wPOKT: Supercharging the Pocket Network
The Pocket core team proposes to launch a wrapped POKT (wPOKT); a fully collateralized wrapped representation of the Pocket token (POKT) based on the Pocket Network blockchain with swapability to Ethereum as an ERC-20 token. Goals are as follows:
- Accelerate Ethereum developer usage in Pocket Network
- Provide an incentive for Ethereum enthusiasts to get involved in Pocket Network
- Plant the foundation for a sustainable infrastructure market
An Ethereum bridge with a wrapped POKT (wPOKT) token creates an opportunity to build a virtuous growth cycle for Pocket Network. wPOKT would tap into Ethereum’s composable DeFi ecosystem, bringing greater liquidity to POKT while simultaneously funding a free tier for Apps.
Wrapped POKT is backed 1:1 by POKT on the Pocket blockchain and held at a custodian (e.g. Copper) where the underlying holdings are verifiable. All wPOKT issued will be fully backed and verified through on-chain proof of reserves. A custodian, such as Copper, will provably hold and secure POKT while the Pocket Foundation will mint and burn wPOKT.
The minting or burning process for wPOKT will occur when a wPOKT is created by depositing POKT in a POKT Multisig controlled by three elected and trusted Signers. This will trigger the process for the minting of wPOKT which will be deposited into a depositor specified Ethereum address. The equivalent POKT will be held in the POKT Multisig until the wPOKT is redeemed. At which time the wPOKT will be burnt and the POKT will be transferred to a specified Pocket address.
To encourage the staking of POKT on Pocket Network, users will be able to freely exchange wPOKT for POKT. Existing holders, such as node runners on Pocket Network, may want to exchange POKT for wPOKT to swap to ETH to participate in the Ethereum ecosystem.
Data Farming: A Virtuous Cycle
This implementation, called Data Farming, would allow Ethereum users to stake for infrastructure on behalf of their favorite Ethereum applications (Apps) to earn rewards. The staking performs two functions for Pocket: 1) it provides Apps with a mechanism to crowdsource free infrastructure from their users through network-specific pools and 2) drives liquidity to wPOKT and subsequently POKT through proven liquidity farming mechanisms. As Ethereum grow their usage of Pocket, a virtuous cycle of demand for POKT and wPOKT is created that provides a compounded and synergetic reward.
This means there are now two opportunities for capital providers to profit from supporting Pocket Network’s economy: stake POKT tokens as a Node Runner in the native Pocket Network – earning staking rewards, serving relays to Apps, and securing the network – or stake wPOKT as a “Data Farmer” – earning farming rewards, subsidizing relays for Apps, and liquidizing the network. This creates a virtuous cycle that provides a compounded and synergic reward.
A smart contract will be created that enables wPOKT holders to stake in a pool of Ethereum applications thereby granting a corresponding number of RPC requests for the pool on Pocket Network. Rewards for staking, provided by the Pocket DAO, will be granted to Data Farmers in proportion to the number of wPOKT staked and the duration of their stake.
This unique reward system incentivizes stakers to lobby applications to switch to Pocket Network and stake with applications that will benefit from Pocket’s technology. To encourage long-term staking and to reward those who identify, stake, and commit to promising sources of relays, we have factored in time weighting. Simply put: The earlier you identify and stake on sources of relays, the more yield a farmer will get for their stake.
The initial distribution of wPOKT, also funded by the Pocket DAO, will be made available through an Automated Market Maker, such as Uniswap. Alternatively, Data Farmers may acquire wPOKT through the wPOKT/POKT bridge by swapping existing POKT into wPOKT.
We’ll be posting the full whitepaper shortly for your feedback.
P.S. Thanks to Jack, Alberto, Luis, Michael, and all the others who helped spec out the wPOKT program so far. We hope to have many other community members to add to this list!