Introducing Pangolin and the PNG Token

PNG hero


Pangolin is a decentralized exchange (DEX) which runs on Avalanche, uses the same automated market-making (AMM) model as Uniswap, features a native governance token called PNG that is fully community distributed and is capable of trading all tokens issued on Ethereum and Avalanche. In a crowded marketplace with multiple contenders, Pangolin offers three critically important benefits: fast and cheap trades, community-driven development, and a fair and open token distribution.

First, Pangolin can finalize trades quickly and cheaply. Since Pangolin is built on Avalanche, it enables users to swap assets while enjoying sub-second transaction finality and transaction fees as low as a few cents. Oftentimes, trades on Pangolin will feel as fast as trades on centralized exchanges. Second, beyond the significant performance upgrades to the technical status quo, Pangolin is community-driven. The native governance token, PNG, enables the community to drive the development of the product in full. Third, but not least, Pangolin features a 100% community-focused token distribution model, meaning that all tokens are distributed directly to the community, without any allocations to team, advisors, investors, or insiders.

Users of existing AMMs, such as Uniswap and Sushiswap, are already familiar with their mechanism of action. Therefore, the rest of this post does not discuss how Pangolin achieves its trading capabilities. Instead, we discuss the PNG token in more detail, including its distribution mechanism and governance rules.

PNG Distribution: A 100% Community-Driven Governance Token

To reinforce the project’s commitment to being created solely for the benefit of users, Pangolin is following a fair launch model with its governance token (PNG). However, while PNG will enable all the governance activities of Pangolin, and therefore its future development, governance proposals will not start until three months after the launch of Pangolin. This waiting period of three months is to ensure that enough PNG is distributed to the community.

Distribution Breakdown

No PNG tokens are allocated to the team, investors, advisors, or any sort of insiders. Therefore, Pangolin is entirely community-driven and entirely community-owned. PNG is capped at a supply of 538 million tokens, 100% of which will be distributed to the community according to Chart 1. The first 95% of tokens, or 512 million tokens, are dedicated to the community treasury, where they will initially be used to fund liquidity mining. The remaining 5%, or 26 million tokens, are dedicated to a community airdrop.

PNG distribution
Chart 1. PNG distribution. 95% of the tokens are given to liquidity miners and 5% to airdrop recipients.

Community - Liquidity Mining Allocation (95% of PNG)

Below are the emission rates. Token emissions began in Feb 2021 and will end in Oct 2024. The full schedule of distribution of PNG in the liquidity mining allocation is shown below:

Date PNG / Day Monthly reduction
Feb 2021-Oct 2021 175,000 0
Nov 2021-Aug 2022 174,340 1k
Sep 2022-Jun 2023 165,340 2k
Jul 2023-Apr 2024 145,340 3k
May 2024-Oct 2024 115,340 4k

The liquidity mining program starts on mainnet launch and will cover the following pools on Pangolin:

  • AVAX Pools

    • AVAX/ETH
    • AVAX/PNG
    • AVAX/DAI
    • AVAX/UNI
    • AVAX/YFI
  • PNG Pools

    • PNG/ETH
    • PNG/USDT
    • PNG/WBTC
    • PNG/LINK
    • PNG/DAI
    • PNG/UNI
    • PNG/AAVE
    • PNG/YFI

The PNG will be allocated per pool proportional to liquidity as calculated by the total AVAX value in the pool. In non-AVAX pools, the proportional liquidity is calculated by looking at the price of the base token in comparison to AVAX.

Here’s an example. Suppose we only have AVAX/USDT, AVAX/PNG, and PNG/USDT pools. We are trying to calculate the proportional amount of rewards for each. Now, suppose the price of AVAX is 4 USDT and 40 PNG. For the AVAX/USDT pool, there’s 1 AVAX of liquidity, and thus 4 USDT. For AVAX/PNG there is 1 of liquidity, and thus 40 PNG. For PNG/USDT, there’s 80 PNG of liquidity. To calculate the amount of AVAX, we calculate that the 80 PNG of liquidity equals 2 AVAX. Therefore, the final liquidities are 1, 1, and 2 for the three pools respectively. This total 4 AVAX, and thus the first two pools receive 25% of the rewards, and the third pool receives 50%.

Community - Airdrop Allocation (5% of PNG)

The airdrop allocation will be distributed on the basis of ownership of UNI and SUSHI. In order to claim the PNG in the airdrop, UNI and SUSHI holders that had tokens on December 7th, 2020 will need to call withdraw on a distribution contract. This transaction must be from the same address that holds UNI/SUSHI on Ethereum and must be sent within one month of Pangolin’s launch. The steps are as follows:

  1. First, a user deposits SUSHI or UNI from their Ethereum address that stored tokens on December 7th, 2020, onto the Ethereum <> Avalanche bridge contract sitting on Ethereum.
  2. Second, the holder withdraws SUSHI or UNI from the Ethereum <> Avalanche bridge contract sitting on Avalanche. The withdrawal address on the Avalanche side must be the same as the address on the Ethereum side. This is possible since Avalanche supports Metamask and other tools out of the box, therefore Ethereum addresses resolve to the same Avalanche addresses.
  3. Third, and finally, the user will be able to instantly withdraw PNG.

The conversion formula from SUSHI or UNI onto PNG is not linear, but rather slightly quadratic. Specifically, PNG will be claimable pro-rata based on the following formula:

PNG amount = 0.3 * (SUSHI amount ^ 0.8)
PNG amount = 0.7 * (UNI amount ^ 0.8)

These conversion rates were chosen in order to reduce wealth concentration onto large holders of SUSHI and UNI and redistribute more evenly onto smaller holders of SUSHI and UNI. 70% of the airdrop allocation -- or 18.2M PNG -- will be distributed to UNI holders and 30% -- or 7.8M PNG -- to SUSHI holders.

PNG Governance

A big part of the value proposition of PNG’s governance is that it is highly community-driven. Because there are no insiders, such as investors, team members, or other such stakeholders, the development of Pangolin remains entirely up to the wider community. Pangolin governance will be live three months after launch and will enable several key actions, including:

  • Modifications to the liquidity pools

    Initially, the distribution of tokens will be entirely through the liquidity mining pools listed in the previous section. The liquidity mining period will remain active until the pools are altered or another community initiative is accepted as a formal governance proposal. Proposals may add and subtract liquidity mining pools or may allocate PNG directly to a user or smart contract such as a community treasury.

  • Fee switch

    The community will also have the ability to enable the Pangolin fee switch. This fee switch can divert .05% of all swap fees to a designated address. Swap fees will remain fixed at .30%, but liquidity providers will only receive at most .25% of these fees. This provides the community with the opportunity to acquire extra funds to support any significant community initiatives. The Pangolin fee switch is subject to a 90-day timelock delay and is disabled by default.

Read more about governance in our Governance Forum

Conclusion: A Public Good for Avalanche and Ethereum

In the summer of 2020, we discovered the limits of the then-current network infrastructure amidst the skyrocketing use of decentralized finance (DeFi) apps, and the equally sharp falls as liquidity shocks rang throughout. The resulting network congestion introduced untenable, systemic risks and led to liquidations not from individuals without sufficient collateral, but from individuals who couldn’t fit their collateral deposit into a block on Ethereum. As avid users and believers in DeFi, we feel there must be back-ups and resources that avoid centralizing the nearly $15B locked in DeFi protocols onto one network that is undergoing a significant, multi-year upgrade. Furthermore, we believe that such applications require deep ownership from the community, and should be highly democratic and distributed.

Pangolin is a response to these two critical issues that other AMMs face: subpar performance and governance controls that benefit a few large holders. With Pangolin, users will be able to enjoy centralized-exchange-like speeds without having to compromise access to their existing portfolio of assets and without having to give control to large insiders.