Allo.Pool.Net: Decentralized pooling and exchange for community-driven liquidity

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Allo . Pool . Net (APN)

Capital Allocation via Ecosystem Stewardship

Contributors: Will Ruddick, Evan Hudson, Aude Peronne, Njambi Njoroge, Mohamed Sohail Azim, AbdulHakim Maina

February 14 2025

Executive Summary

The Allo.Pool.Network (APN) is a decentralized capital allocation Ecosystem designed to enable transparent, sustainable, and community-governed liquidity provisioning. Built on commitment-backed liquidity pools, APN ensures efficient fund distribution, regenerative economic growth, and fair governance mechanisms. The Ecosystem aligns with Allo.Capital’s DAO and integrates quadratic voting, smart contract automation, and non-extractive financial models.

Key Components:

  1. Top-Level Liquidity Pool (Governed by APN DAO)
    1. Overseen by Allo Stewards via a multisig (75% quorum).
    2. Contains stablecoins (cUSD, etc.) and Allo Steward Vouchers (ASVs)—redeemable for pool stewardship services.
    3. Quadratic governance voting determines token inclusion, valuation, risk limits, and exchange fees.
  2. Sub-Pool Seeding & Liquidity Flow
    4. Allo Stewards swap ASVs for stablecoins to fund eligible commitment pools managed by Pool Stewards.
    5. Sub-pools generate returns, replenishing the top pool while allocators earn liquidity fees.
    6. Sustainable liquidity cycle prevents capital extraction, ensuring treasury longevity.
  3. Governance & Incentive Structure
    7. Quorum voting & time-boxed decision-making prevent governance stagnation.
    8. Guardians hold veto power over proposals violating APN principles.
    9. Allocators earn dynamic fee-based rewards, creating a self-sustaining economic model.
  4. Pool Seeding & Eligibility Criteria
    10. Pools must meet minimum activity requirements (liquidity size, transaction volume, cross-pollination and purpose).
    11. Smart contract-based vesting schedules ensure responsible fund allocation.
    12. Fee accrual mechanisms automatically replenish the top-level pool, reducing reliance on external capital.
  5. Innovation & Competitive Advantage
    13. Commitment-backed liquidity pools: Unlike traditional DeFi models (Uniswap, Balancer), APN ties liquidity provisioning to real-world commitments.
    14. Regenerative economic cycles: Inspired by Islamic Finance (Waqf) and the Mijikenda Mweria system, APN enables zero-interest lending via tokenized commitments and fee-driven sustainability.
    15. Fair capital distribution: Quadratic funding ensures fair access to liquidity, preventing capital centralization.
  6. Governance Model

    1. Reward Mechanism Proposal for organization/contributors

    2. Value Capture and Distribution Ecosystem

    3. Community OS

At the heart of this ecosystem are Allo Stewards, governing the allocation pool and ensuring fairness, while Pool Stewards curate liquidity pools, set fees, and manage transactions. Commitment Providers provide essential services, issuing tokenized commitments for real-world activities - which are the contents of the liquidity pools. Finally Guardians safeguard this Ecosystem, with veto rights over proposals to ensure principles are followed.

Allocators fuel liquidity, earning rewards from pool fees and long-term incentives. Commitment Providers tokenize economic contributions, while General Stakeholders create and exchange tokens for services, creating a fluid, trust-based marketplace.

Capital flows into commitment pools, with seeding governed by quadratic voting and time-boxed decision-making, preventing extraction and ensuring longevity. Allocators/Liquidity providers are rewarded via pool fees, communities sustain themselves, and governance remains transparent and decentralized.

Allo.Pool.Network isn’t just a funding mechanism—it’s a living financial ecosystem, where decentralized capital fosters collective wealth, resilience, and regenerative economies. :rocket:

Allo.Pool.Network is not just a funding mechanism—it’s a next-generation financial infrastructure, leveraging decentralized capital allocation to foster resilient, commitment-driven economies. :rocket:

Formation of the Ecosystem

The Allo.Pool Network Stewardship Ecosystem (APN Stewardship Ecosystem or simply APN) is a decentralized capital coordination layer, aligning with Allo.Capital’s vision of enabling efficient, transparent, and scalable coordination mechanisms. The Ecosystem integrates governance, incentive structures, and sustainable value capture and circulation models, ensuring long-term treasury growth, community engagement, and decentralized decision-making. The APN ensures legitimacy, capital sustainability, and equitable governance, reinforcing on-chain capital allocation via networks of pools as a regenerative financial ecosystem.

Purpose and Principles

Purpose

  • Capital Coordination: Establish a network of liquidity pools to optimize liquidity provisioning.
  • Sustainability: Implement self-funding treasury mechanisms to ensure financial resilience.
  • Stewardship: Utilize multi-sig quorum and time-boxed** governance **to balance decentralization and efficiency.
  • Cross-Pollination: Enable resource-sharing mechanisms among pools and stakeholders.
  • Incentivization: Design long-term yield strategies to encourage capital contributions (allocators seeding).

Organizing Principles

  • Transparency & Legitimacy: Clear, auditable capital flows and decision-making.
  • Real World Impact: Facilitating the flow of real world assets (goods and services) validated by reporting and validation.
  • Decentralized Participation: Community-led funding and decision frameworks - (See Mweria and Waqf).
  • Innovation & Scalability: Support for novel financial primitives (Commitment Pools) and growth strategies (Pool Steward expansion and interconnection).
  • Resilience: Adaptive stewardship and connections between pools ensures economic sustainability.

Institutions and Instruments

  • Commitment Pools: Holdings of digital assets governed by smart contracts and curated by Stewards.
    • Pooling Protocol Functions:
      • Curations of value digital assets (such as commitments, stable coins and other tokens).
      • With relative valuation of curated assets by algorithms, static rates, oracles or other methods.
      • With limitations on over exposure to risks of token non-performance.
      • With exchange logic that can include fees on usage returned to liquidity providers.
    • Top Level Allo Pool is controlled by the Allo Stewards DAO and Cascading pools are controlled by Pool Stewards.
    • On-Chain Governance Enforcement
      • Use smart contract-based governance where Allo Stewards’ decisions (token curation, valuations, fees, and limits) trigger automated contract updates.
      • Implement multi-sig quorum results as direct contract inputs to ensure transparent, immutable execution.
      • Guardian Veto should trigger a pause mechanism in contract execution if a proposal violates APN principles.
  • Ledgers: On-chain records of commitments, allocations, and governance decisions.
  • Instruments: Mutual agreements defining rights, obligations, and exit strategies.

How the Allo.Pool.Network DAO Governs the Top-Level Liquidity Pool

The APN DAO operates a top-level liquidity pool, governed by Allo Stewards via a multisig (75% quorum), ensuring transparent, decentralized, and dynamic liquidity provisioning. This top-level pool serves as a strategic capital hub, enabling efficient allocation to sub-pools while maintaining financial sustainability.

Core DAO Governance Functions (Monthly Steward Meetings)

  1. Token Curation
    • Allo Stewards decide which tokens can be exchanged in the top pool.
    • These tokens represent commitments to seed and support sub-pools (e.g., governance commitments, long-term funding pledges, ecosystem-backed tokens).
  2. Relative Value Assignment
    • Stewards dynamically set the value of each token, determining exchange rates based on commitment credibility, economic demand, and liquidity conditions.
    • Valuation mechanisms can be algorithmic, manually adjusted, or linked to external oracles.
  3. Liquidity Risk Management
    • Stewards impose limits on token swaps, preventing over-extraction from the top pool.
    • These limits ensure sub-pool funding remains sustainable while allowing flexibility for active liquidity providers.
  4. Exchange Fee Structuring
    • Fees are set dynamically on token swaps to reward allocators and support treasury sustainability.
    • Fees are structured to incentivize long-term liquidity provision rather than short-term speculative withdrawals.

How Liquidity Flows Through the System

  1. Top level Pool has two types of tokens in it:
    • cUSD (and other stable coins) (seeded by allocators that are expecting returns)
    • Allo Steward Vouchers - Redeemable for pool stewardship services.
  2. Seeding Sub-Pools from the Top Pool
    • Allo Stewards (e.g. Sohail ) can swap their own stewardship-backed tokens for a limited amount of stablecoins from the top-level liquidity pool.
    • These stablecoins are then used to seed and support commitment pools that Stephen is working on with Pool Stewards.
  3. Sub-Pool Profits Flow Back
    • As sub-pools generate fees and return capital, they return liquidity to the top pool.
    • Stephen repays his original swap, replenishing stablecoins while allocators earn pool fees.
    • **The Allo Steward Vouchers in the top level pool represent their debt and must be removed before they can swap again for more stable coins. **
  4. Sustainable Liquidity Circulation
    • Instead of speculative withdrawals, liquidity cycles back into the ecosystem, ensuring long-term capital efficiency.
    • This model self-regulates liquidity demand by linking fund distribution to real economic performance in sub-pools.

Allo Pool Incentive Program

Each pool managed by a Pool Steward will be judged by the Allo Stewards with the following criteria to join a registry of eligible pools for capital allocation from the DAO.

Pool Seeding Eligibility Criteria

  • Seeding Allocation & Vesting
    • Allocations released gradually via a smart contract-controlled vesting schedule based on pool activity and performance.
    • Fee Accrual Model: A portion of fees generated by sub-pools auto-replenishes the top pool, ensuring sustained liquidity.
  • Minimum Activity Requirements:
    • Token commitments above a threshold (e.g., 500 tokens) in at least 10 tokens in the pool with a value of at least $500 USD (or equivalent).
    • A minimum transaction volume per period of 1 swap for each token in the pool once per month to ensure active participation.
    • Proven track record of the pool and tokens contained in the pool. A minimum of 3 months activity for the pool and each token in the pool.
    • Proven cross-pollination with other pools, reinforcing liquidity networks (at least 2 tokens in the pool can be as well found in other pools).
  • Pool Stewards must submit an allocation request with proof of activity.

Seeding Allocation

  • Capital is allocated by allowing Allo Stewards to swap their own voucher for funds in the top level pool. Allo Stewards are then able to use these funds to see pools of Pool Stewards (as well as their own) based on:
    • **Available capital in the Allo.Pool DAO **
    • Transaction volume and network effect metrics.
    • Existing liquidity reserves and governance engagement.
    • Staking-based incentive multipliers for long-term liquidity provision.
  • Depletion safeguards: Time-locked vesting mechanisms to prevent capital drain.
    • Note: Allocated capital cannot be removed without a swap of an approved token in each pool. This token is preferably another commitment for real world assets or other valued digital assets (rather than a derivative or general token without commitment).

Incentives for Allocators

  • Dynamic Fee Structure: Allocators earn a share of liquidity fees.
  • Long-Term Rewards: Staking-based incentives for sustained capital contributions.
  • Quadratic Governance Voting: Participation-weighted voting to balance influence.

Governance and Stakeholders - Roles and Responsibilities

Stakeholder Classes and Roles

General Stakeholders

  • Right to participate in liquidity pools.
  • Can hold, exchange, and seed commitment tokens.
  • Expected to report non-compliance within the ecosystem.

Stewards

Pool Steward (PS)
  • Create and manage commitment pools, ensuring alignment with capital allocation objectives.
  • Manages commitment pools, ensuring liquidity security and transaction integrity.
  • Implements fee structures and quality control for efficient exchanges.
  • Ensures pool transparency through governance oversight mechanisms.
Allo Steward (AS)
  • Manages the Allo.Capital APN DAO.
  • Oversees proposal selection, capital disbursement, and performance tracking.
  • Swap their own vouchers to remove Allocated capital from the top level pool and use this to support eligible sub-pools. They are responsible for the performance sub-pools they manage and future ability to take out forms from the top level pool will depend on that.
  • Allo Steward Vouchers Valuation
    • Allo Steward Vouchers (ASVs) represent commitments to steward liquidity and are issued upon stablecoin withdrawal.
    • ASVs must be repaid via sub-pool profits before another withdrawal can occur.
    • ASVs start at a valuation of 1:1 to cUSD stable coin.
      • Valuation is governed by the Allo Stewards voting, pegged to historical liquidity impact and fee generation.
Commitment Providers (CP)
  • Entities issuing tokenized commitments (ERC20 - RWAs, vouchers, staking bonds, etc.).
  • Provide valuable services. Their tokens are commitments for these services, such as IoT, Computation, Storage, fishing, tree planting and so on.
  • Issues commitment-based tokens redeemable for economic utilities.
  • Receive a limit of how many of their tokens can enter the pool inorder to swap for any other asset in the pool - equates to a credit line with no interest - but with transaction fees.
  • They can as well sell their digital assets through the pool network.

Guardians

  • Hold veto power over governance amendments and proposals that conflict with APN principles.
  • Ensure legitimacy and adherence to community-aligned decentralization.

**Capital Allocators **

  • Provide liquidity and seeding capital to the Allo.Pool DAO as well as directly to pools.
  • Earn fee-based returns and governance weight multipliers.
  • May seed pools directly or create new curated pools.

Governance Role Differentiation

  1. Allo Stewards: Manage the DAO, decide on capital allocation, and adjust liquidity parameters.
  2. Pool Stewards: Oversee liquidity pools, ensuring curation, security, and risk mitigation.
  3. Guardians: Hold veto rights, act as final dispute mediators, and prevent protocol violations.
  4. Allocators: Seed liquidity, earn fees, and participate in quadratic governance weighting.
  5. Commitment Providers: Create erc20 vouchers to market and sell their goods and services.

Stakeholder Agreements and Admissions

  • Stakeholders may participate in multiple roles.
  • Mutual agreements define governance rights and obligations.
  • Non-Performance Protocol: Failure to meet commitments triggers dispute mediation.

Dispute Resolution and Enforcement

  • Quadratic governance-based mediation mechanisms for dispute resolution.
  • Guardians oversee arbitration to enforce compliance.
  • Non-compliance may lead to gradual stake reduction penalties.

Use Case 1: Water Stewardship Commitment Pool

Scenario

Commitment Providers: A Land Steward manages a water source, issuing tokenized commitments for **sustainable access. Several local community groups **- have agreed to take on land stewardship roles in exchange for water access.

Tokenized Commitments

  • MAJI (ERC20) Vouchers: Redeemable for Kenyan shillings worth of water. Issued by Land Steward
  • 10 different community group vouchers: Redeemable for Kenyan shillings worth of watershed conservation efforts as well as other goods and services. Issued by community groups.

A Pool Steward creates a pool and the commitment providers seed initial vouchers into the pool.

Pool Operations

  1. Seeding Phase:
    • Land Steward deposits 500 MAJI (max $1000 USD worth).
    • Community groups deposits 100 of each of their different vouchers in the pool (max $100 USD worth each).
  2. Exchange & Utilization:
    • Ecosystem Stewards swap their tokens (commitments for services) for MAJI to access water.
    • Land Stewards swap MAJI for the tokens in the pool to fund various watershed services.
    • Pool Steward applies transaction fees for sustainability.

**Ex. Allo.Pool DAO - Application **

  1. The Pool Steward applies to Allo.Pool DAO for seeding in a stable coin e.g. cUSD.
  2. Allo Stewards review the application based on criteria and a voting period they find it in alignment with the APN agreement and worthy of seeding.
    1. They note that each token in the pool has a 3+ month track record and good volume and as well the value of assets in the pool meets the minimum criteria.
  3. A stable coin is seeded into the pool and now anyone holding MAJI as well as the other community tokens can swap their tokens for a limited amount of the stable coins to fund other projects.
  4. Note that this is not a donation - all swaps for the cUSD must be for equally valuable commitments - this lends well to Islamic Finance - Waqf/Endowment models for zero-interest lending - with pool fees.
  5. The community uses their cUSD to invest in more water projects and grows the utility of the pool. Community groups exchanging their vouchers for the seeded cUSD can as well lend it out to their own Stakeholders.
  6. Pool fees are collected by the APN DAO and added to a APN DAO Pool and can be sent back to Allocators upon request or on a regular basis.

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Evaluation Criteria Alignment

:white_check_mark: Technical Feasibility (30%) – Smart contract security & on-chain tracking.

:white_check_mark: Economic Design (30%) – Treasury sustainability & fee-based incentive systems.

:white_check_mark: Community Alignment (25%) – Fair launch principles & decentralized governance.

:white_check_mark: Innovation (15%) – Cross-pollination models & capital coordination efficiency.

Notes

The APN solidifies decentralized capital allocation via pooling as a foundational Web3 primitive.

Outcomes

A self-sustaining water economy, aligned with Allo.Capital’s vision of decentralized resource management.

Comparison to Existing Web3 Models

  1. Unlike Uniswap & Balancer, APN pools are commitment-backed, non-speculative, and liquidity-cycling rather than purely market-driven.
  2. Compared to Gitcoin Quadratic Funding, APN allocates capital via on-chain quadratic governance but ensures financial sustainability through liquidity circulation.
  3. Inspired by the Mijikenda Mweria and Islamic finance principles (Waqf), APN enables zero-interest lending through tokenized commitments with built-in sustainability mechanisms via pool fees.
  4. Book on Grassroots Economics: https://willruddick.substack.com/p/grassroots-economics-the-book-is
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