Editor's Note: This article comes fromBlue Fox Notes (ID: lanhubiji), reprinted by Odaily with authorization.
Editor's Note: This article comes from
Blue Fox Notes (ID: lanhubiji)
, reprinted by Odaily with authorization.
After Uniswap was forked from SushiSwap, the number of various swaps was too high. Many swaps simply copied SushiSwap’s liquidity mining token distribution mechanism, which caused these swaps to open high and go low, and even went into a death spiral. At present, the swap with a liquidity of more than 100 million US dollars and an average daily trading volume of more than 30 million US dollars, in addition to the traditional Uniswap, Balancer, and Curve, only SushiSwap is left, and other swaps are still on the way to catch up.
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Manually adjusted token distribution mechanism
At present, there are only 4 liquidity pools on Uniswap that can get rewards, they are ETH/USDT; ETH/USDC; ETH/DAI; ETH/WBTC. As of writing, the liquidity of Uniswap is 2.38 billion US dollars, of which the liquidity of these four pools accounts for more than 87%.
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Not only Uniswap, but also SushiSwap and Balancer have similar situations. At present, there are 29 liquidity pools on Sushiswap that can obtain SUSHI token rewards, and there are currently about 50 token pools with liquidity, among which the liquidity pools with token incentives provide more than 95% of the liquidity.
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(It is difficult for the long-tail token pool on Sushiswap to obtain token incentives, Sushiswap)
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(Token incentives are allocated on Balancer according to the weight factor of the liquidity pool, Balancer)
Uniswap, SushiSwap, and Balancer have adopted this model in which only some liquidity pools can participate in mining, and their original intentions are understandable. Because they want to prevent junk tokens from obtaining token rewards by providing liquidity, they are worried about the elimination of good tokens by bad tokens, they are worried about their overall fairness, and they are worried about their business development focus and competitiveness. However, this has also resulted in many long-tailed liquidity pools being unable to obtain corresponding liquidity rewards.
The question here is, is there a better solution for this original intention? Is there a smart distribution mechanism based only on algorithms? There is no need for manual adjustments through team or community governance. It is a more decentralized rapid response mechanism. In this way, can better and fairer distribution of governance tokens be achieved? Let the long-tail token pool also get the incentives provided by liquidity, so as to attract more tokens to provide liquidity contribution? Let's take a look at how the new DEX project Equalizer deals with this problem?
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Equalizer's intelligent token distribution mechanism
Equalizer is also an AMM-based DEX. Its trading mechanism is basically similar to that of Uniswap. Its main difference lies in the design of the liquidity mining mechanism. It tries to make the distribution of governance tokens fairer, more reasonable, smarter and more decentralized, returning to the original intention of DeFi and Uniswap. Equalizer means equalizer in English, and it can also be seen that the Equalizer project has the meaning of self-adjusting mechanism design.
Just like Uniswap has its own governance token UNI, Equalizer also has its own governance token EQL. This is the token used by Equalizer for protocol governance and can be used for liquidity mining incentives. EQL also captures the transaction fee value of its protocol.
Value capture and distribution of Equalizer
In the DEX agreement project, the main value that the project can capture is the transaction fee. Whether it is Uniswap, Balancer or Curve, the value captured by these DEXs is currently not only in the forefront of DeFi, but also in the forefront of the entire encryption field.
Equalizer, like other DEXs, can also capture transaction fees. Currently, the transaction fee for token exchange on Equalizer is 0.3%. 50% of it is allocated to liquidity providers, and the remaining 50% is used for repurchase and destruction of EQL. Of course, the distribution of transaction fees can also be adjusted through governance.
From the perspective of Equalizer's handling fee distribution, it will use 50% of it (0.15% handling fee) to repurchase and destroy EQL. This is quite different from Uniswap. In Uniswap’s 0.3% transaction fee, 0.25% of it is paid to users, and the remaining 0.05% is allocated to token holders, who capture 16.7% of the overall value, while in Equalizer , token holders capture 50% of the value.
This design means the following things:
In Equalizer, it is more efficient for EQL token holders to capture value from business development.
The fee income of liquidity providers will decrease accordingly, while the income from mining governance tokens will increase.
If the amount of EQL repurchased and destroyed is greater than the amount of newly generated EQL within a period of time, EQL will enter deflation.
Smart Distribution of Governance Tokens
Equalizer’s token, EQL, captures its fees, which are backed by its transaction volume. So, how is the governance token EQL distributed?
Equalizer’s governance token, EQL, has no pre-mining and no investor share, and its token distribution is all distributed through liquidity mining.
Specifically for liquidity mining, how does Equalizer do it?
No mining whitelist
Smart adjustment of EQL token distribution
The more EQL that is repurchased and destroyed by the liquidity pool, the higher the weight of the transaction pair in future EQL liquidity mining will be. In this case, users may have two worries, one is the sharp fluctuation of trading volume, and the other is that someone will brush the volume (including newly opened trading pairs or single trading pairs).
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The mining game of Equalizer is partly similar to the mining game mechanism of Bitcoin, which provides a new way of thinking for the future token distribution model of DEX. If this way of thinking proves to be successful in practice, it will prompt more The DEX adopts this token distribution mechanism, and eventually becomes a generalized mechanism for DEX token distribution, which can reduce artificial token distribution control and promote the organic growth of DEX through the intelligent distribution model.
