How Polygon DAO Can Outmaneuver Other Chains With Their veDYST From Dystopia

vLabs
4 min readJun 3, 2022

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Dystopia is a novel ve(3,3) dex on Polygon which has improved both protocol and technical mechanics to create the greatest ve(3,3) dex possible. Apart from fixing every known and also several unknown bugs that existed in the original Solidly codebase, the brilliant team behind Dystopia has also added new features like an analytics page and also an inbuilt router which would make it compatible with dex aggregators like 1inch, Paraswap, Bogged Finance and more.

This will ensure that the Polygon community gets the best deals on stablecoin and blue chip swaps as they can all be routed via Dystopia. The TVL on Dystopia has also seen tremendous organic growth fueled by the Polygon community and partner dAPPs to create the first successful community owned dex in the DeFi space.

Tokenomics

Unlike Solidly, which vampire attacked all chains to encourage dAPPs to battle it out on Defillama for TVL, Dystopia opted for a different approach to the distribution. The former had several consequences which led to a divide in the FTM ecosystem, as several of the original Fantom native dAPPs, like Liquiddriver and Spiritswap, were edged out and did not get their fair share of the initial drop. This lead to the creation of cartels like veDAO and 0xDAO to fight for power over Solidly, as the tokenomics were designed in a way that prevented dilution of veSOLID holders.

To avoid making the same mistakes as Solidly, Dystopia opted for a very unique and almost communist like approach with their tokenomics:

  1. 11% of the initial veDYST supply was given to the PolygonDAO which would serve as a guardian to Dystopia and ensure that the best performing pairs are always voted for
  2. 4% of the supply was given to genesis liquidity stablecoin providers
  3. 5% of the remaining token supply was equally distributed to 26 dAPPs that qualified for Polygon Liquidity Mining 2.0, excluding dexes.

PolygonDAO’s Dystopia NFTs

The PolygonDAO was given the veDYST NFT due to Dystopia’s long-term vision of serving the Polygon community, as the DAO would always act in the best interest of the community and Dystopia users.

As mentioned earlier, the DAO would only vote for the best performing pairs and would vote-lock all additional DYST acquired for eternity. Apart from this, the entire trading fees earned by the DAO NFT was pledged to be distributed back to the Polygon community in the form of grants to native DeFi projects.

We at vLABS are big advocates of Dystopia’s community first approach and wish to make a proposal for the utilisation of the Dystopia trading fees earned by PolygonDAO.

Phase 1 — Decentralised Community Moderation

Phase 1 would start after the DAO achieves a balance of $10,000 in trading fees.

The first step would be to get paid community moderators for Discord and other social media. All those with a minimum Discord score would be eligible to apply to be a moderator and once selected would have a fixed contract of 6 months, after which they can stand for re-election if they wish.

The genesis moderators could also be official moderators of any of the 26 dAPPs that received the veNFT from Dystopia. A minimum of $10,000 is ideal in order to be able to pay the salaries of the moderators.

Phase 2 — Grants to Incubate New Polygon Native DeFi Projects

Phase 2 would start after the DAO achieves a balance of $50,000 in trading fees. Once a minimum balance of $50,000 has been achieved, a grant programme of the PolygonDAO can commence.

Phase 2 is further divided into two parts:

Phase 2.A. — Grants Phase 1

Capital Efficiency

A decentralised grant process will take time and in order to achieve capital efficiency, the DAO can redirect unutilised trading fees back into Dystopia by providing liquidity. This would not only help the DAO earn more income for grants but it would also ensure a permanent layer of sticky liquidity in Dystopia that is owned by the community and for the community. Any DYST rewards received as a result of providing liquidity would always be locked for eternity.

Once a dAPP raises a request on Snapshot, there would be a soft vote for a period of 1 week in the Dystopia Discord where the community members and DAO can cross examine and air out all their relevant doubts. If the general consensus is positive, a Snapshot vote would follow.

In Phase 2A, 50% of the voting power for grants would reside with the DAO and 50% would be with the veDYST holders which comprises of the Polygon community and the initial 26 partner dAPPs.

Phase 2.B.

In Phase 2B, veDYST holders can propose additional members who would form part of a Grants Committee and would help further decentralise the influence of the DAO to vote for grants. The committee members would be the face of the DAO and would be responsible for the day to day operations of Dystopia. The committee members would have a tenure of 1 year after which there would be a re-election.

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