Bay Area, New York–(Vehement Media – November 21, 2021) – AMM and liquidity mining evoked the explosive growth of DeFi last summer. The combination of the two gave DeFi, where liquidity is fundamental, a foundation to provide services, including DEX trading, lending, derivatives counterparties, etc..
In the early days DeFi used AMM and liquidity mining mechanisms to attract users and gain liquidity to build foundations for service delivery. During this process, LP providers received project tokens as rewards. But such simple liquidity mining is problematic. The opportunistic dumping issue not only damages investors’ benefits, but also takes a toll on the future of the project.
Being hot money, liquidity is bound to tilt towards higher profits, but the value mining of liquidity should not stop.
Arc Finance is a DEX that is based AUM algorithm and deployed on Binance. It achieves the Trade to Earn ecological value for all platform users through the Liquidity Premium Pool (LPP).
Exploiting DEX Liquidity
The initial generation of the DeFi protocols used a mechanism of liquidity mining to gain liquidity. To be more specific, they incentivized users to provide liquidity with token rewards.
Users provide liquidity and can receive a set of incentives including market making fees, transaction fees, as well as the output of liquidity mining, whereas liquidity is locked in a pool.
This model gives rise to the problem of opportunistic dumping, although it could help the project gather a lot of liquidity in the short term. It thus is detrimental to the long-term development of the project, if not handled properly.
Similarly CRV took the approach of DAO governance to lock some of the mining output to curb the price decline. Under this new scheme, although many investors have opted for a 3-year lock-in period and have very sufficient confidence in the project, token price still reduced.
The subsequent DeFi exploration in this aspect made progress no further than locking mining output or using other models similar to Fei and PCV from DeFi 2.0 (Protocol control value). None of them have been proved effective so far.
How does LAAS work in Arc Finance?
Arc Finance has further explored the value of liquidity mining through the combination of AUM and LPP (Liquidity Premium Mining Pool Service).
AUM is not a market making mechanism, but a mining algorithm, called Automatic Unlocking Mining. It is an algorithm that automatically adjusts the speed of unlocking mining output, so that users can get higher APY returns at the same cost.
To participate in Arc Finance’s liquidity mining, users must first lock a certain amount of tokens, and get the corresponding lock-in vouchers of r-Token. r-Token is locked, and to unlock it, users have the following 2 choices.
- Transaction mining:
Trade tokens through pairs (vouchers of your trading volume) to unlock your earnings. Frequent transactions enable a rapid increase in vouchers of trading volume, thereby accelerating the ability to release earnings.
The calculation formula is as follows.
Unlocking speed=α*（total swap volume）/current price of rToken
α= 0.0000029.（the number of r-Tokens unlocked per block time）
- Staking (single token or dual token):
Obtain double income by staking single/dual tokens (staking vouchers), that is, to receive double revenue, including the proceeds of rToken releasing and transaction fee tax rebate. The unlocking speed is calculated as follows:
Unlocking speed=k*(ARC lock-up volume)
k=0.00000029 rToken/Block. (The number of r-Token unlocked in each block time)
The AUM algorithm adjusts the unlocking speed. Both the transaction frequency and the staking amount affect the unlocking speed of your r-Token. With the incentive of AUM, supplemented by liquidity mining, users are motivated enough to trade and stake, which will maximize the value of liquidity.
Arc Finance also has multiple mechanisms to incentivize users to participate in liquidity premium mining and exploit the value of liquidity, including transaction rebates and repurchase and burn. It also uses a cycling mining pool (part of the transaction fees collected by the platform are used to repurchase Arc and inject it into the pool) to keep the incentive long term and sustainable.
In this mechanism, users can get multiple incentives, such as liquidity mining, liquidity premium from active transactions, transaction rebates, etc., which makes the revenue in Arc Finance even higher than the liquidity mining of Sushiswap, and other leading DEX.
| LP mining | Market-making income | transaction rebates | LAAS | Transaction rewards | |
| Arc Finance | Cycling pool | Yes | Yes | For investors and project owners | Yes |
| Uniswap | On pause | Yes | No | For investors | No |
With these diverse incentives, users will take initiatives to trade, which will bring coveted liquidity to the projects with asset pools on Arc Finance. At the same time, Arc Finance’s LAAS will help projects manage their basic market value and projects thus can focus on their ecology development.
Conventionally, the liquidity gathered by Uniswap and others only provide services only limited to traders and offer them better transaction experience. But hereafter, projects will also get liquidity from AUM and LPP on Arc Finance.
Media Contact:
Arc Finance Official
Web: https://arcdex.io
Twitter: https://twitter.com/Arc__Finance
Discord: https://discord.gg/SZex7JYkqe
Telegram Chat: https://t.me/ArcFinance_global
Medium: https://medium.com/@arc_finance
Telegram Announcement: https://t.me/ArcFinance_announce
Email: arcfi2021@gmail.com