*obligatory not financial advice*
What is Diffusion Finance?
Evmos is a new blockchain that is known for its high interoperability with both Ethereum and also the entire Cosmos network. Diffusion is a decentralized exchange on this new blockchain.
Because Diffusion Finance is a fork of Uniswap V2, it uses a standard AMM and liquidity pools for its exchange. People can provide their tokens to a liquidity pool for a trading pair, which is then offered to traders in exchange for a trading fee. The prices are all set automatically based on the ratio of the tokens in each trading pair.
Liquidity providers of certain trading pairs can earn additional rewards in form of the native DIFF governance token. This DIFF token be staked in the xDIFF pool to participate in governance and to earn a share of the trading fees, similar to how SushiSwap works. Every trade has a fee of 0.3%, the liquidity providers of every pool are getting 0.25% as compounding rewards and 0.05% are used to buy back DIFF tokens of which half are burned and the other half is going to the stakers in the xDIFF pool.
The protocol is still rather new because the Evmos blockchain is only now starting out but there are already plenty of tokens and liquidity available because the network is so interoperable with Ethereum and Cosmos and has multiple bridges to them. Diffusion has also gained a lot of popularity thru various airdrops that are still on-going. The will be airdrops for OSMO stakers, Evmos stakers and users, early Diffusion users and UNI token holders and Uniswap users.
There are a few other DEXes that are being built on Evmos too, but so far Diffusion seems to be most popular option and it could likely become one of the most important dApps on Evmos.
The DIFF Token
Diffusion has its own governance token called DIFF. It is used as additional reward for liquidity providers of certain pools and it will give its holders governance rights, although this governance is currently limited and needs to be fully implemented. A small share of the trading fees is used to buy back DIFF tokens, of which half are being distributed to stakers of DIFF as reward and the other half is being burned.
There is a max supply of 326,515,151 million tokens. The liquidity providers are earning 38% of the supply, the team is getting 21%, the stakers of DIFF tokens get 21% as additional reward aside from the trading fees, 8% of the supply is used for various airdrops, 8% are going to the strategic reserve that is controlled by the Foundation and 4% are going to the community pool that will be controlled by the DIFF holders via governance.
All tokens, aside from the strategic reserve and airdrops, are being vested and every year there will be a "thirdening" where the amount new released tokens is divided by 3. It will take about 12 years until all tokens are fully distributed.
Like always, the value of the token directly depends on how much liquidity is held in the smart contracts of its protocol. The governance rights will have more value if they affect more money and there will be more trading fees to earn if more people use Diffusion. Because Evmos has multiple bridges to Ethereum and is highly interoperable with the entire Cosmos IBC protocol, there is already plenty of liquidity available and its blockchain is only now beginning to grow. However, the on-chain governance for DIFF holders still needs to be fully implemented and more importantly we are currently in a bear market so we are not likely to see much demand for decentralized trading right now.
So far there are no centralized exchanges that offer DIFF, but you can buy it on the Diffusion Finance DEX. You can use a normal MetaMask Wallet to store your DIFF tokens and to interact with the Evmos blockchain but you will need to get some EVMOS coins, which you can buy on Osmosis, for the transaction fees.
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