## May 25, 2021

# $DPX Bull Thesis We have all read our fair share of Tokenomics in the cryptocurrency space — DeFi connoisseurs and complete newbies alike. “Worthless governance” seems to be the core concept behind protocol tokens in the DeFi space that are more often than not used as incentives for liquidity providers. Although it may not be a necessity to be distributed as incentives in the long run — a la UNI and YFI, it’s definitely a powerful bootstrapping tool for tokens to build and scale an early community of strong believers. ### “Please, Not Another Governance Token Ser” Why do we call them “worthless governance” tokens? Simple — they’re mainly designed to be used for plain old governance votes. Boring right. Some may be usable today for earning incentives via staking or liquidity provision on your favorite AMMs, but in the long term they usually seem to converge on the singular governance use case. There are tokens that aim to differentiate from the rest by offering alternate use cases such as protocol fee collection for token stakers like in Yearn/SushiSwap — which creates more reason for these tokens to hold value and create objective ways to value them, even with naive methods such as price correlation to fees collected. The more features a coin offers coupled with its governance functionality, the more value it could be perceived to have. Of course, the extent to which governance decisions influence the protocol plays a big role in value accrual for these tokens as well. For example, MKR being used to vote on adjusting parameters for a multi billion dollar stablecoin (DAI) holds a lot greater value than XYZSwap passing a vote to adjust weights for scarcely used liquidity pools on a cloned vanilla AMM protocol. ###$DPX: The “Productive Governance” Token

Taking these points into consideration, DPX, the Dopex Governance Token, was designed with a good mix of objective and subjective valuation properties accounted for. On the objective side, DPX has governance staking, delegate staking, use in margin collateral and liquidity provision incentives as features with potential quantifiable data points that could be mapped to correlate protocol usage to token price.

From a subjective view, DPX governance decisions play a major role from a valuation perspective considering the governance focused model required for Dopex to work optimally as a liquid and efficient options protocol.

But how important of a role do these governance functions play with Dopex?

#### Governance decides:

• Weights of DPX rewards for each pool
• Rebate amounts in rDPX for each pool
• Strike thresholds for option chains in pools
• Fallback for price multipliers in case of delegate failure
• Removal and slashing of delegates

This incentivizes the largest option liquidity providers on Dopex as well as delegates to control these parameters in a way to fairly price options which instill confidence in the protocol and subsequently result in higher protocol usage, TVL and market capitalization.

Dopex delegates who are responsible for quoting option prices and arguably one of the biggest stakeholders in the protocol are required to stake 2500 DPX in the delegate staking contract to be able to quote multipliers within the pricing formula, which would be applied on realized volatility/RV, for each asset to account for option writing risk and short/long term price forecasts.

The pricing formula is used to derive volatility smiles that are used to generate fair priced option chains for each available asset on Dopex.

Delegates are incentivized to buy and stake DPX, quote price multipliers that result in fair pricing for purchasers since it would result in capture of option flow from users of competing platforms considering the increase in price and liquidity efficiency.

Users looking to be writers or just looking for passive yield would in turn be incentivized to deposit their assets in Dopex for passive, perpetual option writing considering their risk would be minimized in comparison to other platforms, while also being incentivized with DPX rewards and receiving rebates in the form of rDPX, which would minimize potential losses in case of unprofitable epochs.

### The Bull Case for Productivity

Higher TVL, volume and overall usage would rationally result in a pricier token. However, based on what we’ve seen in the past these metrics don’t always translate to a higher market cap for the token, unless the actual token is productive in nature.

The question is — how does Dopex aim to solve this?

#### DPX is made to be a productive asset in the following ways:

1. Protocol Fee Collection
Staked DPX earns a portion of protocol fees every epoch. rDPX is used to boost a user’s proportion of these rewards along with DPX tokens.
2. Staking Rewards
DPX stakers also initially get an allocation of DPX rewards as an incentive for locking up their tokens.
3. Liquidity Provision Rewards
DPX/WETH and rDPX/WETH liquidity providers initially earn rDPX & DPX rewards as an incentive. For the first few weeks, this would be the only way to obtain rDPX
4. Margin Collateral
DPX, rDPX and option tokens are usable as collateral for opening cross margin option positions within each pool
5. Synthetic Collateral
DPX in the future would be usable as collateral to create synthetic assets reflecting real world assets such as stocks, indices, commodities etc.

### Conclusion

To recap, DPX is a governance token that is used to govern the Dopex protocol in terms of pricing, reward distribution, fee collection and rebate token allocation. While also being a productive asset that is usable as collateral, able to earn liquidity provision rewards for LPs and collects protocol fees along with DPX incentives for stakers.

Dopex is a decentralized options protocol that aims to maximize liquidity, minimize losses for option writers and maximize gains for option buyers — all in a passive manner.

Dopex uses option pools to allow anyone to earn a yield passively. Offering value to both option sellers and buyers by ensuring fair and optimized option prices across all strike prices and expiries. This is thanks to our own innovative and state-of-the-art option pricing model that replicates volatility smiles.

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