Skip to content

Incentive Design & Token Utility

Glossary

Stability fee - a reward for Network Keepers for staking in favor of "honest" Guilds (which members repay debts properly). This reward is charged as part of the interest rate of a loan.

Penalty fee - a penalty, applied in situation of default on debt of at least one Guild member to the stakes in her favor. It means, that all stakes are equally penalized for a certain percentage of tokens for every default even.

Infra-network interest rate - the maximum value of interest rate magnitude that can be applied to a loan.

Governance fee - the percentage of a debt, that is required to be paid in AKRO tokens which are burned after that. Similar to MKR in MakerDAO.

Staking - a process of placing AKRO tokens as a risky deposit (or skin in the game) to special smart contract with purpose to perform “selection” of honest Guild by collective appraisement. If Guild members repay debt properly, the person who made a stake receive a reward in form of stability fee and (in some cases) additional reward in AKRO tokens.

Token Type Network token
Token Use Governance and Work Token
Comparable token models MakerDAO (We are using similar governance approach), Livepeer (We don’t have token inflation as in Livepeer, but we have similar mechanics to delegated stakes in favor of network actors to allow them to perform actions in the network. Our actors are rewarded in AKRO additionally for their staking activity from the Growth Fund)
Value creation and value capture Curated supply of community-vetted borrowers and incentivized external lenders balance out by network keepers who are incentivized to maintain sustainable network growth. Network adoption is driven by lack of adequate banking alternatives; adoption will drive demand for the network token, whilst staking and burning reduces its supply.

Token type: what utility does the token provide?

Using OutlierVentures classification, Akropolis token can be classified as Network Token, combining the Work and Governance functionality. It provides the right to contribute work to a network and participate in the governance process. Its utility is derived from the decentralized coordination of token holders, e.g. Augur (REP), MakerDAO (MKR), Numeraire (NMR), Livepeer (LPT). We modeled our token with reference to MKR and LPT in particular as the network objectives are highly comparable.

Role and purpose: what is the role of the token?

Our token is classified as a Network Token, combining the Work token and Governance functionality. It provides functionality within the Akropolis network, and can be used to control access to liquidity, provide governance functionality, and/or contribute capital to the network.

As such, the token is an essential element of the internal economy and cannot be replaced by an external stablecoin as token stakes and governance approach required to be managed only by using a token, which value is connected to the current network and not tied to other projects/networks.

To perform Community Staking and execute a Governance process we cannot use other tokens. Other examples of network tokens are those of Ocean Protocol, Fetch, and Ethereum.

The loans will be provided in known and reliable stablecoins, which will be further used to repay such loans and interest. AKRO will not be used for this purpose.

Underlying value: what is the value of the token tied to?

The value of the Akropolis token is tied to the key interactions between network participants, possibility to receive a profit by providing work for the network and to participate in the governance process. It should be noted that the token holder does not receive any profits by simply holding the token. The value is exchanged over the network, similarly to Ethereum, Ocean, and Fetch.

Akropolis token does not grant the right to receive any profits, income, payments, returns, dividends from Akropolis or any entity from its group of companies, nor is it intended to be a security, commodity, bond, debt instrument or any kind of financial instrument or investment carrying equivalent rights.

Value Proposition: How value is created and captured?

The network’s raison-d’etre is to create value for its participants where none existed before and to either (a) meet a current need, or (b) enable a novel prior inconceivable or impossible value-accretive functionality. Our value proposition addresses existing challenges to growth and scalability of AFOs and offers novel ways of interaction, governance and value exchange. Thus, the Network’s benefits to users and tokenholders are:

  • Substantial cost reduction, ease of set-up and low cost of maintenance;

  • Reduction of perceived and real transactional risks;

  • Network growth in terms of volume of transactions parsed through it and number of users;

  • Scalability across geographies.

Token Functionality and Use by Stakeholder Type

Token functionality and use is modeled using Livepeer and MakerDAO frameworks and is designed to ensure that all participants, acting in their own self-interests are motivated to (a) maximize the value captured through and by the network; and (b) maintain sustainable network growth. Please note that a party may combine roles for a greater impact within the network.

Economic Objectives How does a token help them achieve it?
AFO (Borrowers and their associations (Guilds)
  • Secure access to well-priced easily available credit
  • Maximize availability of credit and minimize its price
  • Maximize duration/term of the credit lines
  • Referral incentives: Incentivised to grow the network through referring other AFOs (or encouraging other AFOs to be moved/set up on our network), as the greater the volume of successfully repaid credit, the greater the reputational value of the system and the lower the cost of credit;
  • Ability to attract a greater volume of credit in proportional to the overall volume of value captured by the system, which is maximized through growth in a number of AFOs and in their own size. This is important as fractional-reserve banking approach is not available or applicable to non-bank AFOs.
  • The above increases the volume of staken tokens, thus reducing the token circulating supply
  • Network Keepers
  • Profit-seeking agents rewarded for correct risk assessment by receiving a network stability fee
  • Maximize stability fee
  • Earn additional rewards in tokens from Growth Fund if possible
  • Staking and governance function is enabled by holding the token which provides both an incentive and a skin in the game to facilitate sustainable network growth.
  • Network keepers act as underwriters of the Guilds (associations of AFOs) default risk. They are being rewarded for correct default risk prediction through a % of the Capital Provider income in respect of that Guild and in some cases - additional rewards (AKRO tokens from Growth Fund)
  • Their stake is partially burnt if the Guild member defaults on debt
  • Incentivized to create a public, data-rich rep or credit scoring system to maximize their return, which can only be done through network growth
  • Capital Providers (Lender)
  • To grant a loans with the best risk/profit ratio
  • To be protected from AFO’s fraud and defaults on debts by network mechanisms
  • The token staking approach creates a collective scoring system that helps Capital Providers to make correct decisions and decreases credit risk
  • The governance approach allows Capital Providers to affect the network variables, that are decisive to their profit (such as stability fee and intra-network rate(analogous to the well-known LIBOR)
  • How this token model will work in the real world?

    AKRO staking (the Community trust mechanism)

    The Network Keepers are staking their tokens in favor of Guilds, that are appraised as reliable by them. This appraisement can be based both on on-chain and off-chain data. Guild is an association of AFOs, that has own governance and policy. The aim of the Guild is to select trustworthy and reliable members, and as more reputable is Guild, the more stakes (and as a consequence - the capital) it can attract from the Network Keepers and Capital Providers, respectively. The Guilds in our view are close to a Chamber of Commerce or in some cases a Self-Regulated Organizations, that both have a historical approval of success and now are widely used in countries such as Switzerland and Germany.

    As access to liquidity, granted by Capital Providers, requires the stake in favor of a Guild, the Guild is interested to select only trustworthy and honest AFO for membership from one side and has the incentive to force debt repayment by members from other. By applying these mechanics in the network, the Capital Providers have a decreased credit risk and protected from the frauds and dishonest behavior of AFOs combined with good profitability, what leads to their interest to provide more liquidity and grow the network. Network Keepers are incentivized to make as best underwriting as possible to earn stability fee and (in some cases) the additional AKRO tokens.

    The Governance mechanic

    All network actors holding tokens can participate in the governance process. The governance includes the voting for establishment values of critical ecosystem variables such as stability fee, governance fee and infra-network rate (a max interest rate applied to loans in the network). Such governance mechanic helps to balance the interests of all actors and provide decentralized determination of crucial parameters, that obviously cannot be established in the centralized mode.