Q&A

Why do we need PandoraDAOin the first place?

Stablecoins pegged to the dollar have become an important aspect of crypto due to their stability as opposed to tokens like Bitcoin and Ether. Users feel secure in transacting with stablecoins as they believe they will maintain the same purchasing power over time. However, this is not the case.

The dollar is controlled by the US government and the Federal Reserve, meaning that a decline in the value of the dollar also results in a decline in the value of these stablecoins. PandoraDAO aims to address this issue by creating a free-floating reserve currency, Pandora Token, which is supported by a portfolio of assets. By emphasizing on growth of supply rather than appreciation of price, PandoraDAO aims that PDRAI can act as a currency that can maintain its purchasing power regardless of market fluctuations.

Is PDRAI a stable coin?

No, PDRAI is not a stable coin. Rather, Pandora token aims to become an algorithmic reserve currency supported by other decentralized assets, similar to the concept of the gold standard. The token offers a free-floating value that users can rely on, as its intrinsic value is derived from fractional treasury reserves. PDRAI is backed, not pegged.

Every Pandora Token is supported by 1 USDC, not fixed to it. As the treasury supports each Pandora token with a minimum of 1 USDC, the protocol will buy back and destroy Pandora Token when it trades below 1 USDC, which would push the price of Pandora Token back to 1 USDC. The value of Pandora Token could go above 1 USDC as there is no upper limit imposed by the protocol.

To put it simply, "pegged" means fixed to a value while "backed" means supported with a minimum value. The intrinsic value or floor price of PandoraDAO is considered to be 1 USDC. However, the actual price will depend on the market and could be higher, at 1 USDC + a premium.

PandoraDAO is made up of several components including a protocol-managed treasury, protocol-owned liquidity, a bond mechanism, and staking rewards, which are all aimed at regulating the growth of supply. Profit is generated by the sale of bonds, which the treasury uses to mint and distribute Pandora tokens to stakers. By utilizing liquidity bonds, the protocol is able to build up its own liquidity. For more information, refer to the section below on the significance of Protocol-Owned Liquidity (POL).

Why is PCV important?

The Pandora token can only be created or destroyed by the protocol, which controls the funds in its treasury. This ensures that each Pandora token is always backed by 1 USDC. This feature allows investors to easily assess the risk of their investment, as the protocol will always purchase Pandora tokens below 1 USDC with its treasury assets until there are no more sellers.

The code can be trusted, unlike the FED.

The protocol's accumulation of PCV provides stakers with more financial stability, as it guarantees a longer-term ability to sustain the current staking APY. This is due to the increased funds available in the treasury.

Why is POL important?

PandoraDAO owns most of its liquidity thanks to its bond mechanism. This has several benefits: PandoraDAO does not have to pay out high farming rewards to incentivize liquidity providers a.k.a renting liquidity. PandoraDAO guarantees the market that the liquidity is always there to facilitate sell or buy transaction. By being the largest LP (liquidity provider), it earns most of the LP fees which represents another source of income to the treasury. All POL can be used to back Pandora token. The LP tokens are marked down to their risk-free value for this purpose.

Why PandoraDAO and not another decentralised reserve currency protocol ?

PandoraDAO is better than the other decentralised reserve currency protocols because its treasury is managed by Artificial Intelligence. However, AI can’t replace human decision-making. Human input is always necessary when using an AI-based tool. The AI must be trained and used correctly, and this requires a more complex process than simply setting it loose on the markets without any guidance. Therefore, we have decided to implement Pandora Improvement Proposals (PIP) where holders will be able to vote and guide PandoraDAO’s treasury.