Solana Compass: Reward System
These projects have been deemed as some of the most outstanding tokenomics and incentive designs on Solana by Solana Compass users. We analyzed their economies to determine what makes them stand out.
Solana Compass is a Solana operating validator and ecosystem contributor since 2021. Their infrastructure secured over $270M in assets for over 2,700 retail and institutional clients. Holders can stake SOL on Solana Compass with the added benefit that Compass does more than just focusing on validating the network. Additionally, they provide an analytics platform that is trusted by organizations and other validators, while providing 24/7 network monitoring and insights.
Since Solana Compass is a trusted entity in the Solana ecosystem, their insights carry significant weight when it comes to evaluating tokenomics innovations. In this deep dive, we take a closer look at several projects whose tokenomics models are innovating in incentive design, based on Solana Compass’ users’ votes. We’ll explore how these platforms’ mechanisms, which range from time lock-based multipliers to revenue-sharing, are implementing different token distribution models.
The projects on this list contain different approaches to creating sustainable economic systems. By diving into the core components of their incentive structures, we aim to provide a breakdown of interesting components which may be drawn as inspiration by other projects.
Bonk Rewards
Bonk Rewards is a Solana-based program designed to incentivize the locking of BONK tokens, allowing holders to earn rewards from the growth of the Bonk ecosystem. Rather than offering a fixed yield, the system ties rewards to the performance of ecosystem products like BonkBot and BonkSwap.
- Users can lock their tokens in a smart contract (staking module) for a set period.
- The funds in the Rewards Pool come from a portion of fees generated across some projects within the Bonk ecosystem.
- There is a multiplier which is granted depending on the time the memecoins are locked (which ranges from 1 month to 12 months) with longer durations providing higher multipliers. For example, a 1-month lock offers a 1x multiplier, a 3 and 6-month lockups grant 1.4x and 2x multipliers, respectively, and a 12-month lock increases that to 3.2x, multiplying the share of rewards from the pool.
- The rewards paid out to users are distributed on a pro-rata basis, with payouts in stablecoins, BONK, and possibly other tokens in the future. This model not only promotes long-term holding by reducing short-term selling pressure but also aligns the incentives of token holders with the overall success of the memecoin.
The roadmap for Bonk Rewards includes further integrations such as using locked BONK as collateral in DeFi protocols, expanding the rewards pool to additional ecosystem products, which is simultaneously expanding the memcoin’s utility and long-term sustainability.
What Stands Out
- This model is innovative due to enhancing holders of a memecoin, BONK, to not sell their tokens by rewarding them through rewards funded by a bigger ecosystem that has been built around said memecoin.
- It not only adds a layer of utility to a memecoin, but can potentially incentivize them to hold for the long-term, thus reducing selling pressure from an asset that is typically associated with short-term holding due to their speculative and volatile nature.
Holdium
Holdium is a project on Solana that rewards long-term holding of meme coins without the need for active staking. It uses a points-based system to track both the duration and volume of meme coin holdings by monitoring on-chain wallet data. Users can accumulate points as they hold their tokens, and these points are later converted into Holdium tokens, subject to an 18-month vested airdrop program, ensuring that rewards are distributed gradually to prevent selling pressure considerably.
While Holdium’s token, HM, has a simple economy, its main flows and mechanisms strong alignment to promote long-term holding of both the HM token and memecoins associated with the platform.
- The system tracks users’ pre-approved wallets’ holdings on-chain (by duration and volume), and they accumulate points over time just by holding, without requiring them to actively stake.
- The points are converted into HM tokens, however, they’re not directly distributed. Instead, they implement an 18-month vesting schedule which helps prevent sudden sell-offs.
- If users sell either HM or memecoins too soon, some of their unvested rewards are burnt, this reduces overall token supply (thus making HM more scarce) and leaves more rewards for the truly-loyal holders.
- Long-term holders of HN also get governance rights, enhancing them to decide on protocol development and future rewards mechanisms.
In addition to its rewards mechanism, Holdium features a burn mechanism that penalizes early sellers. If a holder sells their tokens (both HM or memecoins) before the designated timeframes, a portion of their future rewards is burned, which has the following effects:
- Not only it reduces the overall supply, up to February 17th, 27.5% of the supply has been burned
- It also ensures that value is distributed to the most loyal, long-term holders, disincentivizing short-term speculation and incentivizing users to have “diamond hands”.
The HM token was designed to promote long-term commitment and a community-driven development as 66% of the supply was allocated for airdrops. Holdium also features governance, enabling long-term holders to participate in the decision-making process of the platform.
What Stands Out
- Holdium aligns token rewards with holding behavior, creating an ecosystem that benefits both large and small investors as long as they hold.
- The project’s sole purpose is to promote commitment and loyalty for other memecoins, as they have a pre-established list of tokens for which users can be rewarded when holding.
Torque
Torque is a decentralized growth protocol that gives projects the opportunity to create targeted reward campaigns designed to drive user engagement and overall ecosystem growth. Essentially, Torque functions as a marketplace where projects can launch campaigns ranging from trading contests to liquidity provision campaigns.
- Projects can set up customizable parameters and funding rewards pools.
- It has a flexible approach that allows projects to reward specific user actions, tailoring incentives to align closely with their general goals and needs.
Project founders are benefitted by customizable campaigns that are monitored through a real-time dashboard with insights that help to easily adjust said campaigns.
On the user side, the process is straightforward, as they just need to connect their wallets, complete the required tasks, and claim rewards once campaign requirements are met.
The token economy is simple:
- Project owners connect their Solana wallet and create a campaign with defined targets and timeframes.
- TORQ tokens must be staked by project founders to create the campaigns, the higher the value of the campaign, the higher TORQ stake needed. The stake and rewards go into a PDA (Program Derived Address, explained below) which locks the rewards.
- Once the campaign conditions have been met by users, the PDA distributes rewards to users automatically.
- Users can also stake TORQ to get more benefits including rewards boost, governance access, and revenue-sharing mechanism.
What Stands Out
- While the token economy by itself is simple, the main technical differentiator is that Torque utilizes Solana’s PDA (Program Derived Address) to distribute rewards.
- The way it works is that when a campaign is launched on Torque, the rewards are locked inside of a special on-chain account called PDA, which basically acts as a smart contract that contains the sets of rules for when and how these rewards should be released (as established by the campaign owner).
- Once a user meets the pre-defined conditions, the system automatically sends the reward from the PDA to that user without any manual intervention.
Monaco Protocol
The Monaco Protocol is an open-source decentralized betting protocol built on Solana. It provides the backend infrastructure for creating exchange-based betting apps and prediction markets.
Although they’re mentioned in Solana Compass’ list of innovative tokenomics and incentive design, they lack a native token, which is odd.
Without employing a token, Monaco Protocol features a volume-based fee business model to fund its development and drive growth. The fee structure not only incentivizes liquidity provision by market makers but also uses feed to sustain the protocol by reinvesting fees into user acquisition and further platform development.
What Stands Out
- No native token has been announced, but the infrastructure itself stands out for the use of a shared infrastructure model that enables developers to build interoperable betting apps without the hassle of creating their own models.
- By enabling a shared liquidity pool, Monaco creates a network effect that benefits all stakeholders, from app developers and liquidity providers to end users seeking competitive odds.
Sources
https://solanacompass.com/projects/bonk-rewards
https://www.cypherhunter.com/es/p/holdium/
https://solana.com/docs/core/pda
https://docs.monacoprotocol.xyz/readme/the-dev-environment#test-token
https://solanacompass.com/projects/the-monaco-protocol