Glow Protocol Summary

1) A homeowner decides to install new solar on their home.

2) Glow estimates the discounted value of electricity produced by the solar installation on a 10-year forward basis.

3) Miners pay this amount into the protocol treasury in $USDC as a "protocol fee" and must receive an "audit" from an approved "certification agent".

4) Upon paying the protocol fee and clearing the audit, miners earn inflationary $GLW rewards for four years, proportional to protocol fees paid. 175k $GLW tokens are minted weekly in perpetuity for miner rewards.

5) Upon paying the protocol fee and clearing the audit, miners earn $USDC rewards for ten years, proportional to carbon credit production. The protocol treasury is disbursed to miners at a rate of ~0.5% per week, implying an effective liquidation rate of 4 years (~200 weeks).

1) Each installation must pass an "audit" from a "certification agent" before earning rewards.

2) Certification agents visit miners in-person before and after the installation and collect relevant documents - e.g. utility bill and permit approval - and provide an audit report to the protocol.

3) Glow governance approves up to 5 certification agents at any given time (currently 1 active and 1 pending). Certification agents are overseen by a veto council, which is also elected by governance.

4) Both certification agents and veto council members are paid on 100-week linear vesting schedules, where unvested compensation can be slahed for misbehavior.

5) There is a natural disincentive against miner misbehavior since protocol fees are paid up-front. For example in Q1'24, miners representing 75% of the network were kicked offline for falsifying installation dates and forfeited $112k in protocol fees.

1) 230k $GLW minted weekly in perpetuity. (175k to miners, 40k to grants, 10k to certification agents, 5k to veto council)

2) 47m $GLW pre-mine for investors with linear unlocks from Dec'24 to Dec'29. (1-year cliff and 6-year vest)

3) 43m $GLW pre-mine for founders with linear unlocks from Dec'24 to Dec'29. (1-year cliff and 6-year vest)

4) 18m $GLW pre-mine for community with no vesting. (12m to early liquidity, 6m to grants)

5) Staked $GLW determines governance power, but has 5-year cooldown period where tokens are non-transferrible and offers no yield.

Protocol revenue:

1) Glow believes they can pioneer a market for solar carbon credits ($5-10/credit). Historically, solar can only generate renewable energy credits ($0.5-1/credit) because they do not pass the test of additionality.

2) Because Glow miners are 'foregoing' (ie, paying as a protocol fee) 10 years of forward electricity revenue, theoretically the farms do not earn an economic profit outside of Glow-related subsidies. Glow believes they can prove additionality with this argument and sell their verified carbon credits.

3) Glow calculates aggregate carbon credits generated by the network, mints them as $GCC tokens, and auctions them off for $GLW in continuous onchain auctions. The $GLW from the auction is burned, resulting in deflationary pressure / protocol revenue via a buyback-and-burn mechanism.

What you need to believe to invest in miners:

1) Solar installers will find the capital to fund the up-front protocol fee (in the short-term), and carbon credit buyers will adopt solar carbon credits at scale (in the long-term).

2) Markets will at some point value Glow on the basis of book value (of protocol treasury) rather than earnings value (of carbon credit sales).

3) In order to mine tokens at a lower cost basis than the current spot price, the Glow network should have no more than 50-100 farms active at the end of Q3'24 (currently 13).

Risk/Return

Glow is a protocol that incentivizes the deployment of new solar panels in areas with high energy costs.

Solar farms effectively "stake" a large amount of USDC - i.e. the protocol fee - to bet on themselves to generate more carbon credits than other miners.

Everyone's stake gets aggregated into a pool - i.e. the protocol treasury - which gets paid back out gradulally to miners in USDC over the course of 208 weeks. The average miner will make their initial deposit back in full in four years, before subsidies.

The above theoretically works as a closed system denominated entirely in USDC. However there is little incentive for miners to join (quickly) and scale the network.

Glow incentivizes growth with GLW rewards via two main mechanisms: ongoing GLW mining rewards (175k/week tokens minted in perpetuity) and GLW early liquidity pre-mine (12m tokens minted at network launch).

Therefore, miners can expect to get their money back over four years on the basis of USDC rewards (on average), plus earn a "proportional" share of the above GLW subsidies (proportional to the amount protocol fees paid and how early they join).

Glow has raised $4.5m USDC from the early liquidity contract and has minted $8.5m of worth of inflationary GLW mining rewards to date, implying $13m of miner subsidies.

There are 13 farms active today, implying an average of $1m available subsidies per farm (vs $18k average protocol fee). Farms coming online are seeing paybacks of 5 days or less, albeit with no real secondary liquidity.

We believe any farm that comes online in Q2-Q3 is likely to be highly profitable (i.e. 1-2 month paybacks or less) on the basis of inflationary GLW rewards, with downside protection from the protocol treasury USDC rewards.

By investing in miners today, we have a chance to lose 50% of our money, a base case to make 5x, and an upside case to make 50x. However the key is to act fast: by Q4, new deployments will need to compete with insiders for exit liquidity whose vesting begins Dec'24.