Meet the Brand New! More Liquidity, and More Rewards

Meet the Brand New! More Liquidity, and More Rewards

The will work like Curve Finance: with pool voting that influence providers' earnings, separate accrual of trading commissions and native tokens, and efficient liquidity attraction.

We tried to describe the mechanisms of the without any big words. If you want to know more technical details and examples with calculations, check out the Whitepaper.

The DeFi Problem that Solves

For starters, it is worth recalling the economic model of decentralized exchanges.

DEX is underpinned by automated market makers (AMMs). Providers contribute tokens to their pools so that AMMs have the liquidity to exchange some tokens for others. Providers receive LP tokens, a representation of their share in the pool.

Users pay a trading commission for exchanging tokens on DEX. The liquidity providers of the trading pool receive it, and this is their first incentive to provide liquidity.

DEXs and other projects can also run farms, so the providers put LP tokens into them and get additional yield in native tokens. That’s the second incentive.

The problem with this economic model is that the protocols temporarily subsidize the provision of liquidity, but not the more sustainable long-term incentive in the form of trading fees.

The updated will solve this problem with a user reward mechanism similar to Curve: votes for pools, long-term token locks, and legal bribes.

How will work

Among the usual DEX elements in are liquidity pools, AMMs, and LP tokens. But there are a lot of new things:

PLY is a native protocol token. It is earned by liquidity providers who contribute LP tokens to the meter, as well as by vePLY holders.

A vePLY (vote escrow PLY) is an NFT that represents locked PLYs for a fixed period. The length of the period determines the weight of the token in votes: locking 1000 PLY for 4 years (208 weeks) will yield an NFT vePLY with 1000 votes while locking the same amount for a year (54 weeks) will yield a vePLY with 250 votes. The voting power of each vePLY decreases as the unlock date approaches, which should encourage users to lock more PLYs.

The gauge is a smart contract that measures the “weight” of the liquidity pool by the number of votes in the vePLY, and distributes PLYs between liquidity providers. The greater the weight of the pool, the more PLY its liquidity providers receive.

Boosting is about PLY earnings from providing liquidity. The basic annual return for is 40% of the possible maximum. The provider can lock a certain amount of PLY and increase its yield up to 2.5 times, i.e. make it 100%. Pools have different requirements for the number of locked PLY, so some pools will be easier to bribe than others.

A bribe is an additional reward that users or projects “attach” to the liquidity pool gauge. The amount of the bribe is distributed among vePLY holders, who voted for the “bribed” gauge. With the help of bribes, large providers or projects can increase the profitability of their pool, and thus attract liquidity to it.

An epoch is a period at the end of which the protocol distributes rewards in PLY. In the, an epoch will last 7 days.

All together it will work like this:

  1. Alice adds liquidity to the pool and gets LP tokens. She contributes LPs to her pool gauge and gets PLYs each week, but without any trading fees.
  2. Bob buys PLYs, locks them, and gets vePLYs. Then he uses his vePLYs to vote for the pool and earn trading fees and bribes, but not PLYs.
  3. Carol simultaneously contributes LPs to the gauge and votes with her vePLYs. She earns PLYs, trading fees, and bribes.

Find the details in the architecture chart for

How Can Boost the DeFi on Tezos

First, due to the voting power mechanics, it will be profitable for providers to lock liquidity for several years. A similar mechanic is used by youves to accrue the YOU token: the longer LPs are not withdrawn, the higher the profit.

Second, the PLY token will get rid of the constant pressure from sellers. It will become actively traded between liquidity providers and investors who want to earn trading fees.

Third, the mechanism of voting and distribution of PLY depending on the weight of the pool will help effectively attract liquidity where people actually use it.

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