# Proposal: Dynamic Allocation Pool (DAP) **URL:** \ **Category:** Ecosystem\ **Created:** [November 10, 2025, 11:22am UTC](https://forum.polkadot.network/t/proposal-dynamic-allocation-pool-dap/15878 "2025-11-10T11:22:30Z")\ **Posts on this page:** 1\ **Showing post:** 40
**Author:** ![labormedia](https://dub1.discourse-cdn.com/flex005/user_avatar/forum.polkadot.network/labormedia/32/2638_2.png) [@labormedia](https://forum.polkadot.network/u/labormedia)\ **Post date:** [December 10, 2025, 7:17pm UTC](https://forum.polkadot.network/t/proposal-dynamic-allocation-pool-dap/15878/40 "2025-12-10T19:17:54Z")
> [@joepetrowski](#): > > I want to put forward an idea that came up in a staking discussion last week with @seadanda, @sigurpol , and @kianenigma : Since we have a hard cap on total issuance, why not just issue the full amount into the DAP (a.k.a. Issuance Buffer)? I was recently commenting on a **Perpetual DEX–style analogy** for the DAP in [another thread](https://forum.polkadot.network/t/to-the-polkadot-community-a-final-word-from-a-five-year-holder/16215/9), but I believe this comment by @joepetrowski is even more directly suited to that line of reasoning. By comparing the **Dynamic Allocation Pool (DAP)** to the architecture of a **Perpetual DEX Vault** , it becomes clearer why the idea of **pre-issuing the full capped supply and using it as collateral** is not just risky — it’s potentially **counterproductive** to the goals of stability and sustainable tokenomics. Opened to discussion: * * * > [@To the Polkadot Community: A Final Word from a Five-Year Holder](https://forum.polkadot.network/t/to-the-polkadot-community-a-final-word-from-a-five-year-holder/16215/9): > > And PERP DEX won’t be a major game changer for the ecosystem, the ecosystem has never been a DeFi ecosystem by design. It’s not built for DeFi only (compared to some other eco). I’ve argued that @jonas ’ DAP proposal is effectively a Perpetual DEX Vault managed by a protocol-level algorithm. If we map the components, the isomorphism becomes clear: - The Vault → the Allocation Pool (buffering volatility) - Funding Rate → the smoothing parameter (β), which adjusts outflows to preserve solvency - Insurance Fund → the underlying Inflation + Treasury creating the “security budget” | **Perpetual DEX Component** | **DAP Component (Jonas’ Proposal)** | **The Mechanism** | | --- | --- | --- | | **Liquidity Vault (GLP/ALP)** | **The Allocation Pool** | A buffer of assets (DOT) used to absorb shocks between inflow (revenue) and outflow (spending/rewards). | | **Funding Rate / Rebalancing** | **Smoothing Parameter (ദ)** | A variable rate that adjusts to balance the “inventory.” In a Perp Dex, the funding rate penalizes the heavy side to force equilibrium. In DAP, ദ adjusts the “spend” to keep the pool solvent over time. | | **Insurance Fund** | **Treasury / Inflation** | The backstop. If the Vault (Pool) runs dry due to a “price crash” (revenue drop), the system prints more DOT (inflation) or drains the Treasury to cover the liability. | | **Traders (Long/Short)** | **Coretime Buyers / Validators** | The participants extracting value from the Vault. | ## The Economic Problem with DAP proposal: However, if by virtue of similarity of the DAP proposal we contrast it with a “Perp DEX”-style architecture **it reveals the exact economic trap** I warned about in my critique of Jonas’ proposal [here](https://forum.polkadot.network/t/proposal-dynamic-allocation-pool-dap/15878/35?utm_source=chatgpt.com): In a functional Perp DEX (e.g., GMX, Hyperliquid), the Vault is sustainable because **external traders** pay **real fees** (via PnL or funding) into the system. There is a **purchasing power transfer from the outside world into the Vault**. In the current DAP model, however, we are building a “Perp DEX” where the protocol **trades primarily against itself**. We treat **blockspace allocation** as “revenue,” but if that revenue is sourced from **internal rotation** (re-staking, treasury swaps, validator churn) — rather than from external market demand (Cambridge Coefficient _k_) — then the Vault is simply washing volume. As I mentioned in the DAP thread: > “When a system fails to couple its ‘GDP’ (activity) back to its ‘Reserve Asset’ (DOT) via enforced sinks, the velocity of money becomes infinite, k → 0, and the **Cost of Corruption (CoC)** collapses.” * * * If we implement a “Perp DEX” architecture without a **Purchasing Power Anchor** , then we’re **automating the devaluation** of the Insurance Fund (i.e., DOT holders). It becomes a sophisticated machine to burn our own equity with **no innovation value**. --- _[View the full topic](https://forum.polkadot.network/t/proposal-dynamic-allocation-pool-dap/15878)._