Tokemak
Since the birth of decentralized finance, protocols have struggled to coordinate liquidity (the depth of assets with a market). Liquidity is vital for decentralized exchanges because healthy liquidity pools enable high volume trades without significant price slippage. Protocols have traditionally incentivized liquidity providers by attracting them with high APY, typically issued in the protocol’s native asset. However, this practice is highly inflationary and puts a great deal of pressure on the native token’s price. Liquidity providers are mercenary and shift their assets to other protocols when APY is no longer attractive.
Tokemak is a protocol that attempts to solve this problem by allowing liquidity providers to deposit assets in single-sided reactors. The liquidity in these reactors is directed towards decentralized exchanges. These reactors are liquidity pools composed of assets-TOKE. Liquidity providers stake their assets, and are rewarded in TOKE. Liquidity Directors stake TOKE and are rewarded in TOKE.Tokemak itself earns yield on the directed liquidity in non-TOKE assets, which are added to its treasury. Tokemak “solves” the problem of liquidity by removing the need for protocols to constantly issue rewards to attract capital, and retains mercenary capital by removing many of the frictions associated with liquidity mining, such as high gas fees, pair management, and impermanence loss. TOKE holders decide where liquidity is directed, which allows protocols accumulating TOKE to retain control over liquidity.
The Liquidity Wars
In our first AMA @ 25:37, Voke states:
"It really is the case that we are all stronger together. That’s kind of the spirit of Olympus and as I keep touching back to the Bretton Woods 2.0 framework, we are better off cooperating and collaborating. That’s really what the space needs…our main goal is that we want to create a 3,3 at the ecosystem level."
Tokemak has proven to be an aligned protocol within the OHM ecosystem. Olympus has deposited OHM in Tokemak’s OHM reactor, officially ratified through its governance process, and Tokemak has been proactive in reaching out to projects within the ecosystem, providing support to new protocols, such as Concave, during the auction process. Broadly, there is some value in partnering with any aligned protocol, as each partner drives value to the other. This reciprocity furthers the use case of OHM as a currency across DeFi.
More specifically, accumulation of TOKE and establishing a CNV or gCNV reactor, allows Concave to direct liquidity in a more efficient manner. When used in conjunction with our protocol owned LP pools, this should allow us to always have a decent amount of liquidity on market so that CNV continues to be a liquid and desirable asset. This increase in liquidity allows Concave to reduce the costs of sourcing additional liquidity as well. Moreover, if Concave establishes a gCNV reactor, this will allow CNV holders to earn additional yield on top of rebase rewards.
Currently, the Curve Wars continues to be highly contested due to the liquidity that CRV can drive to protocols. As a result, we have seen projects such as Redacted, Lobis, Frax, Keeper, and even Olympus itself acquiring significant holdings of CRV and CVX in order to direct this liquidity.
However, Curve’s focus has always been on facilitating stable swaps, not necessarily on liquidity itself. Tokemak, on the other hand, was designed to facilitate liquidity across both stable and non-stable pairs. As the Tokemak protocol expands and eventually goes cross-chain, Tokemak is positioned to become a foundational layer in DeFi, as every protocol will want a Tokemak reactor in order to direct it’s own liquidity. This is liquidity-as-a-service, and will signal the beginning of the Liquidity Wars.
Concave x Tokemak partnership
We firstly aim to accumulate Toke tokens to direct liquidity to our own AMM pools; secondary Toke tokens can recieve bribes from Tokevote providing us a source of revenue. Holding TOKE as a core treasury asset will be beneficial for Concave because as other protocols fight to accumulate TOKE, the price of TOKE will naturally rise due to higher demand, and Concave will benefit as an early TOKE holder. TOKE, as a holder of Concave, will gain the benefits of holding non-TOKE assets for diversification, and profit from Concave’s anticipated exceptional performance as well.
Concave’s vision is to ultimately become “the arbiter of liquidity, and the enabler of frictionless value transfer of different chains in the DeFi ecosystem going forward.” Tokemak’s vision is to become the sole decentralized liquidity provider in DeFi. These two visions are very much in sync, and Concave looks forward to welcoming Tokemak onboard as its long-term partner in the wars to come.
Last modified 1yr ago