# To the Polkadot Community: A Final Word from a Five-Year Holder

**URL:** <https://forum.polkadot.network/t/to-the-polkadot-community-a-final-word-from-a-five-year-holder/16215>\
**Category:** Ecosystem\
**Created:** [December 9, 2025, 10:36am UTC](https://forum.polkadot.network/t/to-the-polkadot-community-a-final-word-from-a-five-year-holder/16215 "2025-12-09T10:36:33Z")\
**Posts on this page:** 1\
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**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 9, 2025, 9:08pm UTC](https://forum.polkadot.network/t/to-the-polkadot-community-a-final-word-from-a-five-year-holder/16215/10 "2025-12-09T21:08:42Z")

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> [@ThomasR](#):
>
> 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**.

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_[View the full topic](https://forum.polkadot.network/t/to-the-polkadot-community-a-final-word-from-a-five-year-holder/16215)._