Is Pollen the Next Generation of DeFi?

Community powered DeFi protocol Pollen aims to shake up the asset management industry with its bold attempt to really put the community in the driving seat, led by top performing traders that emerge from the community. As the first really tangible step to making that happen after two years’ development and several months of testing involving 7,000+ beta users, Pollen has now launched its trading simulation product after 99% backing in a 100K strong community vote in line with Pollen’s merit-based DAO structure. In essence Pollen’s mission is to “rethink asset management from the ground up, reduce market risk, and provide a safe harbor for market volatility.”

The mainnet launch is designed to create a community of crypto traders, so-called ‘Pollinators’ which in turn will identify a talent pool of the top performers. These traders will provide the trading insights to power the asset-backed Pollen Indexes. Head of Communications, Mia Agova summarized Pollen’s mission: “Due to launch by end-2022, Pollen Indexes will score the real match-point, disrupting asset management – that last, billion-dollar stronghold of traditional finance, hitherto reserved for those sufficiently affluent, knowledgeable, and well-connected, to a point of no return.” In simple terms the new sandbox will allow Pollen to pick out the best trading decisions, which will feed into Pollen Indexes. The result is a circular ecosystem between the virtual sandbox and the index, allowing them to harvest signals and feed those into real asset management indices.

Source: Mainnet launch announced on Twitter

How it works is that Pollen Virtual enables traders to try out their trading strategies in a safe sandbox environment, based on staked tokens, in a portfolio composed of assets available on Pollen with the ability to rebalance the proportion of each asset to improve performance in real time. In turn this encourages traders to compete in a leaderboard to earn reputation points and PLNs. Those less willing to risk their tokens can delegate them to the best performers for an 80% share of the trading profits. On the subject of minimizing risks Mia confirmed that shortly before the mainnet launch, with Pollen’s pre-release available for testing by the public from April 13, one interesting signal from the community was how staking amounts in Tether stablecoin USDT started to go down before the Terra crash.

It appears that their model fits a post-Terra DeFi world, where the trust is put in the decentralized community rather than the founders. Of course, the downside is the gains are not going to be crazy DeFi gains where you stake a dollar and have a million in your wallet in a couple of days! Instead, as Agova explained, the aim of Pollen is to bring some much-needed balance to DeFi and reduce the risk, reduce the volatility through indexes: “DeFi for grownups. It’s DeFi if you’re not necessarily crypto savvy, but an average person with some disposable income that wants to get into DeFi but can’t get into DeFi.”

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Source: the Pollen Litepaper

The virtual assets users allocate in their Pollen Virtual portfolio (with the protocol based on the Avalanche and Ethereum ecosystem) represent real assets, meaning that they rise and fall depending on each asset’s performance in real life. However, there is no exposure to the underlying assets in the Pollen Virtual portfolio: they are purely simulations, with only PLN earned or burned depending on the portfolio’s performance. The Pollen Virtual protocol actually has two tokens available to users, the PLN is the native token, and vePLN is what they call the “voter escrow token” which users obtain when they lock their PLN. While you can earn PLN as a reward you cannot earn vePLN, as a locked token it simply allows you to earn rewards up to 20% more. However, to add a gamification element you can lose vePLN as a result of poor performance of your trading activity.

However, one nice feature of the ecosystem is that you can delegate your PLN to top performing traders (based on proven reputation, scored by the protocol). “That should attract the less savvy traders like the average Joe’s like myself, who might just want to earn from default but can’t do it themselves,” said Agova. That also appeals to the expert traders who are already earning PLN, but also by building a following delegators they earn an extra 20% of each delegator as well.

Agova said that while their Index product is on track for launch in the last quarter of 2022, they needed to have a strong enough user base for Pollen Virtual for people to feed those signals into indexes. “So that’s why we are taking our time. After all, Pollen started out as an open source project which started out as a cool project to see if the idea worked; so, we are going to take your time with Indexes to make sure everything is fine, that we provide a quality service. “Even with Pollen Virtual we were debating with such a difficult market whether this is a good time to launch. But this is precisely the time to learn how to trade or to showcase like if you’re a very good trader, if you’re an expert now the types of you know, showcase your abilities in a difficult market so in a sense, there’s the bear market, and then terror provides a really good environment for us to launch.”

Pollen’s Co-Founder, Philip Verrien explained: “DeFi Summer showed the potential for a fully decentralized financial system. The technology was in its infancy and only those with a large risk appetite and technical smarts engaged. Through all the noise, we identified the need for easily accessible, mature decentralized financial products with appeal to a broader audience – the next generation of DeFi. We have been building what we believe will be the central DeFi 2.0 product: the first truly decentralized asset management protocol, Pollen DeFi.”

Barrister and Attorney at Law at, Brian Sanya Mondoh, said: “In my view, the delegation of tokens to make profits by delegators is likely to interact with the Howey Test, as there is an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.” Mondoh added that crypto regulation is rapidly underway with many DeFi protocols presented as real risks to consumers, businesses, national security, and the financial system. “The recent Terra collapse is still fresh in our minds and has further highlighted the need for appropriate regulation to help mitigate consumer, market integrity and financial stability risks,” he added.

Anndy Lian said Pollen was a great example of what DeFi can offer following the Terra collapse. “The risky returns offered by Terra’s Anchor Protocol proved that you need to base DeFi on sound first principles, a decentralized offering which empowers users rather than encouraging them to take unsustainable risks. Pollen’s approach of proving their offering through a step-by-step community led adoption and testing is the way to get it right. I particularly like the fact that anyone can create their own asset pools, and then turn successful indexes public, and earn tokens. This also opens the door for traders and influencers to set up groups and ‘branded asset pools; crypto influencers have the opportunity to practice what they preach, and you can benefit.”

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