Kain Warwick, Alex Ape
This SIP establishes the Aelin Protocol.
This SIP proposes the creation of the Aelin Protocol, Aelin is an open and permissionless set of factory contracts that enables anyone to instantiate a pool of capital that can be used to source deals within the Ethereum ecosystem.
Aelin is a new decentralized deal coordination protocol. This SIP leverages the established decentralized governance framework of Synthetix to launch this new protocol in a fair and transparent manner. Half of the initial supply of AELIN tokens will be distributed to SNX stakers as a sign of appreciation for the effort that has gone into Synthetix governance enabling Aelin to launch via this SIP.
Establishing a new protocol and community is a challenging proposition, there are very few examples of projects that have been fair launched and managed to become self-sustaining. By leveraging the existing Synthetix governance process and rewarding SNX stakers Aelin will be able to create a new governance system that inherits the legitimacy of Synthetix governance. The decision to leverage Synthetix governance relied on the past success of Thales and Kwenta in establishing independent communities.
Aelin is a new protocol and will have its own token, community, and governance system. Initially, Aelin v1 will be governed by the Aelin Council, a DAO which will be voted on by SNX stakers. The weighted debt of SNX stakers will be used to vote on 5 Aelin Council members.
In v1 the Aelin Council will be responsible for guiding the protocol towards v2, onboarding and paying core contributors, treasury management, and organizing the community. The initial stipend for Aelin council members will be 0.2 $AELIN per month. For v2 and beyond, the roles, responsibilities, and stipends for the Council and any other governing bodies will be decided by the Aelin community; governance will change over time to suit the needs and desires of the Aelin token holders and protocol participants.
For simplicity, the initial format of Aelin Improvement Proposals (AELIP) will follow the Synthetix Improvement Proposals (SIP) standard, which has been refined by Synthetix over time. Anyone from the Aelin community may submit AELIPs and be rewarded in an amount decided by the Aelin DAO.
The Aelin contracts have been written by a team of volunteer engineers. It will be up to Aelin governance to decide whether to utilise funds from the AelinDAO to reward these efforts. The contracts will be deployed once this SIP has been approved by the Spartan Council and after they have been audited.
The purpose of these contracts is to create a new protocol that satisfies the following high level specification: Aelin enables (a Sponsor) to create a pool that anyone (purchaser) can deposit funds into. In exchange for their deposit they get a token representing a claim on the pool of funds. The sponsor then structures a deal with a counterparty (the Holder). The Sponsor and the Holder formalise the deal terms in a Deal Contract. Once the terms are finalized, conversions are enabled between the pool contract and the deal contract. aePool token holders can choose to redeem their aePool tokens for the underlying funds in the pool, rejecting the deal terms. Alternatively, they can redeem their aePool tokens under the terms of the deal. The protocol collects a fixed percentage of each deal determined by protocol governance, 2% initially. The Sponsor can also elect to capture a percentage of the deal in addition to this protocol fee. In both cases, these fees are paid in tokens under the deal terms.
Over the last few years the crypto fundraising process has matured significantly. We see far fewer huge pre-product raises. Most seed rounds are in the low single digit millions. The issue is that this means it is almost impossible for the wider community to participate in early stage projects. There are solutions such as LBPs by Balancer and other projects, but Aelin will allow for a project to launch a new token with a fixed outcome in terms of valuation without needing to negotiate with thousands of people or relying on a market driven mechanism that may result in a highly variable outcome. Using Aelin a pre-token project will be able to find a sponsor with a pool of funds that meets their funding needs and negotiate a reasonable valuation with vesting terms that ensure long term alignment. Additionally for established projects OTC deals that help generate treasury liquidity will be possible resulting in much wider token distribution. There are many other novel use cases, including NFT fractionalization and distribution.
The factory contracts allow anyone to initialise a new aePool contract and then a Deal Contract.
aePool Contracts are created with the following variables:
|Pool name (aePool-name)|
|Pool token symbol (aeP-symbol)|
|Purchase token: (Dai, sUSD, USDC, wETH, WBTC, etc)|
|Purchase token cap: Cap in token (0 for uncapped. Uncapped deals are proRate)|
|Duration: Period after the purchase expiry period where aePool tokens are locked for the Sponsor to show proof of funds during negotations until the deal is offered to purchasers|
|Sponsor fee %: (Optional - set from 0 up to 98%)|
|Purchase expiry: Period after which pool tokens are no longer purchasable|
Deal Contracts are created with the following variables:
|Deal name (aeDeal-name): Name is inherited from the pool|
|Deal token symbol (aeD-symbol): Symbol is inherited from the pool|
|Underlying deal token (YFI, SNX, AAVE, UNI, CRV, essentially any ERC-20 token)|
|Purchase token total for deal (total purchase tokens that can be redeemed)|
|Underlying deal token total: How many underlying deal tokens in total are available in the offering|
|Pro-rata redemption period: An initial period in which purchasers can claim their pro rata portion of the deal|
|Open redemption period: At the end of the pro-rata period, if necessary, anyone who claimed their full pro rata share can continue to redeem the rest of their pool tokens for any unredeemed deal tokens based on the number of purchasers who opted out. This period only exists if the pro-rata share of pool ownership is less than 1:1|
|Vesting period: Time before all underlying deal tokens are released which starts from the end of the vesting cliff. Initially linear but could be more complex in future versions|
|Vesting cliff: Time before underlying deal token begins vesting|
|Holder: the counterparty of the underlying deal token entering into an agreement with the sponsor who negotiates on behalf of the purchasers|
|Holder funding expiry: The amount of time a counterparty has to deposit the funds before a sponsor can create a new deal for purchasers|
AELIN Token Information
|Initial FDV||$30m USD|
|Aelin Launch Pool||5%||250 AELIN|
|DeFi Mega Pool Farming||5%||250 AELIN|
|SNX Staker Distribution||15%||750 AELIN|
|Inflation veAelin||70%||3500 AELIN|
Staking Rewards Contract for Deal Fees and Inflation Distribution
Aelin holders can stake their tokens to capture deal fees and inflationary rewards. The spec for the staking rewards contract is TBD. Aelin v1 will capture deal fees in a multisig with distribution occurring later. The inflationary rewards will start when the staking rewards contract is launched.
aePool Contract Creation
- Sponsor creates an UNCAPPED (0 cap) pool with a NAME and SYMBOL for the token
- Sponsors inputs USDC as PURCHASE TOKEN
- Sponsor inputs one month as PURCHASE EXPIRY
- Sponsor inputs six months as DURATION
- Sponsor inputs 2% as SPONSOR FEE
- Sponsor approaches Holder to purchase XYZ token
- Sponsor agrees to $20m USD of XYZ
- 20% discount to spot
- Six month cliff and six month linear vesting
- Holder has 1 week to deposit the XYZ tokens in the contract or else the sponsor may create a different deal for the pool of capital
Deal Contract Creation
- Sponsor inputs UNDERLYING DEAL TOKEN XYZ
- Sponsor inputs UNDERLYING DEAL TOKEN TOTAL
- Sponsors inputs TOTAL PURCHASE TOKENS REDEEMABLE (must be less than or equal to what is in the pool. This creates an exchange rate)
- Sponsor inputs PRO RATA REDEMPTION PERIOD 24 hours
- Sponsor inputs OPEN REDEMPTION PERIOD 24 hours
- Sponsor inputs VESTING PERIOD 12 months
- Sponsor inputs VESTING CLIFF 6 months
- Sponsor inputs VESTING CURVE linear
- Sponsor inputs HOLDER address (so they can receive PURCHASE TOKENS)
- Sponsor inputs HOLDER FUNDING EXPIRY indicating the amount of time the holder has to deposit funds
- Purchaser sends 500 USDC
- Purchaser receives 500 aePool tokens
No Deal Case (DURATION elapses before deal announced)
- Six month redemption window expires
- Purchaser calls redeem on contract and burns 500 aePool tokens for 500 USDC
- Sponsor announces deal
- Holder funds deal with underlying deal tokens
- Purchaser burns 500 aePool tokens for 480 aeDeal tokens
- Contract sends 10 aeDeal tokens to Sponsor address
- Contract sends 10 aeDeal tokens to veAelin inflation fee pool
- Purchaser waits six months + 1 day
- Purchaser can now start burning aeDeal tokens as they wish according to their vesting schedule for their underlying XYZ tokens. On day one after the six month vesting cliff with a one year vesting period they are entitled to 1/365 of their underlying token.
- Sponsor announces deal
- Purchaser misses redemption window of 24 hours
- Purchaser burns 500 aePool tokens for 500 USDC
- Sponsor announces deal
- Purchase burns 500 aePool tokens for 500 USDC
Test cases for an implementation are mandatory for SIPs but can be included with the implementation.
All variables will be configurable once Aelin governance is established by AELIN token holders.
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