Download our Litepaper in PDF here: https://concave.fyi/gitbook-public-concave-whitepaper Contents 1.0 Overview 2.0 MVP: Bonding-Staking Protocol 3.0 Features 4.0 Treasury Management 5.0 Ecosystem 6.0 Community 7.0 Team 8.0 Additional Documents
Concave is a community-driven, product and investment organization that aims to bring value to investors through the development of innovative DeFi products and active treasury management. At launch, Concave will introduce several novel solutions to grow its treasury while ensuring long-term investors receive the highest returns.
The Concave MVP Protocol is inspired by the general bonding- staking concepts popularized by Olympus. Whereas most other forked protocols penalize stakers in favor of treasury growth via bonding, Concave has been built from the ground up with a focus on delivering value to long-term stakers via bonding and staking mechanisms.
Composable bonding mechanisms have been designed to bring various bonding products to market and are implemented with back-end functionality to control supply inflation and optimize bond issuance as a function of market conditions. These mechanisms are underlined by a novel staking reward structure that incentivizes stakers through anti-dilutive bonding emissions and treasury airdrops that are paid out in non-native tokens through treasury investment strategies.
Both bond positions and liquid staking positions are implemented using NFTs to facilitate secondary markets. These ensure further revenue streams for investors and incentivize users to enter the most beneficial positions for long-term price stability and protocol health.
Bonding & Staking Mechanisms can be broken down into the following key components:
- Bonding Mechanics
- Liquid Staking Mechanics
The implementation of bonding mechanics is built with the goal of offering bonds for virtually any ERC20 token, pricing model, and issuance model. This mechanism gives the Policy Team a vast arsenal of tools to increase Treasury, as both pricing and issuance are designed to support plug-and-play models.
Composable bonds allow for the constant innovation of new bonding products and pricing models to be put into production without the redeployment of smart contracts. Upon protocol launch, Concave will focus on fixed-term accrual bonding of stable coins and LP tokens using custom bond pricing models.
Bond issuance will be optimized and controlled by an off-chain algorithm that will manage target debt by generating a desired supply curve and accelerate bond issuance as a function of market conditions. Simply put, the protocol will maximize the value of the treasury with respect to supply.
In contrast, the Olympus model maximized supply with respect to the treasury. This ensures bond issuance is accelerated or decelerated when the maximum return can be rewarded to staked investors while aggregate supply growth is regulated.
Bond Pricing Model
The custom bond pricing model leverages the idea of virtual AMM reserves popularized by Uniswap V3. Virtual reserves are used in conjunction with actual reserves to derive pricing. Policy can modify virtual reserves to directly influence bond pricing as well as price impact. Since the only direct influence users have on price is positive, we artificially create negative price action through a time based decay mechanism.
This AMM approach expands on the traditional xy=k market making formula by utilizing virtual values. The variables x,y, and k are a derivative of the real assets; since they are virtual, they can be adjusted dynamically to control the amount of slippage that occurs when calculating the bond price.
Therefore, controlling for slippage adjusts the bond price with respect to the bond debt available and the size of the bond purchase.
Previous conceptions of bonding-staking models suffer from one key problem: stakers are diluted in favor of bonders. This arises because nothing is free: in order to reward one user group (bonders), you must take from another (stakers). Our model provides a solution to this by introducing liquid staking terms and a cap on the volume of CNV that can enter non-dilutive pools.
With liquid staking mechanisms, we categorize stakers by term length and use categories to differentiate rewards. Instead of penalizing all stakers, the protocol penalizes short-term stakers with dilution, rewards long-term stakers with non-dilution, and attracts bond revenue in the process.
Liquid staking mechanics have been designed to return the highest rewards to long-term stakers utilizing concepts of anti-dilution. The protocol will allow any Concave holder to enter liquid staking terms that range from 45 days – 365 days. Liquid staking positions will receive boosted rewards based on term length. Investors in the longest-term liquid positions will receive the highest returns. Rewards will be issued in both the native CNV token and non-native tokens such as DAI or Frax. The reward structure is documented below.
Liquid staking pools will receive immediate compounded rewards to its position based on the supply inflation generated through purchased bonds.
Each liquid staking position will capture a percentage of supply growth as a function of CNV minted through our fixed-term accrual bonds.
Those in the longest locked staking position (the 1-year lock) will never be diluted and will increase their share of the market cap when other rewards are considered. This will be reinforced directly in protocol contracts through a staking cap on non-dilutive positions and the minimum price on bonds. These components ensure all liabilities to protocol stakers are accounted for when CNV is minted.
All staking positions will capture immediate compounded rewards to their staking positions through new supply issued on bonds. These rewards will be redeemable at the end of the users staking term.
[Example]: If a bonding event creates an increase in the supply of 10%, investors in the longest lock will also see rewards of 10% to their pool; those in the 6-month lock will see a 7.5% increase and so forth.
Each bonding event creates an available rewards pool of CNV that can be rewarded.
A surplus is generated after anti-dilutive rewards are paid to staking positions. A portion of excess emissions will be allocated to a long-term emissions pool that will be rewarded to stakers over a vesting schedule. The remainder will be recycled back into bond issuance to protect treasury backing. Emissions rewarded to stakers will be capped at an aggregate APR controlled by Policy.
This long-term emissions pool will grow over time allowing for continuous rewards to stakers regardless of bonding activity. Staking positions will receive a boost on these rewards according to term length. The longest liquid staking position will receive the highest return while the shortest liquid staking position will receive the lowest return.
After both reward pools are accounted for, a proportion of excess rewards will remain unminted. This factor is controlled by a variable in the protocol contracts to ensure regulation on inflation, price stability, and treasury backing per CNV.
Concave will actively manage its treasury implemented across a number of investment portfolios and product lines.
These are documented in greater detail below. The yield return on these strategies will be paid out to liquid stakers in the form of a airdrop at defined intervals.
Stakers will receive a boost in their airdrop according to staking term length. Airdrop payouts will be allocated master chef style (ie. Non-native token) to ensure additional revenue streams for stakers while maintaining long term protocol health.
Protocol stakers will receive an NFT that represents their liquid staking position.
On protocol launch, Concave will provide the proprietary marketplace to ensure liquid stakers can trade their positions represented by NFTs. The secondary market helps both the protocol and users reach an equilibrium where everyone benefits - this further incentivizes stakers to choose longer term staking positions.
Concave has developed sophisticated and efficient treasury management strategies to take advantage of the copious yield generating opportunities in DeFi.
Given the large size of our team and our vast experience in the field, we are always looking to innovate and form new treasury management strategies to exploit marketplace inefficiencies.
The experimental nature of the DeFi ecosystem gives us opportunities to generate immense value for our stakeholders.
Treasury Management is broken down into the following key portfolios:
- Investment Research
- Delta Neutral
- Stable Farm
Concave’s investment research focuses on three primary areas: a) Early seed investments b) Venture-style investments in pre-launch protocols c) Strategic investments in post-launch projects
Concave’s investment research differs from other protocols in our unique ability to source alpha, which consists of a multifaceted approach to research.
Some of these approaches are automated, referred to as machines. Pre-Market Opportunity Machines scrape Twitter, Discord, and social media for relevant pre-market projects that are followed by notable thought leaders and crypto Twitter personalities.
Market Opportunity Machines use natural language processing and statistical analysis to gauge sentiment around current opportunities that are actively trading, scraping sources such as Medium, Google, blockchains, and macro event calendars for information.
Comparatively, our investment researchers maintain membership in most of the notable private alpha channels. Concave also incentivizes our large community to bring independent alpha to our researchers, who will make traditional investment analyst-style pitches to our portfolio managers.
The delta neutral portfolio includes proprietary algorithms that manage cross-chain positions on various yield-bearing strategies. These strategies include developing investment vehicles to sustainably grow the treasury while hedging risk and managing exposure.
Concave’s delta neutral machine generates yield while automatically balancing exposure to price volatility in an underlying asset. This trading strategy utilizes multiple positions to reduce the directional risk related to price volatility and will be deployed across various DeFi protocols.
Stable farming is set up as Concave’s base risk-return portfolio to ensure yield is generated on stable treasury assets. The proportion of treasury funds allocated to stable farming increases as a function of volatile and bearish market conditions.
The stable farm portfolio has partnered with Coindix to have an active data pipeline monitoring whitelisted stable farms. Monitoring is fed into an aggregate optimization layer that recommends position reallocation where higher yield opportunities arise in low-risk categories. Our proprietary auto-compound functionality ensures that additional returns can be generated across all stable farm investments.