rate was sufficiently high, they were incentivized to lend to the protocol or risk someone else getting in line before them.

3. The Stalk System created the first ever permissionless bank run minimization mechanism that leveraged a time-weighted incentive scheme to align long-term holders with the protocol while maximizing the distribution of ownership in the protocol. Whereas in previous systems, the efficient behavior during a bank run was to leave and come back later, independent of how much one believed in the protocol, the Stalk System rewarded holders for leaving their Deposits in Beanstalk during tough times.

BEANSTALK LIVE - THE FIRST 8 MONTHS

Although Beanstalk introduced major improvements over its predecessors, there were a variety of inefficiencies in the initial version of the model that made the protocol unsustainable. The first 8 months were spent plugging holes on a sinking ship.

Beanstalk was willing to issue excessive amounts of debt – more than was necessary or efficient – such that the debt level of the protocol skyrocketed. The interest rate the protocol was willing to pay increased even when it wasn’t optimal to do so, and the way the protocol measured demand for debt was flawed, both of which led to Beanstalk overpaying for loans. Issuing too much debt and paying too high an interest rate were both unsustainable.

Furthermore, there was no way for Depositors in the system to use their Deposits to contribute to protocol maintenance, despite being the participants and value in the protocol best suited to do so. Until the introduction of Converts, large amounts of capital sat stagnant within the system, contributing to excess volatility.

While Beanstalk was far from perfect, it was good enough that there was enough time to observe its inefficiencies and fix them. The protocol bent, but it did not break.

BEANSTALK EXPLOIT - A SHAKESPEAREAN TRAGEDY

In its ninth month, something incredible happened: the protocol actually started to work. Enough improvements were made, and enough holes were plugged, that the ship started to float.

The protocol entered its healthiest and most promising period, paying off its debt and increasing its liquidity. The Beanstalk community Discord was electric, and Twitter started to seriously pay attention to what was occurring. For about 3 weeks, it looked like credit based money was about to shake up the cryptocurrency landscape.

But shortly after the protocol started to run, tragedy struck: a governance exploit, that ironically was only made possible due to the excessive health (i.e., liquidity) of the protocol, was executed by a still unknown attacker, and drained all ~$77m of liquidity from the protocol, destroying an additional ~$120m in protocol-native value in an instant.

Because the protocol had demonstrated efficacy in the weeks immediately prior to the exploit, the community organized to revive and restart the protocol. However, 3 weeks after the Beanstalk exploit, Terra Luna, the largest algorithmic stablecoin up to that point (and still today) was destroyed via an economic and social attack that destroyed $60B of value in less than a week, effectively ending the crypto bull run and eviscerating almost all desire amongst the crypto community to continue to pursue algorithmic stablecoins.

BEANSTALK REPLANT - TRAUMA UNRESOLVED

Beanstalk was replanted on August 6th, 2023, a year after its initial deployment. While the protocol was able to borrow ~$17m in new value from the market as part of its recapitalization, the structure of the recapitalization honored all outstanding Beanstalk liabilities at par.

In an article shortly before the Barn Raise to recapitalize the protocol, we wrote “One of the main attractions of the more aggressive Barn Raise strategy laid out in BFP-72 **is that Beanstalk is likely being Replanted with a ridiculously high Pod Rate in the worst a) macro environment in at least a decade, b) crypto market in years, c) stablecoin market of all time, and d) endogenous circumstances possible, as a result of the attack. This presents an incredible opportunity for the model to demonstrate its efficacy. We will all know very quickly if it is working or not.”

Although the protocol did “work” after it was replanted, continuing to cross the value target for another 10 months, between the negative publicity associated with the exploit, the general fear of algorithmic stablecoin after the collapse of Terra Luna, and the system's excessive debt, interest all but disappeared.

A DATA DEFICIENCY

During the first nine months of Beanstalk’s life prior to the exploit, there was so much data collected that there was a significant number of improvements to the mechanism that were imagined – so much so that there was enough development work to continue iterating on the model for another 2 years after the Replant.

However, without users actively participating in the system, our ability to (1) learn about the efficacy of the improvements that were being implemented and (2) discover new ways to improve the model, was compromised.

While the model had come a long way from the early Beanstalk days when the ship had so many holes that it barely survived, there was a lot of reasons to believe that the model was far from an optimal state. It just wasn’t clear what were the next steps to take the model to the next level.

PINTO - DEBT RESTRUCTURING AND DATA DUMP

Enter Pinto. Pinto was deployed in November of 2024 with a variety of model improvements – the last set that was reasonably conceivable given the data collected through Beanstalk. Pinto restructured the Beanstalk debt to honor it in the instance where the protocol succeeds (Pinto will start paying 3% of all mints to Beanstalk after it reaches a 1 billion supply) but effectively gave the model a clean slate to collect more data.

In the 8 months since it was deployed, the protocol has experienced a period of rapid growth followed by its first debt cycle, extended time below the value target, and a return to it. This broad swath of data has enabled the protocol to be improved further and is enough to enable at least another year’s worth of development. Expect a roadmap in the near future.

4 YEARS OF BEANSTALK - PERSPECTIVE

Despite over 35,000 sunrises in the two protocols, it hasn’t been all sunshine and roses. Things certainly didn’t play out how we drew it up on the big board almost 5 years ago when we started working on the project; it’s hard not to fall into thinking about “what if” Beanstalk had never been exploited. Maybe all the money that fled Terra would have flown into Beanstalk, and the protocol would have grown into the billions in short order.

But, I’m a glass half full type of guy, and the glass half full says that the Pinto model today is in a dramatically better spot than Beanstalk was at the time of the exploit, and it’s only a matter of time before the crypto market reconsiders the potential for algorithmic stablecoins.

Building a network-native algorithmic stablecoin that can sustain itself perpetually may be impossible. Without one, however, the security of crypto networks will be permanently compromised. We must find out how to create one, or die trying. The model is ready for its next major test.

-ben

See the original post here.

Having studied the Terra model and its collapse deeply, there is plenty of reason to believe that algo stables can avoid the same fate and will eventually succeed.

There were three fundamental flaws with the Terra/Luna model.

1. Terra used an unscalable source of endogenous value: equity.

2. Terra had no bank run minimization mechanism.

3. Terra maintained a hard peg instead of a soft one.

During Terra’s collapse, these three flaws exacerbated one another, creating a negative feedback loop that culminated in one of the largest and fastest bank runs in history.

At the time of writing, there is significant evidence that each of these flaws is solvable with proper mechanism design.

1. UNSCALABLE ENDOGENOUS VALUE

The UST stablecoin was redeemable for $1 worth of LUNA. Owning LUNA was comparable to owning equity in a company, where the value of LUNA was derived from the value of the Terra network (i.e., the use of UST). Equity is a terrible source of endogenous value.

To better understand why, let’s consider what would happen if Microsoft, a $4T company, issued MicroBucks, a $1 pegged stablecoin that derived its value in the same way (i.e., through redeemability into $1 of Microsoft stock).

At first glance, you might think that MicroBucks could safely grow up to the value of Microsoft equity, or close to it. After all, there are people all around the world that independently value Microsoft at ~$4T for reasons that have nothing to do with MicroBucks.

HOWEVER, upon closer analysis, it is not actually the market cap of the issuer that determines the number of MicroBucks that can be safely issued against Microsoft stock, it's the minimum size of the bid for the equity at any given time.

Because MicroBucks are redeemable for Microsoft stock, the ability for a MicroBuck holder to receive $1 for their MicroBuck is contingent on someone buying $1 of Microsoft stock from them after they convert their MicroBuck to Microsoft stock.

The problem is that the size of the bid at any given time for a stock (no matter how great the stock) is generally decoupled from, and always significantly smaller than, the market cap of the stock.

Herein lies the first major flaw: the equity needs to be orders of magnitude more valuable than the outstanding stablecoins in order for the bid to be large enough to process redemptions smoothly. In practice, there is no source of equity large enough to support a scalable stablecoin.

2. NO BANK RUN MINIMIZATION MECHANISM

Money is fundamentally a social phenomenon. Therefore, bank runs can always happen. The best money will have the best bank run minimization mechanism. Terra had none.

Besides the fractional demand for equity at any given time compared with its total value, the other problem with using equity as the source of endogenous value is that equity is fungible, and fungible assets offer no bank run prevention mechanism (specifically due to their fungibility).

Let's reconsider the MicroBuck example and evaluate the incentives in place for a true believer of Microsoft, someone that LOVES the stock at $4T, thinks Bill Gates is god, and has season tickets to the Clippers, in the instance where there is a bank run on MicroBucks.

Once the bank run starts, the Microsoft lover has a choice to make: hold onto their beloved Microsoft stock, or sell now to buy back later at a lower price.

Because there is a reasonable expectation that there will be a significant increase in the supply of Microsoft stock on the market due to conversions from MicroBucks into Microsoft stock, there should be ample opportunity to buy back the Microsoft stock at a significantly lower price.

In such a circumstance, even the Microsoft lover is going to participate in the bank run. When even your biggest fans are obviously incentivized to participate in causing you pain, there is a serious design problem.

The system offers no incentive for those that believe in its long term value to stick around during the bank run, and instead makes the optimal strategy to participate in the bank run. YIKES!

Worse still, anyone that would otherwise be interested in buying the stock is not going to buy until the bank run ends. During the bank run, the size of the bid for the equity (i.e., the source of the value of Microbucks) evaporates entirely.

A negative feedback loop in which supply skyrockets and demand disappears brings the price to zero in a flash.

3. HARD PEG INSTEAD OF SOFT PEG

Despite the use of unscalable endogenous value and the lack of a bank run prevention mechanism, the kiss of death for Terra was its insistence on perfection. Even in instances where the system was experiencing a bank run, the protocol was willing to offer redemptions of 1 UST for $1 of LUNA.

If someone is participating in a bank run, they are typically willing to take a haircut on their value to leave the system in a timely fashion. Instead of letting people leave the system at a discount, Terra was designed to pay every person that left the full value of their holdings, up until there was no money left.

This created two outcomes for participants during a bank run: either be one of the first to leave and get the full value of your holdings out, or miss the boat entirely and be left with nothing.

Given these two outcomes and the lack of a bank run prevention mechanism, it is no surprise that the entire system collapsed within a week once the bank run started. It was foolish to not participate in the bank run.

CAUSE FOR HOPE

With a better understanding for why Terra collapsed the way it did, it is possible to see a path forward to creating a scalable network-native medium of exchange.

1. Credit is a scalable source of endogenous value with a positive feedback loop: the more the system repays its debt, the more creditworthy the system becomes, thereby enabling it to borrow at lower interest rates and support the issuance of more stablecoins in a progressively more sustainable fashion.

2. The Stalk System originally implemented by Beanstalk and now refined by Pinto has demonstrated efficacy at minimizing bank runs in practice by creating an opportunity cost for leaving and coming back later, and rewarding those who stay.

3. Low volatility money with a soft peg still offers significant utility and is radically more sustainable than a hard pegged stablecoin: if people want to leave the system at a discount, let them; in a tradeoff between perfection and resilience, live to fight another day.

In future posts I will expand on each of these elements individually.

-ben

See the original post here.

In its original whitepaper, Ethereum’s stated purpose was to serve as “a tool of distributed consensus”. Reality today is a far cry from this purpose. While the Ethereum community has been meticulous about designing the network to facilitate a maximally distributed validator set, we have neglected to ensure the distribution of an equally critical element – one which currently jeopardizes the network's sovereignty: its value source.

An overwhelmingly dominant portion of value on the Ethereum network is dependent on centralized stablecoins. Nobody likes to talk about it, but this is such a significant problem that two companies, Circle and Tether, actually control the state of the Ethereum network.

The Ethereum state secures $1.1T of value, of which only about 10% is issued by Circle or Tether. Yet, the utility of USDT and USDC as media of exchange is so great compared to decentralized equivalents (e.g., the OG DAI, Liquity) that the majority of the value of the Ethereum state is dependent on USDT and USDC for liquidity and, de facto, its value.

In practice, therefore, we are not in a position to declare victory. In the same way that the Ethereum community responded to the existential threat of competition at the network layer, we must address the existential threat posed by centralized stablecoin issuers.

With Ethereum solidifying ETH’s dominance over BTC as a store of value from a monetary policy perspective, the last advantage BTC has over ETH is that its value does not derive from fundamentally centralized economic activity.

The missing ingredient to actually distribute the Ethereum consensus and establish ETH as a dominant store of value over BTC is a scalable Ethereum network-native censorship resistant medium of exchange.

After almost 5 years working on solving this problem, there is now significant evidence that a credit based model for a low volatility currency can fulfill this need. Credit is infinitely scalable, plus can be permissionless and distributed.

Trying to create a low volatility money that can outcompete USDT and USDC is frightening for many: there is a graveyard full of previous attempts. The last crypto market bull run effectively ended when the largest attempt to date, Terra, suddenly failed. But given the danger facing the Ethereum network, we cannot sit idly by. Instead of throwing the baby out with the bath water, we must learn from past failures and continue to make progress.

It is still early, but @pintodotmoney is the frontier. If you believe in the vision of Ethereum, it is worth your time to check it out.

-ben

The Pod Marketplace allows the exchange of Pods, Pinto’s native debt asset. To understand how Pods are minted and why farmers may want to trade them, it is recommended that you are familiar with the Field, Pinto’s credit facility.

Read this article for reference: or visit the docs: https://docs.pinto.money/farm/field

Key Terms

• Pod: Represents debt the protocol owes to users. Each Pod is repayable 1:1 in Pinto. A Pod is represented by its place in the Pod Line.

• Pod Line: The queue of all Pinto the protocol owes to users, maintained in FIFO (First In First Out) order.

• Soil: The amount of Pinto the protocol is willing to be lent in a given Season.

• Temperature: The interest rate offered by the protocol for new loans. Fixed at time of Sow.

• Sow: Lending Pinto to the protocol in exchange for Pods.

• Plot: A group of consecutive Pods created by a single Sow action. Plots can be partially harvested or transferred.

• Harvest: Collecting repayment once Pods reach the front of the Pod Line.

Pod Market

The Pod Market is a peer-to-peer marketplace that allows Pods to be bought and sold in a trustless fashion without trading fees. The Pod Market creates liquidity for Pods through an onchain order book.

Sellers can list Pods or fill open Pod Orders placed by buyers.

Buyers can order Pods or fill open Pod Listings placed by sellers.

Pod Market Orderbook Types

Pod Listings

A Pod Listing is a sell order for a Plot of Pods at a given place in the Pod Line.

Each Pod Listing is characterized by the number of Pods for sale, the position of those Pods in the Pod Line (i.e. how early or late they are expected to harvest), and the listing price, which is defined as a price per Pod denominated in Pinto. The listing remains active until it is either filled by a matching Pod Order or it is canceled by the seller.

Sellers can list any subset of their Plots, and multiple Listings can be created from a single Plot. Importantly, only Pods that have not yet been harvested can be listed.

Pod Orders

A Pod Order is a buy order placed on the Pod Market. Buyers specify the maximum price per Pod they are willing to pay and the maximum place in line (i.e., how far out in the Pod Line they are willing to buy). If a matching Pod Listing exists that satisfies both conditions (price and place), the order is filled immediately or partially. The prices are, again, denominated in Pinto.

Orders that are not immediately filled remain open and can be filled later when matching Listings are created. This allows buyers to express demand for Pods even before a corresponding seller appears. Buyers can cancel their open Pod Orders at any time prior to fulfillment.

Creating the Pod Pricing Curve

One of the most intriguing aspects of Pinto is how Pods are priced. In traditional financial terms, Pods resemble zero-coupon bonds with an uncertain maturity date. However, unlike conventional assets, Pods are non-fungible and not traded on an AMM like Uniswap, making their valuation more complex.

Several key factors influence Pod pricing. The most significant is their position in the Pod Line, which determines how close they are to maturity. Other important variables include perceptions of Pinto’s creditworthiness and the comparative interest rate one could get by Sowing Pinto at the current Temperature.

The Pod Marketplace enables participants to express these views through buy and sell activity. Each transaction reflects expectations about risk, time to harvest, and overall trust in the system. As a result, Pod prices encode market sentiment and serve as a signal of perceived value.

Naturally, Pods that are further back in line tend to trade at lower prices, reflecting the longer time to maturity. This typically produces an exponential decay curve in pricing. However, this curve is not always smooth—market inefficiencies, liquidity constraints, and shifting expectations often lead to deviations from this idealized shape.

Relevant Links:

Pinto App: https://pinto.money/overview

X: https://x.com/pintodotmoney

Docs: https://docs.pinto.money/

Pinto has a $1 value target, but does not strictly adhere to it. The protocol embraces a degree of volatility in exchange for trustlessness, capital efficiency, scalability, and dramatically enhanced robustness under adverse conditions. In practice, this means that Pinto is prone to spending long stretches of time priced between $0 and $1. These periods below the price target open up opportunities for active users to establish a position that has outsized potential in the case where Pinto grows over the long term.

How Can these Openings Exist?

If you are discovering Pinto while it is below its price target you may come across openings that seem excessive — four digit Temperatures, double Seeds for Pinto deposits, a 40% discount on the token, or something else. It is reasonable to be skeptical of these numbers. The crux of all of these opportunities, and the reason they are not immediately taken by bots, is that they are a bet that the system will be able to successfully return to its value target and that the supply of Pinto will grow in the future. There are compelling reasons to believe this will be the case, but they are outside the scope of this article. For the purposes of this article, it is only necessary to know that this belief underpins many of the opportunities outlined below.

Strategies

Below are some ways a user can take advantage of Pinto being below its value target to set themselves up with an outsized position in the event of Pinto's success – in no particular order.

Sow in the Field

This is the most straight-forward way to take a bet on the future of Pinto. Generally, when Pinto is below its price target and confidence is wavering there will be insufficient demand for Soil in the Field, which translates to an increase in Temperature (interest paid on Sowing). The longer Pinto remains in this phase, the higher the Temperature will go, thus creating a larger opportunity for future yield. For example, a temperature of 500% will provide the user 6 Pods for every 1 Pinto Sown. Each Pod will then be redeemable for 1 Pinto when the token supply grows enough to pay off the existing Pod Line.

You can read more about how the Field works here.

Convert Existing Silo Deposits

Users who already have capital in the Pinto ecosystem via the Silo may be able to take advantage of the situation without deploying additional funds. Holders of LP deposits can convert their LP to Pinto without leaving the Silo. This allows the user to retain all of their Grown Stalk while also allowing them to capture more future value by increasing the Pinto Denominated Value of their deposit. In other words, it allows users to indirectly buy Pinto with their LP while Pinto is at a discount. Converting into Pinto while below the price target may also result in more sSeeds, which will generate more Stalk over time and result in more Pinto earned when next above the value target.

You can read more about the mechanisms underlying Converts here.

Deposit Into the Silo

Users looking to deploy new capital but who do not want to lock their value into the Field can instead deposit directly into the Silo. This strategy is not as exciting, and often has a smaller potential reward. However, it allows for value to stay liquid. Conservative players may want to deposit LP, which will accrue Stalk slower but will experience less volatility with the Pinto price. Opportunists may instead want to deposit Pinto directly, which will allow them to capture the full value increase when Pinto returns to its price target as well as a significantly larger amount of Stalk growth (as a result of Pinto being assigned more Seeds when below the target).

You can read more about how the Silo works here.

Hold sPinto

sPinto is an ERC20 wrapper around Pinto deposits in the Silo. Holding sPinto is similar to depositing Pinto in the Silo — it offers exposure to the future movements of the Pinto price as well a share of future Silo yield. It is slightly less efficient over a long time frame, however it has the added benefit of composability in the broader DeFi ecosystem, unlocking more complex strategies.

You can read more about how sPinto works here.

• Lock a Fixed APR via Spectra

sPinto has been integrated into a Spectra market. This allows users to take a position that will pay a fixed rate of Pinto until maturity of the Position, even when Pinto is below its value target and not generating native yield.

• Borrow against sPinto

The value underlying a user’s sPinto position can be used as collateral to borrow USDC or other assets. This allows a user to get exposure to Pinto upside and yield without locking all of their capital up in the bet. Users may be subject to liquidations based on fluctuations in the Pinto price and accrued interest.

• Leverage the Price and Yield

Although leverage is not recommended, as it carries an outsized risk of liquidation, it is possible by looping through the lending markets for sPinto. This allows a users to lever up their exposure to the price of Pinto returning to the value target as well as lever up the yield when Pinto supply grows. The supply of sPinto is capped to prevent excessive leverage.

The Future of the Game

Each time Pinto returns to its price target following a stretch of time below target, it improves its lindyness (i.e. its reliability). This decreases perceived risk and naturally translates to more users being willing to deploy these strategies, thus an increase in competition. In other words, one might expect that each cycle of the system will offer less dramatic entry opportunities below the value target and therefore less price volatility.

Get Started

Come seed the first Leviathan-free economy and hone your own strategy at https://pinto.money/.

Relevant Links:

Pinto App: https://pinto.money/overview

X: https://x.com/pintodotmoney

Docs: https://docs.pinto.money/

To really understand how sPinto works, one should be familiar with the Silo and its related terminology. See this article or visit the docs for reference.

Key Terms Refresh

• Stalk: An asset linked to Silo Deposits that represents user's proportional share of future Silo yield.

• Seeds: An asset linked to Silo Deposits that determines how quickly the Deposit's Stalk grows.

• Grown Stalk: Stalk linked to a deposit that has accumulated over time from Seeds. All Grown Stalk is lost upon Withdrawal of the linked deposit, creating an opportunity cost to exiting the system.

What is sPinto

sPinto, which is short for Siloed Pinto, is a yield bearing token that wraps Silo Deposits and enables composability across DeFi. This composability unlocks external utility for capital in the Pinto protocol.

When holding sPinto, users passively accrue value via the Silo from supply growth, without the need to actively manage their positions or understand the protocol’s complex mechanics. It is as simple as holding the token and using it like any other ERC20. Anything that is possible with WETH or SDAI is theoretically possible with sPinto -- granting users exposure to Pinto upside without having to lock away their capital.

How sPinto works

Holders of sPinto share a pool of Pinto Silo Deposits that underlie the value of sPinto. The summative value of all underlying Pinto Deposits determines the value of the sPinto token.

The underlying Deposits earn yield over time from their associated Stalk. Additionally, the Deposits within sPinto continually accumulate Grown Stalk from Seeds, allowing sPinto to increase its relative Stalk ownership and gain momentum over time.

When users unwrap, they receive a portion of the Pinto Deposits held by sPinto, determined as the ratio of amount of sPinto being unwrapped relative to total sPinto supply. The underlying value is fully held in Pinto and cannot decrease, making sPinto a non-rebasing, up-only token in Pinto terms. When unwrapping, users are always guaranteed to receive at least as much Pinto as they put in.

Earned Pinto is automatically claimed on each interaction with the sPinto contract. Claimed Pinto are linearly vested to sPinto holders over a period of time, currently set to 4 hours.

The pool of Deposits in sPinto follows a LIFO (Last In First Out) model in Grown Stalk terms — i.e., Deposits with the least Grown Stalk are withdrawn first when unwrapping sPinto. This allows valuable Deposits to keep accumulating Stalk for sPinto holders and enables sPinto to naturally improve its relative position in the Silo with more activity. It also means that if users unwrap directly to Deposits they will receive the Deposits with least Grown Stalk, which could result in a net Stalk loss for the user.

Composability

sPinto leverages the ERC-20 and ERC-4626 standards — the industry standard for onchain yield-bearing assets. You can use sPinto like any other token while earning yield in the process, allowing for composability with the DeFi ecosystem. This unlocks use cases such as borrowing against your position on lending protocols, leveraging, and speculating on future yield in yield tokenization protocols.

sPinto vs Silo

While sPinto is built for maximum composability, it requires users to give up some of the efficiency and direct control offered by the Silo.

A holder of sPinto has no fine-grained control over their Silo position. This prevents users from taking actions that would improve their position within the Pinto ecosystem relative to other participants.

There are many strategies that an active farmer may run in the Silo - Converting between Pinto and LPs during opportune times may yield an increase in Pinto denominated value; holding certain deposit assets may generate Stalk at a faster rate; different LP tokens may more accurately represent a user's desired exposure, and many more. However, when holding sPinto a user loses the ability to participate in these advanced strategies and optimize their holdings.

Furthermore, users do not own their Stalk gains. Whereas when participating directly in the Silo, a user grows Stalk over time, increasing their relative ownership of future yield, so a user who has been deposited for 12 months has a much better position than a new entrant. On the other hand, if the user was holding sPinto for 12 months, they would not have a stronger position than someone who has acquired sPinto an hour ago. Conversely, a new user may find that they will have a larger Stalk exposure per dollar by holding sPinto than they would with a new Deposit.

Current integrations

sPinto has already been integrated into some core protocols to provide users the standard functionality of tokens in DeFi.

Lending and Borrowing

When borrowing, you can put up your sPinto as collateral and in return get a loan denominated in another asset. This allows users to unlock the value underlying their Pinto position or to lever up on Silo exposure. It is possible to leverage the Silo by borrowing USDC, swapping the borrowed assets into Pinto, acquiring more sPinto, and looping. Note that there is a cap on sPinto to prevent excessive looping during growth cycles. It is also possible to borrow sPinto on Cream Finance with other assets as collateral.

sPinto lending and borrowing is live on Cream Finance here.

A guide on how to use sPinto in Cream can be found here.

Yield tokenization

When speculating on yield, you can essentially trade your sPinto yield in exchange for a fixed return or get leverage on sPinto yield at a set expiration date. This is currently facilitated by Spectra. You can read more on the Spectra integration here.

How to get started with sPinto

Users can wrap into sPinto now on the Pinto UI and unlock the potential of their capital.

Users can wrap with any whitelisted tokens including USDC, cbBTC and WETH on Base. In the backend, your assets will be swapped into Pinto and wrapped into sPinto.

Relevant Links:

Pinto App: https://pinto.money/overview

X: https://x.com/pintodotmoney

Docs: https://docs.pinto.money/

Let’s answer the universal question first.

Pinto is a low volatility money protocol designed to adapt to changes in demand by creating incentives that adjust its supply.

When the supply of the Pinto token grows, new Pinto is distributed to participants. This is often referred to as seignorage. The Supply of Pinto grows when Pinto trades above its value target of $1. This occurs when demand for Pinto is greater than the supply of Pinto.

97% of newly minted Pinto are distributed in equal parts to the Field, Pinto’s credit facility and the Silo, Pinto’s staking facility. 3% is reserved for the development budget, paid out until Pinto reaches 1 billion of total supply. The development budget is only contributed to if and when supply increases, ensuring maximum incentive alignment.

Pinto’s yield is protocol-native, with no reliance on external token incentives or off-chain mechanisms. Pinto has no outside investors or VC funding. Supply growth directly benefits protocol participants. As of the time of writing, Pinto has minted and distributed 17.8 million new tokens to its users.

Participate

To get started, note that Pinto is deployed on Base. You'll need an EVM-compatible wallet, some ETH for gas fees, and a supported token to use in the UI, such as USDC, ETH, WETH, cbETH, cbBTC or wrapped SOL (WSOL).

Field

The protocol allows users to lend Pinto to the protocol in exchange for fixed interest paid in first in, first out (FIFO) ordering. When users lend to the protocol, they receive Pods, Pinto’s debt asset. You can read more about the Field in a dedicated article here:
Tour of the Farm: Understanding the Field

Lending Pinto to the protocol in the Field is essentially a bet that the protocol will mint a certain number of Pinto as a result of demand. Although Pods resemble zero coupon bonds with an unknown payback period, unlike in traditional finance, they are not directly liquid. However, they are transferable and can be traded peer-to-peer for Pinto in the Pod Marketplace anytime.

Lend in the Field

To get started, head to the Field Page on the Pinto UI. https://pinto.money/field

• ‘Available Soil’ represents how much Pinto the protocol is willing to borrow.

• “Current Temperature” represents the interest rate at which the Pinto is borrowed. The current Temperature (interest rate) you will get is displayed on the top left chart.

• “Pod Line” represents the outstanding debt that needs to be paid back before you can redeem your Pods for Pinto and realize a gain

1. Connect your wallet by clicking the button on the top right.

2. Choose an asset to sow with and an amount. You can use any of the available assets in the dropdown menu. We will use USDC here.

3. Approve the USDC for spending and sign the transaction in your wallet

4. Observe the amount of Pods you are going to get for lending and their position in line. If you are happy with the outcome, go ahead and click on “Sow”.

In the backend, the UI will swap your assets for Pinto and Sow them in the Field, burning the Pinto for Pods.

5. If the transaction is successful, you will see a “Sow successful!” message appear at the bottom of the screen.

6. You can view your Pods at any time by clicking on “My Pods” in the Field Page or by visiting the Overview page of the app where you can see all your balances. You can trade your Pods in a peer-to-peer manner, in the Pod Marketplace: https://pinto.money/market/pods

When will I get paid back?

You can calculate the expected number of Pinto needed for the protocol to mint in order to get paid back at any time using this formula: PodLine / 0.48.

For example, suppose the interest rate (Temperature) offered by the protocol for lending is 50%. Lets also suppose that the total outstanding debt is 10 million Pods (Pod Line). A user lending 1000 Pinto to the protocol (Sow) will receive back 1500 Pods. The user will be able to redeem the Pods for Pinto (Harvest) again, when the Pinto protocol mints ~20.8 million new Pinto.

Note that Soil Supply can be limited, and at times of high demand there may be no soil available. You can automate the process of Sowing in the Field by signing an order with Tractor for automatic execution by clicking on the button below the sow.

Read more about Tractor and how to use it here: Start Your Tractors: Introducing the Soil Orderbook

Learn more about the Field here: Tour of the Farm: Understanding the Field

Key Terms for Field

• Pod: Represents debt the protocol owes to users. Each Pod is repayable 1:1 in Pinto. A Pod is represented by its place in the Pod Line.

• Pod Line: The queue of all Pinto the protocols owes to users, maintained in FIFO order.

• Soil: The amount of Pinto the protocol is willing to be lent in a given Season.

• Temperature: The fixed interest rate offered by the protocol for new loans.

• Sow: The user action of lending Pinto to the protocol in exchange for Pods.

• Harvest: Collecting repayment once Pods reach the front of the Pod Line.

Silo

The Silo is Pinto’s deposit and staking facility. Anyone can deposit Pinto directly or provide liquidity to receive LP tokens, which can then be staked in the Silo at any time. By doing so, users receive Stalk and Seeds and earn passive yield from future Pinto mints whenever Pinto trades above its $1 target. Stalk represents a user’s proportional claim to future Pinto supply growth. Seeds yield new Stalk every hour, meaning that Stalk increases over time. The more Stalk a user has, the more yield they receive. When a Deposit is withdrawn from the Silo, all Stalk and Seeds associated with the Deposit are forfeited and burned.

You can read more about the Silo in a dedicated article here: Tour of the Farm: Understanding the Silo

Unlike the Field, Silo yield and rewards can be claimed every hour, so it may be prudent to check on your positions periodically.

Note that a 2 hour period must pass from the time of a Deposit to the time the user starts receiving Silo yield. This is known as the Germination Period and prevents people from gaming the reward system.

Deposit in the Silo

To get started, head to the Silo Page on the Pinto UI. https://pinto.money/silo

The Silo supports several whitelisted assets. For this tutorial, we are going to add liquidity and stake PINTO:USDC LP tokens in the Silo.

1. Connect your wallet by clicking on the top right of the screen.

2. Choose the whitelisted token you wish to deposit into. We will click on PINTO:USDC LP.

3. Choose the token you wish to deposit into the pool on the dropdown in the top right. You can deposit with any of the available tokens in any pool. In the backend, the UI will swap your tokens for the token in the pool, add liquidity and deposit the LP tokens in the Silo.

4. Click on 'Deposit' and sign the transaction in your wallet. We will use ETH here so we don’t need to approve tokens. If you re using an ERC-20, you will need to approve it for spending first.

5. If successful, you should see a “Deposit Successful” message in the bottom of the screen and your Deposit should appear in the “My Deposits” tab.

6. You can see the value of your Deposits and claim yield and Stalk every hour in the overview page of the UI: https://pinto.money/overview

How much yield will I get?

Pinto yield depends on how much time Pinto spends above its value target of $1.

To calculate the yield of a Deposit, consider the following example: The total supply of Stalk in the Silo is 3,000. A user comes in and deposits in the Silo, when Pinto is trading at $1, receiving 2,000 Stalk in return. The total supply of Stalk in the Silo is now 5,000, with the user owning 2,000 Stalk, so 40% of the total supply.

After 2 hours, demand for Pinto pushes its price up to $1.1. Since the price is above the value target, the protocol mints 1,000 new Pinto and distributes 48% of them (so 480 pinto) to the Silo. Since the rewards are distributed based on Stalk ownership and the user currently holds 40% of total Stalk, the user will receive 0.4 * 480 = 192 new Pinto as yield.

If Pinto trades below $1, you will not receive new Pinto as yield but you will keep gaining Stalk, which will entitle you to more yield when Pinto trades above $1. Since withdrawing causes you to forfeit all Stalk earned over time in the Silo, it comes with an opportunity cost.

Learn more about the Silo here: Tour of the Farm: Understanding the Silo

Key Terms for Silo

• LP tokens: Tokens representing a users liquidity provision position in a Pinto Exchange pool.

• Stalk: An asset linked to Silo deposits that represents user's proportional share of future Silo yield.

• Seeds: An asset linked to Silo deposits that determines how quickly Stalk grows for the deposit.

• Germination Period: The 2 hour period from initial deposit to the time a given Deposit starts receiving Pinto Silo yield.

sPINTO

If you’re looking to get started with Pinto without actively managing your Silo deposits, you can acquire sPinto, the yield-bearing version of Pinto, here: https://pinto.money/wrap

sPinto provides exposure to Silo yield, though it’s slightly less efficient than a direct Silo deposit. However, it’s fully composable and can be used across DeFi integrations like any other yield-bearing token.

Get sPinto

1. Go to https://pinto.money/wrap and connect your wallet

2. Pick a token to deposit with from the dropdown menu. You can use any of the available tokens but we will use USDC here.

3. Choose an amount to deposit and click on “Approve” to approve tokens for spending. Note that there is a minimum threshold of 1 Pinto in USD when minting sPinto.

4. After a successful approval, click on “Wrap” to get sPinto.

5. You should see the new sPinto tokens in your wallet and on the balances page

How do I get yield from sPinto?

sPinto accrues value from Silo yield over time, making it an “up only” token when denominated in Pinto. You just hold it and earn. You can redeem sPinto for Pinto anytime from the same page in the Pinto UI.

You can also use sPinto in other DeFi protocols such as Cream Finance for lending or Spectra for Pinto yield speculation, with more integrations underway.

Read more about sPinto here: https://docs.pinto.money/appendix/spinto

Trade sPinto yield in Spectra guide: https://docs.pinto.money/spinto/trade-spinto-yield-on-spectra

Borrow against sPinto in Cream Finance guide: https://docs.pinto.money/spinto/borrow-against-spinto-on-cream-finance

Disclosures

Pinto is a heavily audited protocol. See the audits here: https://docs.pinto.money/resources/audits

Pinto is an experiment. Before interacting consider the risks https://docs.pinto.money/resources/disclosures

Other Relevant Links:

Pinto App: https://pinto.money/overview

X: https://x.com/pintodotmoney

Docs: https://docs.pinto.money/

Transacting in the EVM has historically been complex and time-consuming for most users. Only the small subset with the technical skills and resources to code smart contracts and spin up servers can execute sophisticated strategies at speed and scale.

Despite attempts to broaden access to automated strategies through open-source solutions, the cost of operating personal bots remains prohibitively high for average users. Furthermore, bots-as-a-service present significant adoption friction given the all-or-nothing nature of approval systems in existing token implementations. Users cannot easily specify precise conditions under which one's funds can be spent by the service, so significant verification or trust is required. This dynamic fails to adhere to leviathan-free principles like trustlessness while bearing significant economic costs on the system itself.

Built on top of the Pinto protocol, Tractor is a trustless, P2P tool that allows farmers to delegate specific actions without surrendering total control of their assets. Tractor empowers users beyond merely permissioning how many tokens a given party can spend on one's behalf to trustlessly specifying which actions said party can take. Pinto users thus gain unprecedented ease and strategic customization, accessing functionalities previously limited to those with significant technical expertise and capital.

Tractor's first use case makes every farmer a master of the Field. The Soil Orderbook allows farmers to submit Tractor orders to automatically sow from their deposits at desired conditions. The Soil Orderbook includes several key features:

• Setting a maximum place in line for Sowing;

• Choosing to execute during or after the conclusion of the Morning Auction;

• Specifying a minimum/maximum amount of Pinto to Sow per Season (allowing for gradual Sowing over time);

• Sow from specific Deposited assets or use various pre-built strategies–farmers can choose to Sow from Deposits with the lowest Seeds or the highest price;

• Setting operator fees for order execution.

In addition, the Field and Overview UI has been revamped to support this functionality, giving farmers visibility into Tractor activity in the field and highlighting which of their orders are executable within the next season. A transparent Tractor market will enable farmers to set their orders in response to real time conditions.

Dev Thoughts: Why Soil Orderbook First?

The Field functions optimally when farmers Sow as soon as the Temperature reaches a desirable level. Currently, this requires constant monitoring and action, which creates a high cost to play efficiently. With PI-6, which significantly decreased the availability of Soil (and ramps it up continuously over Seasons in which Soil is sold out), farmers wishing to sow more than the available Soil must return to the Farm each season, with no guarantee that someone else won’t Sow before them. This high friction has discouraged activity in the Field and in turn pushed the Temperature to unnecessary heights.

The Soil Orderbook drastically enhances the Field's efficiency by allowing farmers to predetermine ideal sowing conditions and desired sow amounts. This eliminates most of the friction associated with monitoring the system and executing Sowing actions, marking an unprecedented decrease in user friction that will also improve the fidelity of the data with regards to the parameterization of the Field.

What's Next? (Future Work)

The Soil Orderbook is designed with composable code to streamline the deployment of additional Tractor applications, including:

• Automated Conversions: Triggered at target prices or when the Convert mechanism grants certain Stalk bonuses or penalties;

• Enhanced Pod Marketplace: Enabling Orders through Deposits in addition to Pinto, or allowing dynamic listing prices as a function of place in the Podline;

• Deposit Marketplace: allowing users to buy and sell Deposits, facilitating price discovery for Stalk.

Future enhancements to the Soil Orderbook itself may include:

• Facilitating the purchase of Soil with non-Silo Deposit assets (e.g., ERC20 tokens).

• Including more strategies (e.g., use Deposits with the least Grown Stalk across all Silo Deposits)

• Introducing variable sowing amounts over seasons (e.g., scaling from 10 to 500 Pinto per season).

Possibilities are endless.

Tractor represents a transformation in the sophistication and ease with which humble farmers can tend to their crops, and does so in a trustless fashion. As automated strategies continue to evolve, the power in the hands of individual users and the overall efficiency of the ecosystem will only increase. The team is excited to see how existing and future participants will use this awesome tool on the Farm and to learn how the model can be refined as a result.

-frijo

22 April 2025

Learn with Us

Read the whitepaper - https://pinto.money/whitepaper

Join our community and ask questions - https://pinto.money/discord

Access the ecosystem and documentation - https://pinto.money

Connect with us on X - https://x.com/pintodotmoney

– Paulo Coelho, The Zahir

Historically, one of the biggest impediments to Pinto (and Bean) utility has been the excessive volatility in the yield earned for continuously holding Pinto. During growth cycles, the return from Silo Deposits can be tremendous (e.g., 3 or 4 figure APYs); during periods without any growth, the APY can be at or near 0 for months on end. Such volatility in yield greatly limits the number of market participants willing to hold Pinto for extended periods of time.

Now, for the first time, thanks to the integration of the sPinto yield-bearing ERC-20 wrapper for Pinto Deposits with Spectra’s yield swapping protocol, users that are comfortable with volatile yield that comes in unevenly distributed spurts can lever up on the volatile yield they receive and simultaneously create a new opportunity for other market participants to “lock in” a fixed yield.

This integration opens up the market of potential holders of Pinto tremendously, and is the beginning of a new chapter for the Pinto experiment.

How it Works

Spectra introduces the ability to split up sPinto into two tranches: (1) a fixed yield token, PT-sPinto, and (2) a variable yield token, YT-sPinto.

Principal Token

Principal Token (PT) allows users to earn a fixed yield (denominated in Pinto) for a predefined interval of time (i.e., until the pool closes). In the case of the initial sPinto Spectra integration, the pool will close 6 months after creation.

PT can be purchased at a discount to the Pinto Denominated Value (PDV) that can be redeemed at the time the pool closes for ownership of PT. Therefore, the cost of each PT at the time of purchase implies a fixed APY that will be earned over the term of the pool.

In practice, PT holders:

1. Redeem their PT for sPinto (not Pinto), based on the exchange rate between Pinto and sPinto;

2. Can redeem their PT for sPinto at anytime up until and even after the Spectra pool closes; and

3. Earn fixed yield continuously up until the pool closes or they redeem their PT for sPinto, and no yield thereafter.

Yield Token

Yield Token (YT) represents a variable yield token. In practice, YT ownership allows holders to access leverage on the yield being earned by sPinto by agreeing to pay a fixed yield to PT holders until the pool closes.

YT ownership allows holders to claim all remaining sPinto in the pool pro rata, based on YT ownership, after the requisite sPinto has been paid to PT holders after the duration of the pool elapses.

In practice, YT holders:

1. Redeem their YT for sPinto (not Pinto), based on the difference between the Pinto-denominated yield of sPinto and the fixed yield earned by PT during the duration of the pool;

2. Can redeem their YT for sPinto at anytime up until and even after the Spectra pool closes; and

3. Earn leverage on their sPinto yield continuously up until the pool closes or they redeem their YT for sPinto, and no leverage thereafter.

Fixed APY pricing

Any sPinto holder can simultaneously mint PT and YT, and then trade either side (for fixed or variable yield). Conversely, any holder of PT or YT can swap some of the PT or YT for the other in order to redeem sPinto from the pool. In both instances, the UX makes it feel as though users are swapping sPinto for PT or YT directly, and vice versa.

The fixed yield received for purchasing PT is determined by (1) the cost of the PT in Pinto relative to the number of Pinto that the PT will be redeemed for upon pool closure, and (2) the duration of the pool. The cost of the PT in sPinto, and therefore the fixed APY received, is a function of the Pinto:sPinto exchange rate, sPinto:PT-sPinto invariant and relative demand for PT and YT tokens.

Increased demand for PT relative to YT decreases PT supply in the Spectra pool, increasing its price and decreasing the fixed APY. Conversely, increased demand for YT relative to PT increases PT supply in the Spectra pool, decreasing its price and increasing the fixed APY.

What it Means

The Spectra sPinto integration marks a new chapter in utility for Pinto and lays the groundwork for additional future utility.

Instant Utility

For the first time, there is a market price for expected yield from Pinto over a period of time.

Anyone expecting lower Pinto yields is incentivized to acquire PT. Anyone expecting more is incentivized to acquire YT. This allows the market to determine the expected future yield from Pinto exposure.

The ability to swap fixed and variable rates creates a whole new dimension of utility for Pinto holders. In addition to Pinto price exposure + Pinto variable yield, users can now choose:

1. Pinto price exposure + fixed Pinto yield; or

2. Pinto price exposure + leveraged variable Pinto yield.

Future Utility

The market price for fixed Pinto yield plots the first ever point on the Pinto yield curve, which shows market expectations of yield from holding Pinto over time, with time on the x axis and yield on the y axis. In practice, the date the pool expires is the x coordinate and Spectra PT fixed yield implied by the pool is the y coordinate.

In the future, additional Spectra sPinto pools can be created to plot additional points on the Pinto yield curve. A yield curve set by market expectations will serve as a tremendous datapoint for Pinto users to plan around for the future. The launch of the initial Spectra sPinto pool marks a pivotal step towards a Pinto-enabled Leviathan-free economy.

– ben weintraub

18 March 2025

Links

• Access the market on the Spectra UI.

• How to use sPinto on Spectra: https://docs.pinto.money/spinto/trade-spinto-yield-on-spectra

• How to use sPinto: https://docs.pinto.money/spinto/wrap-unwrap-spinto

The soft overcomes the hard; the gentle overcomes the rigid. Everyone knows that is true, but few can put it into practice.

Therefore the Master remains serene in the midst of sorrow. Evil cannot enter his heart. Because he has given up helping, he is people’s greatest help.

True words seem paradoxical.”

— Lao-tzu, Tao te Ching, Verse 78

An Existential Threat

“Whatever can happen, will happen.”

— Murphy’s Law, 20th Century Proverb

Quality money empowers individuals and communities. By leveraging the power of a censorship resistant, verifiable, permissionless, globally distributed computer network, BTC has found clear product market fit as the best store of value. However, there has yet to be a comparable success with respect to media of exchange.

Stablecoins promise to serve as reliable media of exchange in the crypto economy. However, leading stablecoins suffer from a centralization flaw that not only limits their utility, but creates an existential threat to the integrity of the computer networks they are used on.

Because (1) the centralized operators of leading stablecoins (e.g., Circle, Tether) dictate the canonical state of networks where the majority of network-native value depends on said stablecoin (i.e., every existing censorship resistant compute network but Bitcoin) and (2) companies are subject to governments, the canonical state is ultimately subject to governments rather than stakers or miners.

This reality is a far cry from the goal to create truly censorship resistant, verifiable, permissionless, globally distributed computer networks.

Nonetheless, the demand for quality media of exchange is so great that stablecoins are the crypto asset class that has found foremost product market fit after BTC. While stablecoins make up only 6% of the crypto market cap, 77% of the aggregate crypto trading volume is at least one side stablecoin. The need for a quality censorship resistant, verifiable and permissionless network-native medium of exchange has never been greater.

Between a Rock and a Hard Place

“Revolution rock, it is a brand new rock”

―The Clash, London Calling, 1979

To date, all attempts to create a censorship resistant network-native medium of exchange with competitive carrying costs to centralized stablecoins have failed due to either (1) excessive carrying costs due to collateral requirements or (2) excessive volatility due to insufficient collateral requirements.

On the one hand, locking up collateral to mint stablecoins realizes incredible opportunity cost which ultimately manifests in high carrying costs. Censorship resistant collateralized stablecoins are unable to compete with centralized stablecoins on carrying costs because there isn’t sufficient quality censorship resistant collateral. Excessive carrying costs for censorship resistant stablecoins compared with centralized stablecoins lead to wider spreads and higher borrowing costs*.*

On the other hand, the highly reflexive nature of under-collateralized stablecoins has resulted in fatal excess volatility in almost every implementation to date. Most attempts at under-collateralized stablecoins have experienced a bank run and collapse to ~$0 within months.

There have been 2 notable exceptions, neither of which attempts to maintain a hard peg (i.e., perfect stability) or uses any collateral.

Ampleforth is a rebasing stablecoin that has successfully achieved consistent peg crosses over the course of 5+ years. However, the rebasing nature of the system limits the utility of the currency as money. When below peg, tokens are removed from people’s wallets in order to repeg the stablecoin. While this technique has demonstrated efficacy at regularly crossing the stablecoin price over its peg, it creates a horrible user experience for savers and borrowers alike.

Beanstalk is a credit based stablecoin protocol that similarly issues dividends to depositors when above peg. But, instead of forcibly rebasing when below peg, Beanstalk incentivizes individual holders to voluntarily burn their stablecoins (i.e., Beans) for an IOU for more Beans under certain conditions in the future (i.e., Pods). While Beanstalk has experienced extended periods below peg, it is the only other non-collateralized stablecoin model that hasn’t crashed to $0 due to a bank run.

A Seed of Hope

“So you’re telling me there’s a chance”

— Lloyd Christmas, Dumb and Dumber, 1994

Credit is king.

Beyond creating a better experience for stablecoin users, credit presents the only viable option for network-native value with anti-reflexive properties and the potential for infinite scale. The more debt a borrower repays, the more creditworthy the borrower is viewed. Increased creditworthiness enables borrowing more at lower interest rates.

An autonomous agent native to censorship resistant, verifiable, permissionless, globally distributed computer networks and optimized to create credit has the potential to issue a censorship resistant network-native medium of exchange with competitive volatility and carrying costs to centralized stablecoins.

In the 3 weeks prior to its hack in April 2022, Beanstalk began the first ever deleveraging of an autonomous agent. Even after being hacked for every dollar, Beanstalk’s credit history enabled it to borrow an additional $17m of value to recapitalize and restart itself.

Nobody knows what would have happened had Beanstalk not been hacked, but given the efficacy demonstrated by the model both before and after being hacked, there are very good reasons to find out.

A Data Problem

“Beanstalk is likely being Replanted with a ridiculously high Pod Rate in the worst a) macro environment in at least a decade, b) crypto market in years, c) stablecoin market of all time, and d) endogenous circumstances possible, as a result of the attack. This presents an incredible opportunity for the model to demonstrate its efficacy. We will all know very quickly if it is working or not.”

— Publius, Thoughts Before the Barn Raise, June 5, 2022

While the plan to restart Beanstalk in incredibly adverse conditions did lead to high quality data, it did not ultimately indicate whether the model is “working” or not, nor did it best set Beanstalk up for success.

The Stalk System of the Silo has kept Beanstalk alive over extended periods below peg by preventing and limiting the extent of bank runs. Clearly, the deficiencies in Beanstalk lie in (1) its inability to attract creditors in its credit facility (i.e., the Field) and (2) incentivize Conversions within the Silo to repeg the Bean price.

The dutch action mechanism theoretically improved the efficacy of the Field to near perfection, but has not been used despite being live for 18 months. The exploit and ensuing terms under which Beanstalk restarted have left it in so much debt it cannot attract creditors at any rate.

Similarly, the Seed Gauge System overhauled the peg maintenance mechanism by creating tools for Beanstalk to autonomously optimize some of the parameters in the Silo to incentivize particular Conversions, yet it has barely been used in its 6 month life. Beanstalk cannot currently incentivize Conversions because of certain improperly fixed parameters and a lack of an active user base.

Without users, the theoretical efficacy of the model doesn’t matter. Without data, it is impossible to gauge its practical efficacy and improve it accordingly.

Pinto

“I got a fever, and the only prescription is more cowbell.”

— Will Ferrell as Gene Frenkle, SNL, April 8, 2000

Today, we are proud to announce the launch of the first ever Beanstalk fork — Pinto: censorship resistant low volatility money.

Pinto implements all the latest features of Beanstalk, Basin, Multi-Flow Pump, Pipeline and Tractor (i.e., the entire Beanstalk ecosystem code base) and restructures the original Beanstalk debt to give the Beanstalk model a clean shot at success and failure.

We expect Pinto to generate a significant amount of new data that can be used to further refine the Beanstalk model and ultimately create a censorship resistant medium of exchange that outcompetes centralized stablecoins.

Why low volatility?

“Everything flows, nothing stands still.”

— Heraclitus

The term stablecoin gives people the wrong idea. Whereas sufficiently collateralized stablecoins are in fact stable coins, they are not money. Money has endogenous value. Money is volatile in nature. Our goal is to create money with endogenous value because of its censorship resistance, capital efficiency and low volatility.

Beanstalk was never intended to create perfect stability. The stablecoin trilemma clearly states that censorship resistance and capital efficiency (i.e., low carrying costs) come at the cost of ideal price stability. However, there is certainly some sufficiently low level of volatility below which a censorship resistant money with competitive carrying costs would compete with centralized stablecoins.

Stablecoin out. Low volatility money in.

Why Fork?

Two gunslingers walked out in the street // And one said, “I don’t want to fight no more” //

And the other gunslinger thought about it // And he said, “Yeah, what are we fighting for?”

— Tom Petty, Into the Great Wide Open, 1991

While censorship resistant low volatility money is likely to be a winner take most asset class (i.e., just like censorship resistant store of value, a la BTC), at such an early stage in the development of the asset class, multiple competing versions can be symbiotic.

Beanstalk clearly could benefit from a debt restructure. Doing so requires either (A) proposing a debt restructure to the DAO that would force the restructure on everyone, including those that did not vote for it, or (B) deploying a fork that restructures the debt without imposing the restructure on anyone.

Forking enables every debt holder in the old version of Beanstalk to retain the entirety of their position in Beanstalk and receive an airdrop for additional debt from Pinto.

A true win win, Pinto demonstrates the potential for a healthy and sustainable model for forking the Beanstalk codebase by enabling low friction and permissionless development while honoring prior versions’ debts and without imposing on any participant.

Securing Pinto

“Fool me once, shame on you; fool me twice, shame on me.”

— 17th Century Proverb

There are two and three separate and independent systems within and without Pinto, respectively, that have been or will be put in place to minimize the risk of another hack.

No Governance

Using a fork-based model for upgrades instead of on-chain governance removes the need to vote on upgrading the system. By removing the ability to upgrade Pinto via vote, there is no longer the potential for governance vulnerabilities like the one that was exploited to hack Beanstalk.

While in its early days Pinto will remain upgradable by a multisig under explicit conditions, the intention is to remove upgradability altogether as soon as is prudent.

Beanstalk 3: Secure Beanstalk

This year, the entire Beanstalk codebase was restructured with a prioritization on loss prevention and minimization over gas efficiency. In the past, a significant amount of complexity was added to the code in the interest of lowering Farmers’ gas costs to make Beanstalk more accessible. However, this complexity also introduced a significant amount of bugs and, with them, costs via bug bounty programs.

Pinto uses the Secure Beanstalk implementation to minimize the risk of losing funds due to bugs and is deployed on the Base L2 network to minimize fees despite the less gas efficient implementation. Because it is on an optimistic rollup that uses Ethereum mainnet as the base sequencer, Beanstalk gets the low latency and costs of an L2 with the censorship resistance and security of the L1.

Bug Bounty

Beanstalk has had an Immunefi bug bounty covering the Secure Beanstalk codebase with a maximum bounty of 1.1M Beans live for almost 2 months. Although no guarantee, the lack of substantive bug reports since Secure Beanstalk was deployed is very a strong indicator the codebase is secure.

The vast majority of the Pinto codebase is identical to Beanstalk, so Pinto effectively inherits security from the Beanstalk Immunefi bug bounty program. Additionally, a Pinto bug bounty program will be created once the Pinto supply passes 10M for the first time, with one-off mints to fund the program according to the schedule outlined here.

Audit Competitions

In our experience, public audit competitions are among the highest efficacy ways to discover bugs because of the number of eyes looking at the code simultaneously.

Beanstalk, and thus Pinto, have been heavily audited via various audit competitions. Additionally, we intend to run Pinto-specific audit competitions of the entire codebase once there are enough funds in the development budget.

Real-Time Monitoring and Defense

A critical component of a robust security stack is a real-time production monitoring and defense solution. Once there are sufficient funds in the development budget, we intend to setup Hypernative support similar to Beanstalk’s (or use another competitive solution) for Pinto.

No Governance

“The only freedom which deserves the name is that of pursuing our own good in our own way, so long as we do not attempt to deprive others of theirs or impede their efforts to obtain it.”

— J. S. Mill, On Liberty, 1859

Pinto does not have governance. While Pinto is the first Beanstalk fork, additional development must be completed in order to create a generalized fork system that replaces the need for contract upgrades. In the meantime, limited upgrades to Pinto may be implemented by the Pinto Contract Multisig (PCM), the owner of the Pinto contract.

The PCM will only make changes to Pinto that:

• Fix bugs or security vulnerabilities (including dewhitelisting an LP token for which the non-Pinto asset has collapsed);

• Change parameters until 2 weeks after the first time the Pinto supply reaches 500M (e.g., Target Seasons to Catch Up, Pod Rate and L2SR thresholds, Deposit Whitelist, optimal LP BDV distribution, etc.);

• Mint Pinto to fund a bug bounty program according to the schedule outlined here;

• Add a Shipment that pays back old Beanstalk holders after the Pinto supply reaches 1 billion (see details here); or

• Implement a Fork Migration System.

What About Beanstalk Holders?

“Nemo Resideo [No one left behind]”

— Ancient Roman Military Principle

Pinto will be upgraded to issue assets to holders of Beanstalk debt based on a snapshot of the state of Beanstalk at the time of Pinto deployment. After a supply of 1B Pinto, 3% of mints will go to paying back old Beanstalk debt holders as follows:

• Fertilizer holders will receive ERC-1155 tokens similar to the existing Fertilizer tokens;

• Unripe Bean holders will receive an asset representing a recapitalized Unripe asset (Ripening Pinto) at a rate of 1 Ripening Pinto per Unripe Bean;

• Unripe LP holders will receive an amount of Ripening Pinto based on the Bean Denominated Value of Unripe LP if Beanstalk were fully recapitalized at the time of snapshot; and

• Pod holders will receive Pods in a separate Beanstalk Pod Line.

(1) Active Fertilizer holders, (2) Ripening Pinto holders and (3) Pod holders in this separate Beanstalk Pod Line each receive 1/3 of Pinto mints allocated to paying back old Beanstalk holders (i.e., 1% of mints).

If there is no Active Fertilizer, Ripening Pinto holders and Beanstalk Pod holders each receive 1/2 of Pinto mints allocated to paying back old Beanstalk holders (i.e., 1.5% of mints).

If there are neither Active Fertilizer nor Ripening Pinto, Beanstalk Pod holders receive 100% of the Pinto mints allocated to paying back old Beanstalk holders (i.e., 3% of mints).

If there is no longer any outstanding Active Fertilizer, Ripening Pinto nor Beanstalk Pods, the 3% of mints allocated to honoring Beanstalk debt will be distributed to Pinto participants under its normal model.

Pinto is not allocating any mints for Beans or liquid LP tokens held by Beanstalk the time of the snapshot.

A Healthy Environment to Experiment

“I know it when I see it.”

— Chief Justice Potter Stewart on Non-substantive Trolling, 1964

The Pinto experiment will benefit tremendously from constructive public discourse.

As a group participating in an attempt to create censorship resistant money, the Pinto community should value free expression. At the same time, the Beanstalk community learned the hard way that blindly upholding censorship resistance at all costs, particularly in a pseudonymous environment, has major drawbacks. Angry community members who refuse to engage substantively have pushed out the genuinely interested and curious.

In order to create an environment where people actually want to express themselves, the Pinto Discord will not tolerate non-substantive trolling.

Men Wanted for Hazardous Journey

“Small wages, bitter cold, long months of complete darkness, constant danger, safe return doubtful. Honour and recognition in case of success.”

— Sir Earnest Shackleton, Advertisement for the Endurance Expedition, 1913

Thus begins the next chapter in the Beanstalk experiment. A frightening journey lies ahead.

But a future without censorship resistant low volatility money is even scarier.

- 20 Nov 2024