Aloe Explained #1: The ALOE Token
Aloe Explained is a series where we discuss details of the Aloe Protocol in an accessible way. For a more general overview, check out our introductory post.
Why does the Aloe Protocol need a token?
Aloe is predicated on the idea that stakers can compete with one another to predict an optimal Uniswap V3 position. We need a way to keep the competition serious and keep score. The ALOE token serves both purposes — stakers must be willing to sacrifice some to participate, and winners are rewarded with more.
ALOE will also serve as the protocol’s governance token. Similar to Uniswap, Aloe governance will control code licenses and a protocol fee switch. If enabled, a small fraction of swap fees will be streamed to Aloe’s treasury.*
How will ALOE be distributed?
There will be 1,000,000 ALOE tokens, total, forever. Making it inflationary would be counter to the idea of score-keeping for stakers. Here’s how the tokens will be distributed at launch:
- 65% owned by the DAO; allocated to users through liquidity mining
- 5% to the predictions of our open-source staking bot
- 4.9% airdropped to top performing stakers in our beta
- 0.1% airdropped to extra early supporters
- 25% retained by the Aloe Capital team
Aloe’s liquidity mining will be somewhat non-traditional. You will not need to LP in a specific ALOE pair. In fact, we won’t be deploying any trading pairs for the ALOE token. We encourage users to hold onto their tokens and participate in governance and/or staking activities. This is what ALOE is made for!
Instead, liquidity providers will earn ALOE by depositing to Aloe’s pool for any of the top 10 Uniswap V3 pairs (ranked by volume at time of launch). After launch, governance will be able to add/remove Aloe pools from this eligible list as it sees fit.
Why do it this way?
We want to align incentives with long-term strength and security of the Aloe Protocol, and we’re not interested in external perceptions of ALOE’s value — it’s designed for use inside the protocol.
Thanks for reading! Next on Aloe Explained, we’ll discuss the math behind staking, prediction aggregation, and staker rewards.
*We think it’s likely that (i) [enabling the protocol fee] and (ii) [allocating part of the treasury as additional staking rewards] will be among the first Aloe governance discussions/proposals. If the community wants this, the Aloe Capital team can support development.