A DePIN-Native Token Primitive: Medallions
Medallions Have Been Used For Decades to Manage Physical Infrastructure: They Can Help Manage Tradeoffs between Liquidity Fragmentation and Token Flexibility That Many DePIN Projects Face
We are introducing a new 500-word essay format to explore some of the most innovative ideas in crypto. These will primarily be published via ev3.xyz (subscribe here), but I will re-distribute the most important ones through this channel.
Today’s essay is about medallions, and how they can be used to manage and coordinate sprawling real-world infrastructure projects powered by Crypto.
To create real-world value, DePINs must adapt to real-world conditions. Helium uses offchain oracles to boost rewards at high-traffic locations (HIP-103) and uses market-based weights to split rewards between subDAOs (HIP-51).
HIP-51’s vote-escrow tokenomics add significant complexity and fragment liquidity / value across multiple tokens. Today, HNT represents roughly 60% of FDV and 75% of trading volume in the Helium ecosystem, while MOBILE trades at ~8.5x multiple of its treasury redemption value in HNT.
Medallions are a novel staking mechanism that incorporate market-based weights under a single token, avoiding the downsides of traditional vote-escrow tokenomics.
In short, they work like this:
Stakers can lock tokens to mint medallions. The number of tokens needed to mint a medallion increases along a bonding curve.
Medallions can be delegated to a region to earn a proportional share of regional revenues or capacity, weighted by time-under-delegation.
Medallions can be transferred, traded, un-staked, or re-delegated at any time.
The architecture is inspired by Berachain’s proof-of-liquidity, Serum’s MegaSerum, and hybrid NFT projects like MutantMon and ArtGobblers.
Medallions inherit vote-escrow’s two most desirable properties: 1) tokenholders are incentivized to stake tokens as soon as possible, for as long as possible, and 2) tokenholders are incentivized to constantly re-delegate to higher-yielding regions. Like in vote-escrow systems, market-implied yields on medallions can serve as a market-driven signal for the relative cost of capital for different regions or technoloies.
Unlike stakers in vote-escrow systems, medallion holders are long-term aligned with the success of the network. Stakers in vote-escrow schemes like HIP-51 get paid in subDAO tokens that are immediately liquid. Medallion-holders only profit if they hold medallions long enough for a region to generate real onchain revenues or capacity.
“Show me the incentive, I'll show you the outcome.” — Charlie Munger
Medallions align stakers towards maximizing revenues or capacity—not market cap. Both relative inflation, i.e. which regions get rewarded, and absolute inflation, i.e. how many new tokens are minted, can be based on the number of new medallions minted. Because medallions are economic instruments with zero governance power, they avoid compounding known issues of fragmenting decentralized governance.
The medallion system is fully generalizable and does not need to be geographic. DeWi networks can use location-frequency pairs (NYC-3.5GHz vs LON-6GHz), ridesharing networks can stratify markets based on who the local incumbent is (Uber-dominated vs Lyft-dominated), freelancer marketplaces can use professional domains (engineering vs sales), etc.
We believe medallion-based staking is a strictly better architecture for DePINs looking to incorporate market-driven information into rewards schemes. We look forward to seeing future iterations of this system being adopted across the space.
Special thanks to Jason Badeaux (Daylight Energy), Neil Chatterjee (Andrena/DAWN), and Anirudh Pai (Dragonfly) for their help cooking up these ideas.
If you’re an investor, trader or entrepreneur interested in discussing medallion staking, please reach out to join us at a dinner on June 26th in NYC hosted by Andrena.
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