Liquidity Rebalancing Scenarios


Most tokens tend to decrease in value vs. ETH over time. They may launch with fancy tokeneconomics and complex staking mechanisms, but ultimately cannot escape the fundamental problems that arise from too much token supply, not enough demand, and insufficient liquidity to support the market.

As retards have become more savvy about the longevity of these incentive mechanisms, token cycles have accelerated. Over time, partially backed assets have gained popularity as an economic model to support token values over the long term.

Olympus was the first to pioneer the model of Protocol-owned liquity (POL), where assets owned by the protocol are used to support the long term token value of the token and provide liquidity to the market. However, due to inefficiently designed constraints, the market ultimately collapsed and the token lost significant value.

More recently, in the last few weeks, a new model has emerged: building in a redemption mechanism to the token (floor price) and taxing trades as a means of ensuring sufficient liquidity for their tokens and long-term value accrual to their holders.

However, many of these protocols are lacking in some shape or form. Some leak value in their accrual mechanisms to third party liquidity pools, while others insufficiently manage their liquidity provisioning, making their protocol owned liquidity capital inefficient and ineffective for healthy price discovery.

I've been aping into these protocols and learning from their failures. I've taken all these lessons and decided to launch a protocol that fixes these issues. This is the experiment.