CoinEx Institution: Compound2.0? How Did the Anonymous Team PowerPool Draw So Much Attention?

Nowadays the segment of DeFi governance tools is still in its infancy. Controlled by giants, most governance protocols have few users participating in voting, with widespread apathy among the voters.

The “voters” (i.e. retail investors) take an inactive part in governance for reasons: they can hardly extract value from the governance tokens in their hands. On the one hand, due to the small proportion of the governance tokens held by a single retail investor in the total circulation, its decision-making power cannot directly affect the direction of the project; on the other hand, which is even more important, most governance tokens cannot bring users any income.

The DeFi governance protocol has been suffering from “voter apathy” for a long time. PowerPool has emerged as a response to this trend.

Compound 2.0: PowerPool integrates governance power in various DeFi applications

PowerPool Concentrated Voting Power (PowerPool for short) is a cumulative governance solution based on the Ethereum protocol, generally referred to as “meta governance”. It helps solve voter apathy, increase voting security, and promote the decision-making coordination of stakeholders. PowerPool aims to build a lending platform for governance tokens, and accumulate governance power for those in need.

“Meta governance” is governance based on protocols. The main task of PowerPool is to manage various protocols from one place conveniently. By integrating governance tokens in a pool, it provides liquidity for governance tokens, and aggregates their power.

PowerPool is very similar to Compound in the lending model. Governance token holders deposit the governance tokens in the liquidity pool and get the same governance tokens as interest. Any user who needs liquidity can borrow the required governance tokens with specific assets (such as ETH, wBTC, and DAI) as collateral.

However, PowerPool’s governance tokens are different from Compound tokens. With functions of Compound, PowerPool can also determine the voting intention of those unclaimed coins in the pool, which is the origin of its nickname “Compound 2.0”.

Specifically, PowerPool centralizes the governance power in each DeFi application. When a user personally holds a certain DeFi token such as COMP, LEND, and YFI, PowerPool will be hardly influenced; but when the user deposits DeFi tokens in PowerPool and have them integrated by the pool, the governance power of these tokens will converge into an important voting power, which is under the control of CVP, PowerPool’s governance token.

In other words, when users merge DeFi voting rights (the governance token CVP), they also integrate PowerPool’s voting rights. They can vote with tokens such as COMP, LEND, and UNI (which will be added to the protocol) if they have CVP. Then retail investors can coordinate, influence and even control the application of DeFi in the entire industry by joining PowerPool, a party-like “meta-governance” structure.

As the native governance token of PowerPool, CVP can be used in the following ways:

(1) Decide which governance token can be added to PowerPool and the proportion of its yield farming rewards;

(2) Determine the cryptocurrency of the collateral;

(3) Maintain and update the source code of the contract and key variables of the protocol;

(4) Use the share in the community pool to participate in yield farming on other DEX.

By distributing more power to a few holders, PowerPool solves the issue of “voter apathy”

How to make community governance decentralized enough has always been a headache for the current crypto market. Governance is the foundation of all decentralized applications, and makes for the core of a project. Governance tokens represent the voting power, and sufficient governance tokens will control the future direction and major issues of a project.

For PowerPool, all protocols of governance tokens are divided into two categories: holders of a small number of tokens and those of many tokens. Normally, the votes of the minority holders do not have an impact, which they know clearly about. In the end, it is the majority that has the final say. That has led to “voter apathy” commonly seen in the crypto market — voters showing indifference in voting.

PowerPool solves this problem through influence farming, and distributes more power to a small number of holders. They only need to reach an agreement on a certain decision and gather voting power. Users who hold a small number of tokens can lend the tokens needed in the governance system on the PowerPool platform. At this time, the governance power accumulates in PowerPool, thereby increasing the voting weight.

At the same time, PowerPool also designed Farming, which is very similar to yield farming, to issue CVP, its protocol system token, as incentives for governance token holders’ borrowing behaviors on the platform.

In fact, we can deem CVP as a governance tool used to govern the voting pool (interest arbitrage is forbidden), because the voting governance rights are granted to PowerPool through tokens of small investors, which are pledged and borrowed on the PowerPool protocol. When users need to call the governance authority stored in PowerPool, CVP plays a major role, which is also the core value of tokens in the entire protocol.

How can the anonymous team PowerPool get so much support and attention?

Through PowerPool’s incentive mechanism, both users and DeFi protocols can be benefited:

1. Increase the income of token holders

Users can obtain additional governance tokens from their stakings. As interest rates are paid in the same governance tokens, users’ interests can continue to increase;

2. Increase voting participation

With the rate of return and rewards for liquidity providers, retail investors will be encouraged to contribute their governance tokens to PowerPool, and these tokens will be put in voting according to demand, thereby increasing the overall voting cost. Even if no one borrows tokens through the procedures of the PowerPool protocol, the tokens can participate in voting;

3. Accumulate voting rights

The voting rights allocated to thousands of retail investors are useless. Now such rights can be concentrated in one place through PowerPool and become a real power in protocol management.

It is worth mentioning that behind PowerPool is an anonymous team. Unlike many projects with institutional investors, the team has no VC nor private equity. The promotion process is in line with the current concept of decentralization in DeFi. PowerPool does not have pre-mining, and the tokens are allocated as below: 5% to the team (locked up for one year and to be released in 18 months) and 95% to yield farming.

In addition, PowerPool is mainly community-driven and highly active, and it has also become a leader in the segment of DeFi governance tools. It has been launched on CoinEx and the three major exchanges, i.e. Binance, OKEX, and Huobi.

The continued growth and maturity of the DeFi market are inseparable from governance and management. PowerPool has the potential to become the basic pillar of the DeFi field by building a two-sided market, bringing more convenience to users in need and DeFi protocols. However, PowerPool may not be able to fundamentally solve the problem of voter apathy — if retail investors choose to give up their voting rights at the beginning or are indifferent to the development of the project, they will not exercise such rights with CVP even if they put their tokens in PowerPool.

Therefore, it is still a matter of time before we could know if PowerPool can truly solve the various problems of governance tokens and decentralized governance.

References:

EncryptClub: Decentralized Revolution of PowerPool’s Anonymous Compound 2.0

BlockBeats: PowerPool, A Governance Power Aggregation Platform to Make Your Governance Rights Flow