Treasury Mint

The treasury's role extends beyond its current functionalities, aiming to secure access to the protocol's future ecosystem growth. A critical aspect of this ambition is realized through the Treasury Mint mechanism, which facilitates value capture not only by issuing the PRIMIS governance token but also directly from the yield token, PRM.

The Treasury Mint operates on an annual schedule, where a predetermined amount of PRM tokens can be minted into the Primis DAO treasury. This minting occurs at a fixed rate that follows a specific decrement schedule: starting at a 15% rate, the mint rate is designed to decrease by 1% each year until it reaches zero. Additionally, there's an ongoing mint rate of 1% in perpetuity after the initial schedule concludes.

This approach balances the need for funding the treasury to support future growth and initiatives with the imperative of maintaining the value and stability of the PRM token. It reflects a methodical strategy to finance the DAO's activities and ecosystem expansion while ensuring the minting rate is predictable and gradually declines to mitigate inflationary pressures on the token's value.

• Year 1 - 16%

• Year 2 - 15%

• Year 3 - 14%

• ...

• Year 15 - 2%

• Year 16 - 1%

• Year 17 - 1%

The Treasury Mint schedule includes three distinct cliffs or unlock points throughout each year, offering the flexibility to mint a third of the annual mint rate at each interval, with the remainder automatically minted at the year's end if not utilized earlier. These cliffs occur at 3, 6, and 9 months into the year.

For instance, in the first year, the protocol has the option, after 3 months, to mint 5.333% of the PRM token's total supply at that time into the treasury. After 6 months, an additional 5.333% can be minted, and by the 9-month mark, the total possible annual mint of 16% (reflecting the initial 15% plus the additional 1% in perpetuity) can be completed.

Furthermore, each minting event triggers a vesting period for the newly minted tokens, during which they are vested linearly over the following 6 months. This vesting mechanism is designed to ensure a gradual release of tokens into the treasury, aligning the immediate availability of funds with the protocol's long-term financial health and stability.

The issuance of PRM tokens, tied to bond activities and rebasing rewards, means there's no fixed supply limit. The amount minted is determined by the volume of LSTs deposited and their generated yield. This dynamic supply model is why the treasury utilizes a rolling minting schedule, enabling adjustments based on the inflation rate of the supply, ensuring the protocol's economic model remains responsive and sustainable.

Strategically, to maximize the annual minting potential, it's advantageous for the treasury to execute the full annual mint rate at the end of each year, when the PRM token supply is at its highest. This approach ensures the treasury capitalizes on the maximum possible minting quantity under the annual rate. The inclusion of cliffs at 3, 6, and 9 months provides the treasury with optional opportunities to mint earlier if necessary, offering flexibility to meet immediate needs or strategic objectives. However, for the purpose of optimizing the amount of PRM tokens minted to the treasury, deferring to the automatic end-of-year minting captures the greatest benefit from the supply's annual growth.

Governance Control and Income

The minting process within the Primis Protocol can be likened to the collection of a protocol fee, derived from the staking yields of all LST deposits. This mechanism represents a stream of income for the protocol, with the minted tokens being under the full control and ownership of Primis DAO stakeholders. These stakeholders have the authority to vote on how these tokens are utilized, thereby directly influencing the protocol's financial strategies and allocations.

This setup not only adds a layer of financial management and strategic planning to the protocol's operations but also enhances the intrinsic value of governance tokens by associating them with a tangible income stream. Such income, generated from the protocol's activities, brings additional value to the governance tokens, potentially increasing their appeal to current and prospective holders by offering a share in the protocol's revenue.

Backing

The process of minting and the backing of PRM tokens raise important considerations about the nature of their value. While PRM tokens are indeed backed by the LST yields from bond deposits, the rebasing algorithm focuses on calculating rebase values based on yields from deposit assets, including any additional yields generated through strategic investments. Once these yields are accounted for in the backing of PRM tokens, they become part of the treasury assets, which continue to generate compounding yields.

This mechanism allows PRM tokens to progressively exceed their initial backing, evolving into assets that not only maintain their value but also appreciate over time, similar to a 'flatcoin' that accumulates real yield. The treasury mint serves as a tool to capture a portion of this compounding value for the Primis DAO, illustrating a strategic approach to enhancing the underlying financial structure of the PRM tokens. Through this, the tokens don't just remain fully backed by their initial yields but grow in value, underpinned by a robust and appreciating treasury, effectively owned and governed by the Primis DAO stakeholders.

Supply Dilution

Given that the supply of PRM tokens is in a constant state of increase, driven by bond deposits and the subsequent compounding of these assets once integrated into the treasury backing, the annual mint rate effectively experiences dilution against the expanding overall supply. This is a key reason for the extended duration of the minting schedule.

As time progresses, the proportion of the total PRM token supply minted through the treasury will diminish, representing an ever-smaller fraction of the overall supply. Despite this gradual dilution, the treasury mint mechanism ensures a steady stream of income for the treasury, complementing the governance token emissions. This structure is designed to balance the growth and value distribution within the protocol, ensuring that while the treasury continues to benefit from the minting process, it does not disproportionately inflate the total supply or undermine the value of PRM tokens.