Amun aims to build the first index token for the Polygon ecosystem. The PECO token will help investors gain easy and automated access to Polygon native projects including Aavegotchi. The Polygon Foundation is supporting this project by pledging $10m of MATIC in seed capital. We seek a smaller portion of seed capital from each protocol to support this launch. For Aavegotchi, the ask is for $500k in GHST tokens. This will be minted into PECO and seeded in liquidity pools for a period of nine months. After nine months, the PECO tokens are returned to Aavegotchi.
Benefits to Aavegotchi
- The PECO launch will generate substantial buzz and attention to Polygon projects. We will be promoting Aavegotchi throughout all our channels for this launch.
- The PECO token will be made available on Polygon and Ethereum, creating an easy way to gain exposure to GHST without bridging to Polygon. Demand for PECO translates into demand for GHST. If PECO reaches $20m in market cap, that will drive an additional $2.3m in demand for GHST.
- PECO is a diversified basket of tokens. Having a portion of Aavegotchi’s treasury in PECO likely reduces volatility relative to GHST only.
We propose to build and launch a token ($PECO) to give investors broad exposure to the Polygon ecosystem. The token will be made available on two chains: Polygon and Ethereum. We believe there is a large number of people who would like to invest in the Polygon ecosystem but do not wish to go through the trouble of bridging funds to the Polygon chain and doing the diligence and trades to purchase individual project tokens. By making a Polygon ecosystem token available natively on both Polygon and on Ethereum, we are able to address a significantly larger investor base than a Polygon-only token.
Supporting the Polygon network ecosystem through the foundation is also a key motivator. The eventual goal is to integrate PECO into Polygon projects to explore DeFi strategies and composability. Through this, we envision to provide greater capital efficiency in borrowing, lending and yield optimization whilst at the same time diversifying risk for holders, projects and the Polygon Foundation.
Polygon DeFi Index (PECO) selects projects based on the following criteria:
- The project must be native to the Polygon network and contribute to the Polygon ecosystem.
- The project must have launched on the Polygon mainnet for a period greater than 2 months, to eliminate transient, unsustainable projects.
- The project has organic adoption in liquidity and market cap.
- The project has sufficient DEX liquidity on Quickswap and DFYN. For a starting point, we look for DEX liquidity above $5 million.
- To start, MATIC makes up 50% of the index composition. As the Polygon system matures, we expect to lower the portion of MATIC to make way for more project tokens.
- The remainder of the 50% is composed of protocol tokens weighted using the averaged ratio of market cap and DEX liquidity.
- Presently, only a handful of project tokens satisfy liquidity requirements. We expect that as projects scale, the constituents will be reevaluated monthly.
- Given the low transaction fees on Polygon, we believe PECO can grow to include a large number of constituents, so long as they satisfy liquidity requirements.
Seeding & Liquidity Provision
To bootstrap market cap and liquidity, we aim to seed PECO with $12m of capital—a portion of which will be minted into PECO. The seed will be pooled from the six protocols that make up the initial index. Polygon has agreed to lead the seed with $10m of capital. Most of the five protocols are also on board to provide seed funding in proportion to their weight in the portfolio:
The seed funding will be locked up for a period of nine months, after which it will be returned to the seed contributors. The seed capital is not consumed other than basic trading costs and slippage.
PECO will be made available on both Polygon and Ethereum. We propose to deploy the seed capital in two liquidity pools to help facilitate trading:
- On Polygon: PECO–MATIC
- On Ethereum: PECO–MATIC
Because PECO is composed of 50% MATIC, we expect any impermanent loss will be modest.
- Seed capital is converted to PECO
- The PECO token amount at the start of 9 months is documented
- PECO is deposited into a PECO/MATIC liquidity pool
- At the end of the 9 months the original documented PECO token amount is returned as PECO
- Fees generated from the pool at the end of 9 months will be used to cover any impermanent loss
- Any remaining revenue will be distributed to the seed contributors prorated
DAO Votes So Far:
We hope the Aavegotchi community will support the proposal to seed the PECO token with $500k in GHST. We believe it will help bring new users and capital to GHST and the wider Polygon ecosystem.