Opium Token Economics
By: Opium Team
Tags: Governance, Blockchain, Opium, Decentralization, Community

OPIUM governance

The Opium Team believes that decentralized governance overseen by an active community of stakeholders creates the most sustainable and antifragile support base for an open financial infrastructure (decentralized finance). Standing on the shoulders of earlier pioneering innovators, the Opium Team has learned new methods and models for governing financial protocols and gradually decentralizing control.

We propose a governance model that uses a governance token ($OPIUM), and we describe both the model and the concept of governance token economics in the following section.

The OPIUM governance token

The Opium Protocol requires active and decentralized governance of certain parameters to evolve the protocol for the benefit of the community. This, in turn, will result in the creation of relevant decentralized derivative contracts with sufficient liquidity — which will ultimately attract more users to the Opium ecosystem.

The governance model is based on a decentralized autonomous organization (DAO). $OPIUM token holders will interact with the DAO by proposing and casting votes on governance proposals, which will influence the Opium Protocol and the behavior of its stakeholders.

One of the key parameters that $OPIUM token holders will control is the allocation of $OPIUM governance tokens from the Active-Users Fund. A certain amount of $OPIUM tokens will be unlocked every week to be distributed among active protocol users and benefit the Opium ecosystem.

This is the most effective way to get the protocol in hands of the community and to the best people within that community. The liquidity mining programs are intended to incentivize bottleneck processes in the ecosystem to stimulate the weak points (which exist in every ecosystem).

Active users will stimulate these weak points (for example, if everyone takes short positions, then liquidity‑mining active users will take long positions, thereby eliminating weak points and doing all the hard work). Hence, those who take on the hard work will have a greater influence on protocol governance by owning a greater number of OPIUM tokens.

This mechanism is similar to the notion of “liquidity mining,” but allows for more flexibility through active user definition. The following example behaviors can be implemented through this mechanism:

● Providing order book liquidity for the derivatives market

● Writing up CDSs and options

● Increasing the Total Value Locked in the Opium Protocol

● Designing relevant (high-demand) financial derivative products on Opium

● Incentivizing liquidity providers to participate in third-party pools/projects that are useful for the Opium ecosystem (e.g., derivatives as collateral, Balancer pools with $OPIUM)

$OPIUM token holders will vote on proposals that determine liquidity-mining logic and the allocation of governance tokens. Not only can token holders change parameters, but they can also change the entire protocol because an $OPIUM token gives its active user full control over the protocol.

The governance model for Opium will initially be limited to proposing and casting votes on the following changes and actions:

● Changing DAO parameters within its permissions,

● Executing actions on its behalf,

● Allocating the active users fund, and

● Making changes to the Opium Protocol codebase.

Any new parameters to be governed, resulting from upgrades of the Opium Protocol codebase, will also be controlled by Opium DAO.

How OPIUM will be distributed

The minted supply of $OPIUM will be 100,000,000. The distribution of this supply is projected as follows:

60%: Active users

This fund will be used to allocate governance to active users of the protocol to benefit the Opium ecosystem, as described in the previous chapter. The definition of active users will be decided regularly by governance. More tokens can be allocated for specific actions such as providing liquidity on a specified instrument or term, building actively-used instruments, or other essential activities. The tokens in this fund will be unlocked gradually and distributed retroactively to active community members, based on the specified criteria of active usage.

16%: Investors and advisors

This fund will be used to compensate early investors and advisors for their contribution to the success of Opium thus far. The tokens are going to be vested continuously for the next two years.

14%: Opium Team

This fund will be used to fund the expenses of the founding team behind the Opium Protocol, and to fund key hires and the future growth of the team. A part of these tokens will be granted to current members of the Opium Team and will be vested continuously for the next four years. Opium Team is a fast-growing distributed community of builders consisting of developers, mathematicians, traders, and consultants who strive to further grow and develop the Opium Ecosystem.

10%: Governance Reserve Fund

This fund will be used for external initiatives and partnerships which will help the Opium ecosystem to further grow and flourish. $OPIUM token holders have full control over the usage of this fund through governance proposals and voting.