What are the two innovative DeFi projects Whitehole & Pacman that Arbitrum is about to launch for IDO? (Part 2)
Pacman Finance: A decentralized leveraged mining protocol on ArbitrumAuthor: veDAO
In the previous article “What are the two innovative DeFi projects Whitehole & Pacman that are about to IDO on Arbitrum? (Part 1)”, the veDAO Research Institute focused on introducing Whitehole Finance, a multi-asset lending protocol in the Arbitrum ecosystem. The project completed its fundraising target of 450,000 USDT within 15 minutes after the IDO opened on April 26, showcasing the potential of innovative DeFi.
Following that, in this article, the veDAO Research Institute continues to bring you an interpretation of the innovative DeFi project Pacman Finance on Arbitrum. As a protocol focused on decentralized leveraged mining, at first glance, one might think that Pacman Finance is no different from other mining projects in different ecosystems, merely reinventing the wheel. However, Pacman Finance does have certain innovations, such as the Lego combination of various ecosystem tokens and the introduction of the "veIDO" concept.
It is worth noting that Pacman Finance also has plans for an IDO in mid-May, but currently, no further details have been disclosed. The veDAO Research Institute will continue to keep an eye on this project along with its readers.
Pacman Finance: A Decentralized Leveraged Mining Protocol on Arbitrum
Official website: https://pacman.finance/
Twitter: https://twitter.com/_pacmanfinance
More information: https://app.vedao.com/projects
Project Introduction:
Pacman is the first community-oriented decentralized leveraged yield and liquidity aggregation protocol on Arbitrum. Its specific business model uses the interest from leveraged mining to pay off borrowing interest, generating excess returns. At the same time, Pacman is a community-driven project where token holders can vote on proposed changes to the protocol, ensuring transparency and fairness. All performance fees will be distributed to VePAC token stakers who hold governance rights in the system. Pacman has three major advantages:
Concentrated Liquidity: Pacman utilizes its liquidity to concentrate funds through the Farm ETH trading pair, greatly improving the capital efficiency for liquidity providers and reducing liquidation risks.
Unique Vetokenomics: Pacman has built a Vetokenomics system based on VePAC and oPAC around Curve and FOO (Fungible Ownership Optimization) to reduce the frequency of Farm and Dump scenarios and extend the lifecycle of the economic model.
ETH Liquidity Expansion Aggregator: By increasing the utilization of ETH funds among borrowers, Pacman allows users to use ETH as collateral and provide interest-free loans. Additionally, Pacman will offer LSD services to users on Arbitrum.
How Does It Work?
Pacman Finance does not rely on a single principle decentralized exchange but provides multiple liquidity leveraged yield farms, combining various liquidity pools to maximize returns. Since most decentralized exchanges (DEX) on Arbitrum operate under different governance models, Pacman Finance will serve as a middleware layer, providing decentralized yield farm services to ordinary users.
Lending: This is a core element of Pacman Finance, providing more liquidity to the platform and allowing platform users to earn more passive income. Furthermore, Pacman Finance allows investors to achieve higher investment returns by borrowing funds. With the ability to earn interest on borrowed funds, investors can increase their returns without putting in more capital.
Farming: Users can also use yield aggregators to reinvest in leveraged yield farming, generating higher returns.
Voting: Users need to hold vePAC to participate in voting. VePAC is a specialized ERC-721 token that implements the vested voting (ve) model, representing the user's underlying position. Users participating in voting will be able to earn rewards through accepting bribery.
Bribery: Pacman draws from and integrates the ve(3,3) governance model. There are two types of bribery within the system:
Voting Bribery ------ Users/protocols can bribe voters to produce voting results for specific token pairs, in return, they will receive a proportional share of the bribe.
Leverage Farm Lps Bribery - Tokens can be directly bribed to Leverage Farm Lps stakeholders to incentivize liquidity growth for target currency pairs. This is mainly applicable to protocols that want to effectively guide liquidity on Pacman. To be included in the bribery list, each product must open-source its code and submit an audit report, passing Pacman's testing and review.
veIDO
Unlike the common IDO concept in the market, Pacman Finance adds a staking element on top of the IDO. According to official statements: The initial release of PAC will open the PAC-ETH trading pair, priced at 0.0000133333 ETH, approximately $0.025, and will sell 15% of the total PAC supply, 4,500,000 PAC, through three rounds of veDAO. According to the rules of veIDO, the listing price range for PAC is $0.39~$0.6, with an FDV range of 19.71M~30M.
On the Launch page, users can choose whether to exchange PAC for vePAC (Note: In the first round of veIDO, players exchanging vePAC will receive a genesis NFT, which will enjoy higher voting weight and oPAC exercise discounts, as well as priority repurchase rights after exchanging for xPAC, which will be explained in detail below).
In short, Pacman Finance sells vePAC, and you can choose the lock-up period; the longer the lock-up time, the greater the discount for purchasing PAC. No lock-up means no discount.
Details of the three rounds of fundraising for veIDO:
Token Economics
Unlike traditional single or dual token models, the Pacman Finance ecosystem consists of four types of tokens & NFTs working together.
PAC: The native token of Pacman Finance, with a total supply of 30,000,000. The release of PAC will be divided into three phases, with different emission reductions in each phase. 18,000,000 PAC will be distributed over more than 120 epochs, with an exponential decay of 10%~1%.
vePAC: The staked version of PAC, which is a non-transferable NFT token based on the ERC-721 standard. It represents a user's voting weight and the amount/time information of PAC locked.
Users obtain it by locking PAC tokens. The longer the lock-up time, the more vePAC they will receive.
In this regard, Pacman Finance adopts a model similar to Curve, and even the Whitehole Finance mentioned in the previous article has almost followed the Curve model.
Uses of vePAC:
Governance Voting: Voting on governance proposals, including listing new metrics, changing protocol parameters, and approving budgets.
Weighted Voting: Voting to determine how rewards are distributed across different gauges.
Accepting voting bribery.
Earning protocol revenue.
In vePAC, in addition to regular NFTs, there is a category of genesis NFTs that have the same functionality as regular vePAC, and users can only obtain them by participating in Pacman Finance's veIDO. In the early stages of ecosystem governance, genesis vePAC has a significant voting weight advantage. Under the same conditions, genesis vePAC has a weight of 150% in the first round of voting, 130% in the second round, and 110% in the third round. During the oPAC exercise process mentioned below, holders of genesis vePAC will also enjoy a higher basic discount rate than other users.
In addition, for different batches and different time points of users' PAC staking actions, the two different types of vePAC obtained by users can also be merged to generate a new vePAC. The new vePAC will accumulate the total value of the old vePAC and inherit the longest staking time from the two old vePACs.
Currently, the lock-up periods for vePAC are 6 months, 12 months, 18 months, and 24 months. When users choose a 24-month staking period, they can exchange vePAC for a new token: xPAC.
xPAC: This is the tokenized version of users locking vePAC for 24 months, using the ERC-20 standard. Users can freely exchange between the 24-month locked vePAC and xPAC at a 1:1 ratio. It is important to note that xPAC itself does not enjoy the governance rights of vePAC or the rights to earn protocol revenue.
Essentially, xPAC can be seen as a bearish expression of users towards vePAC. It allows users who have an uncertain attitude towards the future of vePAC or want to exit to escape their principal through xPAC.
However, it is worth noting that the minting address for xPAC has not yet been disclosed, and the official has stated that users holding genesis vePAC will be prioritized for repurchasing their xPAC. As for the detailed rules of the repurchase, Pacman Finance has not disclosed more information. It is currently speculated that the repurchase of xPAC may not be able to be done in real-time and may require users to queue. Although it seems that xPAC provides stakers with a chance to "reconsider," this opportunity does not appear to be easily obtainable.
oPAC: This is a call option token for PAC, allowing its holders to purchase PAC at a cost below the market price.
The discount strength of oPAC is reflected in the strike price: According to the article "Understanding Pacman: A Decentralized Leveraged Mining Protocol on Arbitrum": Current PAC price * (1 - discount rate). The factors affecting the discount rate are B(x) + L(x), where B(x) is determined by the change in PAC price; the higher the price, the higher B(x); L(x) is determined by the protocol's TVL, meaning that the more LPs there are and the longer the lock-up time, the higher L(x) will be.
In other words, when the native token PAC price and the overall TVL of the protocol are higher, the discount strength of oPAC will also be higher. Users can obtain PAC at a discounted price through the oPAC + ETH payment model.
The official example: Suppose PAC is $0.78, the current ETH price is $1600, the discount is 30% + 20%, and the discount rate is 50%, then the strike price is $0.39. Users can exchange 1 oPAC + 0.00024375 ETH for 1 PAC. When users sell PAC, they can earn a profit of $0.78; meanwhile, the protocol treasury receives 1 oPAC + 0.00024375 ETH = $0.39.
Additionally, the project team has introduced the ve model, allowing oPAC to be exchanged 1:1 for vePAC, and vePAC holders can earn protocol revenue from the treasury.
Note that oPAC only supports the creation of new vePAC NFTs and cannot add more PAC tokens to existing vePAC NFTs, but users can choose the vePAC merge function to consolidate their staking positions.
The core business of Pacman Finance is leveraged yield farming. As the products become more advanced and the user base grows, the income of Pacman finance farmers will depend on the protocol's transaction fees. In the early stages, Pacman will attract more users and funds by encouraging deposits, leveraged farming, and governance among early contributors. Additionally, the protocol revenue of Pacman Finance will also include various aspects such as lending & staking rewards, farming rewards, voting rewards, etc.
Conclusion
Unlike Whitehole Finance mentioned in the previous article, Pacman Finance has garnered more industry attention. According to data from the veDAO platform, Pacman Finance currently has 5,646 Twitter followers, with 11 top KOLs following, 3 asset whales following, and 15 NFT whales following.
Overall, the entire model setup of Pacman Finance is quite clever, and the interconnection of multiple tokens provides participating users with more opportunities: whether it is the profit from staking vePAC or the profit from holding oPAC options, or the simpler secondary trading of PAC tokens. Multiple channels provide users with more wealth allocation choices. It is worth noting that since Pacman Finance has set a hard cap for fundraising with both locked and non-locked options, whether users are willing to accept another fundraising method after reaching the limit of their preferred fundraising amount is a question they need to consider carefully. Being unable to participate in non-locked fundraising and the possibility that xPAC may not be freely tradable means that choosing locked fundraising entails taking on the risk of price decline due to the lock-up.
In summary, as an early innovative DeFi product on Arbitrum, Pacman Finance is worth our continued attention.
