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Validated | An Open-Source Toolset for Token Infrastructure w/ Tommy Johnson

By Validated

Published on 2023-11-28

Discover how Armada is transforming token launches and infrastructure on Solana with open-source tools for sustainable tokenomics and governance.

The notes below are AI generated and may not be 100% accurate. Watch the video to be sure!

The Evolution of Token Launches on Solana

The landscape of token launches in the Solana ecosystem has undergone a significant transformation since the early days of 2021. Tommy Johnson, a key figure in the development of Armada, provides invaluable insights into this evolution during his conversation on the Validated podcast. In the nascent stages of Solana's growth, the approach to token launches was often hasty and poorly thought out. Projects would rush to launch tokens based on little more than a white paper, leading to a plethora of tokens with questionable utility and sustainability.

As the ecosystem matured, particularly towards the end of 2022, there was a noticeable shift in sentiment. The community began to question the necessity and purpose of new tokens, with a prime example being the scrutiny faced by projects like Aptos. This change in perspective prompted developers and project leaders to more carefully consider the rationale behind launching a token and its long-term viability within their ecosystem.

The Birth of Armada

Armada emerged as a response to the evolving needs of the Solana ecosystem. It is a collaborative project between PsyFi and HXRO, aimed at providing an open-source toolkit for launching tokens. The project's inception was driven by the recognition of pain points experienced by teams when launching tokens, managing liquidity, and implementing governance structures.

Tommy Johnson explains, "Armada came about because PsyFinance, formerly PsyOptions, and HXRO were chatting. We were just talking about the pain points we'd seen with launching a token and getting liquidity on those tokens and governance and everything under the sun." This conversation highlighted the need for comprehensive infrastructure to support projects from token inception to full decentralization.

Armada's Core Components

Armada's toolkit encompasses several critical components designed to streamline the token launch process and enhance post-launch operations:

  1. Token Launch Mechanism: Armada provides an auction mechanism that allows for price discovery. As Tommy describes, "There's this auction mechanism that has price discovery in it." This feature enables projects to start with a higher price point, which can adjust based on demand, ensuring a fair and efficient distribution process.

  2. Liquidity Management: Recognizing that liquidity is crucial for a token's success, Armada offers tools to help projects establish and maintain liquidity pools. "Once you have a token, like what else do you do with that? Well, you need to get liquidity on the token. Otherwise, like you have no ecosystem," Tommy emphasizes.

  3. Incentive Structures: The platform includes features for incentivizing liquidity provision, which is essential for creating a robust token economy.

  4. Governance Infrastructure: While not directly building governance systems, Armada provides integration points with existing governance frameworks like SPL Governance and Realms.

Open-Source Philosophy

One of the most noteworthy aspects of Armada is its commitment to open-source development. This decision was made despite the potential risks of competitors forking the code. Tommy articulates the reasoning behind this approach: "As the ecosystem grows, it's not so much like the IP that becomes the moat; it's more of your community and liquidity and other aspects of it."

This open-source strategy aligns with the ethos of the blockchain community and allows for greater transparency and collaboration. It also positions Armada as a public good for the Solana ecosystem, potentially accelerating innovation and adoption across the platform.

The Challenge of Decentralized Development

During the podcast, Tommy shares an interesting perspective on the challenges of decentralized development. He recounts an early attempt to leverage a global network of contributors: "In the very beginning, we tried to get a bunch of decentralized contributors and, you know, get community, get involved, but that was a waste of money. Like you get really bad developers, poor designs, like things are all scattered."

This experience led to a more structured approach, with two core contributing teams working in tandem. This model allows for more efficient development while still maintaining a degree of decentralization that is crucial for blockchain projects.

Sustainability and Revenue Model

The sustainability of open-source projects in the blockchain space is a perennial challenge. Armada's approach to this issue is multifaceted. Tommy outlines several potential revenue streams:

  1. Fees from the concentrated liquidity market-making vaults
  2. Potential transaction fees on the demultiplexer
  3. Performance fees from market-making activities

Importantly, Tommy notes that certain components, like the staking program, will not incur fees to ensure accessibility and widespread adoption.

The Role of Community in Token Projects

A critical question addressed in the podcast is the optimal timing for community involvement in token projects. Tommy acknowledges the complexity of this issue, suggesting that different aspects of a project may benefit from community input at various stages. For marketing and growth initiatives, early community involvement through sub-DAOs might be beneficial. However, for core development and strategic decisions, a more centralized approach may be necessary initially.

Governance Challenges and Solutions

The podcast delves into the intricacies of on-chain governance, highlighting some of the current limitations in existing systems. Tommy points out a significant issue with delegation in SPL Governance: "Fixing delegation and improving that to make it easier for these groups and token holders that can't participate in governance to delegate to not just one wallet, but many different wallets... would be a huge improvement."

Armada's approach to governance is to provide tools that can integrate with existing governance frameworks while focusing on improving user experience and participation rates.

The Future of Token Infrastructure

Looking ahead, Tommy envisions a future where token infrastructure becomes more integrated and user-friendly. He sees Armada playing a crucial role in this evolution by providing a comprehensive suite of tools that work seamlessly together. This integration could significantly lower the barrier to entry for new projects and improve the overall quality of token economies on Solana.

Armada's Impact on the Solana Ecosystem

The introduction of Armada to the Solana ecosystem represents a significant step forward in the maturation of the platform. By providing a standardized, open-source toolkit for token launches and management, Armada has the potential to:

  1. Improve the quality of new token projects
  2. Increase the efficiency of token distributions
  3. Enhance liquidity across the Solana ecosystem
  4. Foster better governance practices

These improvements could collectively contribute to Solana's competitiveness in the broader blockchain landscape.

The Importance of Tokenomics

Throughout the discussion, the importance of well-designed tokenomics is repeatedly emphasized. Tommy stresses that governance tokens should have real utility beyond speculative value: "Otherwise, like your governance token is a gimmick and most, I mean, to date, most governance tokens are gimmicks." This perspective underscores Armada's focus on creating sustainable token economies that provide genuine value to their ecosystems.

Addressing Market Cycles

An interesting aspect of the conversation is the acknowledgment of market cycles and their impact on project development. Tommy notes that the tools Armada is building become even more critical during bullish market conditions: "This is something where the fundamentals really matter and the tools that groups like Armada have built out that can help people do sustainable and well thought out token launches become even more important when more noise enters the ecosystem."

This foresight in developing infrastructure during quieter market periods positions Armada and the Solana ecosystem to capitalize on future market upswings.

The Legal Landscape

The podcast touches on the complex legal considerations surrounding token launches and decentralized organizations. Tommy mentions the extensive legal work that goes into structuring such projects: "Lots of legal bills. That's the answer." He outlines a structure involving an offshore foundation with service agreements to onshore tech providers, illustrating the intricate legal frameworks necessary in the current regulatory environment.

Armada's Unique Selling Proposition

What sets Armada apart in the crowded field of blockchain infrastructure projects is its comprehensive approach. Rather than focusing on a single aspect of token economics or governance, Armada provides an end-to-end solution that covers token launch, liquidity management, and integration with governance systems. This holistic approach addresses the interconnected nature of these elements in creating a successful token economy.

The Technical Innovation of Armada

Armada introduces several technical innovations that could significantly impact how tokens operate on Solana:

  1. SPL Staking Program: This program provides tokenized representation of stake weight, allowing for seamless integration with governance systems.

  2. Demultiplexer: A flexible system for distributing fees from any program to various actions or recipients, enabling complex tokenomic structures.

  3. Customizable UI: Armada offers a customizable interface that projects can self-host, allowing for branding consistency and tailored user experiences.

These innovations demonstrate Armada's commitment to creating flexible, powerful tools that can adapt to the diverse needs of different projects in the Solana ecosystem.

The Challenge of Balancing Immutability and Flexibility

One of the key challenges discussed is finding the right balance between immutability and flexibility in smart contract design. Tommy explains their approach: "The goal is to make, you know, all these actions that that'll be fleet three, we're building some actions for the launch of the demultiplexer, but, you know, we don't want to make assumptions and we'll let other teams contribute."

This philosophy allows for a core set of immutable, secure contracts while enabling flexibility through pluggable actions and upgradeable components where necessary.

The Potential for Partnerships and Integrations

Armada's modular design opens up significant possibilities for partnerships and integrations within the Solana ecosystem. Tommy mentions the potential for fee splits and collaborative tokenomics models: "If there's, you know, some collaboration, you could do a split, a fee split from those protocols and send them to two different treasuries, or you could stack these demux instances."

This capability could foster a more interconnected and collaborative DeFi ecosystem on Solana, where protocols can easily create symbiotic relationships through shared tokenomic structures.

The Role of Education in Adoption

Throughout the conversation, there's an underlying theme of the importance of education in driving adoption of these sophisticated tools. As token launches and management become more complex, there's a growing need for resources that can help project teams understand and implement best practices. Armada's open-source nature contributes to this educational aspect by allowing developers to study and learn from the codebase.

The Future of Decentralized Organizations

The discussion touches on the evolution of DAOs and governance models. Tommy expresses interest in the concept of sub-DAOs for specific functions like marketing, citing examples from other projects like Osmosis. This points to a future where decentralized organizations may become more sophisticated, with specialized sub-units handling different aspects of operations.

Armada's Vision for Solana's Infrastructure

When asked about areas where Solana still needs improvement, Tommy highlights the need for better integration between existing tools: "I think there's a lot of good infrastructure, but it's all very disjoint." Armada aims to address this by providing a more cohesive suite of tools that work seamlessly together, potentially setting a new standard for infrastructure projects on Solana.

The Economics of Open-Source Development

The podcast delves into the challenging economics of open-source development in the blockchain space. Tommy acknowledges the difficulty of building a sustainable model when the code is freely available: "It is frustrating. It is also definitely like very difficult, right? If someone's like two or three years of their time, like into it, it's like building sustainable model is like not easy when you have that nature, open source code, right?"

This leads to a discussion on potential monetization strategies, including transaction fees, performance fees, and possibly SaaS-like models for certain components of the Armada toolkit.

The Importance of Community Feedback

A recurring theme in the conversation is the value of community feedback in shaping the development of Armada. Tommy emphasizes their current focus: "We're just still in such the early phases of just get people using it, and collecting feedback. So, you know, it becomes the best product and it creates a moat in and of itself." This approach underscores the iterative nature of blockchain development and the crucial role that user input plays in refining and improving tools like Armada.

Armada's Contribution to Solana's Competitiveness

By providing a comprehensive, open-source toolkit for token infrastructure, Armada is contributing significantly to Solana's competitiveness in the broader blockchain ecosystem. The availability of such sophisticated tools could attract more developers and projects to the platform, potentially accelerating Solana's growth and adoption.

The Evolving Nature of Blockchain Development

The conversation with Tommy Johnson provides valuable insights into the evolving nature of blockchain development. From the early days of hackathons and rapid prototyping to the current focus on sustainable, well-designed systems, the industry has matured significantly. Armada represents this new phase of development, where tools are created with long-term sustainability and real-world utility in mind.

Conclusion: Armada's Role in Shaping Solana's Future

As the Solana ecosystem continues to grow and evolve, tools like Armada will play a crucial role in shaping its future. By providing open-source, comprehensive solutions for token launches and management, Armada is laying the groundwork for more sophisticated and sustainable token economies. This, in turn, could lead to increased adoption, better governance models, and ultimately, a more robust and competitive Solana ecosystem.

The conversation with Tommy Johnson on the Validated podcast offers a deep dive into the challenges and opportunities in building token infrastructure. It highlights the thoughtful approach that projects like Armada are taking to address complex issues in tokenomics, governance, and community engagement. As the blockchain space continues to mature, it's clear that projects focusing on foundational infrastructure like Armada will be instrumental in driving the next wave of innovation and adoption in the Solana ecosystem and beyond.

Facts + Figures

  • Armada is a collaborative project between PsyFi (formerly PsyOptions) and HXRO, providing an open-source toolkit for launching tokens on Solana.
  • The first Solana DeFi hackathon took place in February 2021, where Tommy Johnson's team won first place with their options primitive.
  • Armada's development was initiated in response to the pain points observed in token launches, liquidity management, and governance implementation.
  • The toolkit includes components for token launch mechanisms, liquidity management, incentive structures, and governance infrastructure integration.
  • Armada's auction mechanism allows for price discovery, starting with a higher price that adjusts based on demand.
  • The project emphasizes the importance of liquidity, recognizing it as crucial for a token's success in the ecosystem.
  • Armada has taken an open-source approach to development, despite potential risks of competitors forking the code.
  • The project initially attempted to leverage a global network of decentralized contributors but found it inefficient.
  • Armada's current development model involves two core contributing teams working in tandem.
  • Potential revenue streams for Armada include fees from concentrated liquidity market-making vaults, transaction fees on the demultiplexer, and performance fees from market-making activities.
  • The SPL Staking Program introduced by Armada provides tokenized representation of stake weight for seamless integration with governance systems.
  • Armada's demultiplexer is a flexible system for distributing fees from any program to various actions or recipients.
  • The project offers a customizable UI that projects can self-host, allowing for branding consistency and tailored user experiences.
  • Armada's development has involved significant legal considerations, including the establishment of an offshore foundation with service agreements to onshore tech providers.
  • The project aims to address the disjoint nature of existing Solana infrastructure by providing a more cohesive suite of tools.

Questions Answered

What is Armada?

Armada is an open-source toolkit developed collaboratively by PsyFi and HXRO for launching and managing tokens on the Solana blockchain. It provides a comprehensive set of tools for token launches, liquidity management, incentive structures, and governance integration. Armada aims to address the pain points experienced by projects in the Solana ecosystem when dealing with tokenomics and related infrastructure.

How does Armada's auction mechanism work?

Armada's auction mechanism is designed for price discovery during token launches. It allows projects to start with a higher token price, which can then adjust based on demand. Tommy Johnson explains that if no one is buying at the initial price, it goes lower, but when people start buying, the price jumps up. This dynamic pricing model helps ensure a fair and efficient distribution process for new tokens.

What are the key components of Armada's toolkit?

Armada's toolkit consists of several key components. These include a token launch mechanism with an auction feature for price discovery, tools for liquidity management to help projects establish and maintain liquidity pools, incentive structures for encouraging liquidity provision, and integration points with existing governance frameworks like SPL Governance and Realms. Additionally, it includes innovative features like the SPL Staking Program for tokenized stake representation and a demultiplexer for flexible fee distribution.

Why did Armada choose to make their toolkit open-source?

Armada decided to make their toolkit open-source despite the risk of competitors forking the code. Tommy Johnson explains that as the ecosystem grows, the real value lies not in the intellectual property of the code itself, but in the community and liquidity aspects of a project. The open-source approach aligns with the ethos of the blockchain community, allows for greater transparency and collaboration, and positions Armada as a public good for the Solana ecosystem.

How does Armada plan to be sustainable as an open-source project?

Armada has a multi-faceted approach to sustainability. The project plans to generate revenue through fees from concentrated liquidity market-making vaults, potential transaction fees on the demultiplexer, and performance fees from market-making activities. However, certain components, like the staking program, will not incur fees to ensure accessibility. The team is also considering potential SaaS-like models for certain aspects of the toolkit in the future.

What challenges did Armada face in development?

One of the main challenges Armada faced was in decentralized development. Initially, they attempted to leverage a global network of contributors but found it inefficient, leading to poor quality code and scattered designs. This experience led them to adopt a more structured approach with two core contributing teams working together. Additionally, the project had to navigate complex legal considerations, resulting in significant legal expenses and the establishment of an offshore foundation structure.

How does Armada improve governance in token projects?

While Armada doesn't directly build governance systems, it provides integration points with existing frameworks like SPL Governance. The project aims to improve governance participation by addressing issues like delegation. For example, Armada's SPL Staking Program provides tokenized representation of stake weight, allowing for seamless integration with governance systems. The team is also working on improving delegation processes to make it easier for token holders who can't directly participate in governance to delegate their voting power effectively.

What impact does Armada expect to have on the Solana ecosystem?

Armada aims to significantly impact the Solana ecosystem by providing a comprehensive, open-source toolkit for token infrastructure. This is expected to improve the quality of new token projects, increase the efficiency of token distributions, enhance liquidity across the ecosystem, and foster better governance practices. By lowering the barrier to entry for new projects and improving the overall quality of token economies, Armada could contribute to Solana's competitiveness in the broader blockchain landscape and potentially accelerate its growth and adoption.

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