Another day, another Decentralized Finance (DeFi) token. The latest one to join the lengthening list of governance tokens is Opium Network, which announced a new distribution model for its OPIUM token.
Opium is a synthetic derivatives platform that launched its exchange in May 2020. The protocol allows users to create, settle, and trade decentralized derivatives on ethereum (eth). It can combine any oracle with any financial instrument.
The latest announcement is the launch of its own OPIUM governance token, which has skyrocketed in price since listing.
Decentralized Governance With a Difference
No DeFi protocol or exchange would be complete without its own governance token. In theory, this is the key to decentralization. In practice, however, this seldom works as a few whales often control the majority of these tokens.
The Opium Network has taken a slightly different approach to this with the idea of rewarding active users instead of the big bag holders.
“Opium’s philosophy is to allocate the governance to active users of the protocol, who bring value to the community and participate in the protocol for the long term.”
The solution is called DR.OPIUM, and it’s quite simple. Opium liquidity mining tokens will be allocated to a vault from which users can always withdraw their earned tokens. Those that do so immediately will sacrifice some token earnings to those who continue holding in the vault.
This disincentivizes early withdrawals and market dumps. This is exactly what happened with Uniswap’s UNI airdrop.
This blog post explains the mechanism that will allocate more tokens to steady holders. The sacrifice rate may decline with time to give a fair distribution to ‘good actors.’
The team relies heavily on game theory to keep incentives aligned for the health of the overall protocol and ecosystem.
“We believe that the best incentives are well-balanced; good actors should naturally get rewards at bad actors’ expense,”
The total minted supply of OPIUM will be 100 million, with a 60% distribution going to active users through various liquidity mining incentives. Investors and advisors get 16% and the Opium team 14%. The remaining 10% will go into the governance reserve fund.
OPIUM Makes a Move
Within hours of launch, prices for the new token skyrocketed to almost $10, according to Uniswap stats. CoinGecko now reports a sharp decline to $6, indicating a market dump not unusual for highly speculative projects.
Total Value Locked (TVL) in the protocol has skyrocketed over the past 24 hours from under $900k to over $5.6 million according to DeFi Pulse.