The INC Incentive Token is a unique digital asset designed to reward participants who contribute liquidity to a decentralized finance (DeFi) protocol – PulseX. By distributing INC tokens to users who provide liquidity to specific farming pools, the ecosystem aims to incentivize active engagement, foster liquidity, and promote stability. On PulseX DEX the liquidity providers receive INC as a reward. This provides an opportunity for users to reinvest their rewards by selling INC and purchasing more PLSX tokens, thereby benefiting from potential price appreciation. There’s one thing that no one is talking about, though, and that is the single-sided staking as a feature for the farmers and a free gas opportunity.
The INC token operates on a fixed inflation rate, resulting in a decreasing supply growth rate over time. The initial supply was zero, and the token is being created every second according to the inflation rate. At the time of writing, the total supply of INC is 5.62 million, the daily inflation rate is 1.55%, and the annual inflation rate is 566.74%. The below chart shows the red line marking initial hyperinflation and a fast decline over time. As the increase in supply of INC gradually diminishes, the token becomes scarcer, potentially leading to increased value. The current inflation rate is the highest, as it results in 1 INC per second. The MasterChef.sol smart contract can decrease this inflation rate.
INC vs Bitcoin, Doge, XEN
This way of creating a token supply is similar to Bitcoin, Doge, or XEN because it’s hyperinflationary at the beginning and disinflationary over time. It ensures the broadest possible distribution while rewarding early adopters. While many users initially take profits from the free token and sell it on the market, others accumulate it at the lowest possible price, becoming whales. They become liquidity providers and market makers, and this concentration of an asset in the hands of a few within the system acts as a safeguard against significant price decreases. With limited supply available on the market, the price tends to maintain stability above the floor price established in previous years, making the token more valuable. While Bitcoin, Doge, and XEN have an additional safeguard against a total price fall that is reflected in production costs tied to electric energy or gas, INC doesn’t. The INC whales will need to be the ones to maintain the floor.
To earn INC, participants provide liquidity on PulseX and receive LP (liquidity provider) tokens. The length of the staking and the percentage of tokens staked in relation to the pool’s total supply are two important factors that affect the earnings from staking LP tokens. The longer the duration of staking and the greater the stake, the higher the earnings. The system periodically calculates earnings by determining the time elapsed since the last update, calculating the INC rewards per second, and distributing them based on the allocation points assigned to each pool.
The dynamic system employed for adjusting and distributing INC rewards ensures fairness and efficiency. The accumulated INC per share is continuously updated based on the rewards calculated for the time since the last update. These rewards are then distributed to individual stakers by multiplying the difference in accumulated INC per share by their staked LP token balance.
INC MasterChef contract
In layman’s terms, the MasterChef contract governs the distribution of INC to users who provide liquidity to DeFi protocols. The contract manages various pools where users can deposit their tokens, and based on the amount and duration of their deposits, they earn rewards in the form of INC tokens.
The contract defines two important structures: UserInfo and PoolInfo. UserInfo stores information about each user, such as the amount of LP (liquidity provider) tokens they have provided and the pending rewards they are entitled to. PoolInfo contains details about each liquidity pool, including the LP token address, the allocation points determining the share of rewards for the pool, and the accumulation of INC tokens per share.
The contract utilizes several external libraries for safe arithmetic calculations and interactions with ERC20 tokens. It also extends the Ownable contract, which gives the owner certain privileges and control over the contract’s functions.
The MasterChef contract allows the owner to add and configure new liquidity pools by specifying the allocation points and the LP token contract address. The contract ensures that no duplicate pools are added and calculates rewards based on the time and amount of LP tokens staked in each pool.
Users can deposit and withdraw their LP tokens from the pools, and the contract automatically updates the reward distribution based on the current state of the pools. Pending rewards are calculated by multiplying the user’s LP token amount by the accumulated INC per share and subtracting the previously claimed rewards.
MasterChef also includes emergency withdrawal functionality, allowing users to withdraw their LP tokens without claiming rewards in case of unforeseen circumstances. Additionally, there are safety measures in place to ensure that INC tokens are transferred correctly, even accounting for potential rounding errors.
MasterChef has also made comments at the beginning:
“// Note that it’s ownable and the owner wields tremendous power. The ownership
// will be transferred to a governance smart contract once INC is sufficiently
// distributed and the community can show to govern itself.”
This comment and the code within mean that INC will serve in the future as a governance token, granting holders the ability to influence decision-making within the ecosystem. Holding INC over an extended period will allow participants to have a say in the future development and direction of the project. Right now, this governing function is in the hands of whoever sets the farms, which is probably Richard Heart, however, the comments imply that once “the community can show to govern itself,” this function could possibly be decentralized.
Single-sided staking with INC
Single-sided staking is something that is much anticipated by many. It’s because it’s staking without risk. Staking the token and getting the rewards is all a user needs to do. It would seem like this was also the initial intention for PulseX, but it hasn’t come yet.
Nevertheless, INC acts effectively as a single staking mechanism. While single sided staking doesn’t incur exposure to impermanent loss because it’s just one token being staked, the INC as single-sided staking is a bit different. Normally, a liquidity provider needs two tokens, which give him the Liquidity Pool token (PLP). PLP can then be taken to the PulseX farm and staked, giving the user free INC. The user can then take this free INC and stake it with PLSX or PLS. This is like staking a single token, PLX or PLS, because INC was given for free. While the first step exposes the user to the risk of impermanent loss, the next step is risk-free in this sense. Generated INC could offset any loss if price appreciation kicks in.
The price appreciation potential of INC becomes apparent when users purchase the token at a low price. By acquiring INC during such periods, individuals effectively “buy back time,” increasing their potential returns as the token’s value appreciates over time. The gradual reduction in inflation as a percentage of the total supply will make sure that less and less tokens are created, while the demand from farmers for more INC to get more PLSX or PLS will potentially make the price go up. By having a pair of tokens to generate free INC and rolling back INC into PLS, users can obtain free gas for their transactions. Even if the price of gas increases in the future, some users who had the foresight to get in early will transact for free.
The INC incentive token operates as a reward mechanism for liquidity providers in DeFi protocols like PulseX on Pulsechain. With its fixed inflation rate, potential price appreciation, and governance capabilities, INC offers an intriguing opportunity for long-term holders to actively engage in the ecosystem and have a say in its future. By understanding the dynamics of earning rewards, users can make informed decisions regarding their participation in farming pools, gas cost offsetting, and impermanent loss mitigation and strive to maximise their returns. As the INC token continues to evolve and the ecosystem expands, it will be fascinating to witness its impact on PulseX and the broader PulseChain landscape.