Pearl x Frens: Tokenomics Update

DEXs and blockchains (especially L2s) are both mature markets. In our view, there are only two ve-style DEXs which have truly succeeded. Both of these exchanges rode the wave of a new chain and the ecosystem development that followed, supporting the launch of new tokens and rewarding LPs while establishing themselves as the native liquidity layer.

For Pearl to succeed, we believe it needs to be central to the adoption of a new asset class in the onchain space. We hoped RWAs would be that new asset class to push Pearl into category-wide relevance, but they weren’t. As an asset class, we don’t believe RWAs are a 1000x opportunity for us. They’re not a new type of value that excites the industry nor are they aligned with current market sentiments that animates the majority of users.

Our belief is that social tokens are a 1000x opportunity and Pearl can play a central role in the evolution of this new category, the tokenization of users and content.

Value for PEARL and vePEARL

Frens and Pearl are now integrated as the one place to launch and trade social tokens, through the social layer, the launchpad and exchange.

Frens has adopted PEARL as the underlying token for the ecosystem. FREN is a wrapped version of PEARL. In addition to operating as the native currency on Frens, FREN will also serve as the base token in all creator pairs. This links creator token value with PEARL and creates a token sink for current and future PEARL emissions. PEARL now has significantly more value than a simple emissions token.

The integration also means that Frens value/equity is captured by vePEARL holders. Imagine if Raydium incubated Pump and RAY token-holders captured the value of the entire stack in a new token’s launch and trade journey. This is what’s happening with Pearl and Frens.

As a holistic solution to design, launch and trade social tokens, Pearl’s value in that solution becomes immeasurable. vePEARL is no longer just a DEX token, it’s also infra in the developing SocialFi space. It’s a bet on the adoption of an untapped category of assets and a means to capture the trading fee value generated from the exchange of these new tokens.

Below is a topline summary of how Frens activity generates rewards for PEARL and vePEARL (including CVR.) Frens will be publishing detailed documentation in the coming weeks.

Frens Generates Fees

Fees are generated on Frens of the trading activity that takes place within the bonding curves. This includes all trading of content tokens as well as creator tokens before the bonding curve is completed and liquidity is seeded.

Frens Fees Accrue to vePEARL

These fees will be used to bribe a special FREN gauge on Pearl which will allocate PEARL emissions to Frens on a weekly basis.

As with any other bribe on a ve DEX, emissions will be allocated proportional to the rewards offered. More fees generated → more bribes → more votes → more PEARL for Frens.

vePEARL voters (CVR) collect these bribes while the allocated emissions are wrapped into FREN and used as rewards to drive activity within Frens. This enforces a healthy, sustainable incentive mechanism for Frens.

Creator Token Trading on Pearl

Creator tokens will be paired with FREN when liquidity pools are seeded on Pearl, generating value for PEARL and additional rewards for vePEARL holders. Trading fees sourced from creator token trading volume will accrue back to locked PEARL. We also anticipate that some creators will add additional rewards via bribes on their pools, driving token demand and additional liquidity.

The integration with Frens is a major step forward in the design of ve(3,3). vePEARL holders are now stakeholders in a new SocialFi ecosystem and the beneficiary of any future success, which could be massive.

Of course, as with anything experimental, refinements to existing systems should be expected as new features are deployed and measured.

Emissions Reductions

At this time, PEARL is too inflationary when compared to revenue generated (bribes and fees.) As a result, over the course of the following two epochs, emissions on Pearl will see substantial reductions as we look to balance tokenomics within the new ecosystem.

Pearl emissions will reduce by 33% this epoch flip and 33% again next epoch flip. From there they’ll resume the usual 1% reduction per epoch.

What this means is that PEARL and FREN will become more scarce, making rewards within both ecosystems more valuable over time. In just two epochs, we’ll reduce annual inflation to approximately 20%, a rate we feel is sustainable across all utility touchpoints including FREN trading on Solana.

This emissions reduction will apply across the board, with fewer PEARL added to vePEARL positions via inflation protection and fewer PEARL released as incentives to liquidity pools. Reducing emissions doesn’t dilute anyone, all users are impacted equally.

Our view is that emissions are designed for growth and there’s nothing inherently sacred about the emissions curve. Our goal is to generate ecosystem value and growth. If reducing emissions makes that easier, we should pursue that path.

As our business changes from a simple liquidity marketplace to a more robust integration into SocialFi, the role and impact of emissions changes as well. Our hope is that fewer new tokens allows each current and future token to become more valuable as we’re no longer fighting uphill against a deluge of new weekly sell pressure.

As outlined above, we’re making radical changes with the goal of creating meaningful, lasting value for our community. Quitting has never been an option as we search for the next 1000x. We appreciate the support and flexibility of our community as we build new spaces and opportunities in a rapidly shifting marketplace.