---
description: >-
  PEP is the platform's utility and governance token, holding/staking the token
  unlocks a variety of benefits
---

# Pepper Token (PEP)

## Tokenomics Motivation

DeFi token economics have seen a tremendous evolution in a remarkably short period of time. One of Defi's foundational elements of sound token mechanics is liquidity mining. However, in a naïve sense, liquidity mining comes with a considerable amount of risks to the protocol's economics. Historically, most basic liquidity mining implementations incentivize mercenary "farm and dump" activities.

This creates a considerable misalignment of interests and intentions between LPs and the protocol token holders. Additionally, once the reward emissions are severely reduced, LPs are likely to pull their liquidity in search of better opportunities.

Therefore, PepperDEX has adopted some spicy economic innovations to create a single cohesive and sustainable strategy. PepperDEX has chosen against incentivizing LPing but instead to incentivize trading on PepperDEX. To address on-chain PEP liquidity, PepperDEX will allocate 25% of the PEP supply to protocol-owned liquidity (POL), which will also receive 20% of protocol revenue from DEX transaction fees and the exercising of oPEP. PepperDEX's strategy seeks to achieve the following:

1. Incentivize the productive activity of trading on PepperDEX
2. Ensure deep on-chain PEP liquidity through POL
3. Combat mercenary incentive farmers
4. Organically build the protocol treasury assets
