Sirwin
Sirwin

Exploring Ve(3,3) tokenomics & Equalizer Exchange


In the world of DeFi, liquidity plays a crucial role in the success of any protocol. Numerous innovative solutions have emerged to incentivize liquidity provision. However, striking the right balance between short-term and long-term incentives, as well as aligning the interests of different stakeholders, remains a complex challenge.

While ve(3,3) model holds promise in addressing issues faced by decentralized exchanges (DEXs), it also has certain limitations. Equalizer has taken steps to address some of these limitations by introducing unique improvements, notably the absence of rebasing, to ensure sustainable long-term operations.

Through a meticulous analysis of the strengths and weaknesses of similar platforms, Equalizer has crafted a model that combines the best features while introducing novel mechanisms to enhance liquidity retention.

Before delving into the specifics of Equalizer, it is important to briefly discuss the ve3,3 tokenomics and understand how it has set the foundation for the next generation of DEXs.

ve(3,3) tokenomics

Ve (3,3) tokenomics model, pioneered by Andre Cronje and implemented in projects like Solidly, aims to address several challenges traditional decentralized exchanges (DEXs) face. 

Traditional DEXs incentivize liquidity providers (LPs) with native tokens, leading to issues such as

- dilution of the token value

- mercenary capital that quickly withdraws liquidity

- suboptimal fee generation

- misalignment of incentives

- low liquidity in certain pools

- an imbalance in voting power, and

- unsustainable liquidity mining

 

Ve (3,3) model combines the (3,3) game theory model from Olympus DAO with vote escrow (ve) tokenomics from Curve Finance. It seeks to align the incentives of token holders and LPs, incentivize fees rather than passive liquidity, and lock governance tokens to strengthen participation. By locking governance tokens, users can receive increased farming rewards and have more influence in the protocol's governance.

In ve(3,3) model, users who lock their tokens for a longer duration receive more rights and benefits, temporarily reducing token supply and selling pressure. The vote-locked tokens also enable holders to receive trading fees from the pools they vote for, promoting efficient allocation of resources and liquidity. The model aims to prevent token dilution and supports permissionless pool creation, gauges (used for reward distribution), and bribes.

In short, ve(3,3) Model

- Incentivizes LPs through emissions

- Users lock their token and receive voting power (ve-token)

- Ve-token holders control emissions that go to LPs

- Ve-token holders/Voters receive trading fees in addition to bribes

- Traders benefit from low slippage

- Protocols pay bribes in order to gain liquidity

 

Ve (3,3) tokenomics model is a game-changer for DEXs. It tackles the challenges traditional exchanges face head-on, revolutionizing how we think about liquidity provision, governance participation, and sustainable growth. 

Unfortunately, despite having the mechanics sorted out, the original Solidly protocol faced several challenges in its execution. One significant difficulty was the inability to incentivize desired voting behavior effectively due to the imbalance between external rewards (fees and bribes) and the cost of acquiring voting power. However, the concept of ve(3,3) introduced by Solidly served as inspiration for multiple forks that aimed to build upon its principles and make improvements.

Equalizer on Fantom

Equalizer is a Solidly fork built on Fantom focused on retail investors and promoting overall education to make DeFi accessible.

It strives to serve as the trading mechanism for the Fantom network, utilizing the perpetual model established by Solidly with some modifications to fee structures and emissions.

Additionally, Andre Cronje’s return to Fantom has sparked renewed optimism among the crypto community, highlighting the positive sentiment towards Fantom and its associated projects.

Besides, kudos to the team for doxxing themselves and delivering a transparent and reliable experience. 

 

What’s different from Solidly?

Short version Equalizer Re-imagined ve(3,3) Model

  • veLOCK period (max 26 weeks)
  • Emission schedule
  • Improved initial distribution
  • No negative voting
  • No rebasing, fair opportunity
  • Sustainable fee structure

 

Long version Equalizer Re-imagined ve(3,3) Model

veLOCK Period
Equalizer has made specific modifications to optimize incentives and ensure the sustainability of the model. One notable change is the reduction of the lock-up period from 4 years to 26 weeks (6 months). 

This shorter lock-up duration is more appealing to investors and encourages them to lock up more EQUAL tokens.

The increased circulating supply and sell pressure from the shorter lock times is addressed through the veNFTs.

veNFT but make it worthwhile
Representing locked EQUAL tokens, veNFTs are fully transferable and tradeable.

They act as gateways to voting rights with the opportunity to earn 100% of the platform's fees and bribes. They provide significant advantages to token lockers, as they can be sold at a slight discount on platforms like PaintSwap, creating a semi-liquid environment. This incentivizes token holders to keep their tokens locked long-term, effectively reducing sell pressure and promoting a sustainable ecosystem.

Compared to other liquid wrappers, veNFTs bring additional benefits, including reduced liquidity costs and minimized risks. 

The collaboration between Equalizer and PaintSwap further enhances the veNFT experience, offering useful metadata and filtering options that elevate their usability.

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Zero Rebase
The concept of rebasing poses an unfortunate side effect for late entrants. To ensure fairness and equal opportunity, Equalizer made the decision to completely remove the rebasing model.

Rationale - While rebasing may provide advantages for early investors, it creates a concentration of voting power and disrupts the economics of locking for new participants. This imbalance impacts the demand for emission tokens and ultimately hinders the overall progress of the ecosystem. In order to maintain long-term equilibrium and preserve incentives for all stakeholders, Equalizer has chosen to exclude the rebasing mechanism.

Controlled Emissions
$EQUAL

  •  Initial supply: 2.5M
  •  Emissions: Weekly emissions 50k 
    • With a 0.5% decline rate per week (will be changed to 2% beginning Epoch 32)
    • From week 104 decay shall reset to 0.1%
  •  Rebase: None
  •  Rewards: Emissions, fees & bribes
  •  Fees
    • stable pairs 0.02%
    • volatile pairs 0.2% 
    • Acceptance of community can result in an increase to 0.3% on either type of pair
  •  Lock: Max 26 weeks

5013fdee248e4a824dfaa23970a2ac8d1cdc18e677587fa82e14f554ce634376.png

EQUITY - A unique earning opportunity for veEQUAL holders

EQUITY is Equalizer’s latest offering. The innovative decentralized trading platform introduces a new liquidity type, enabling efficient swaps and leveraged options. With EQUITY, veEQUAL holders can unlock additional revenue streams and enjoy unique benefits.

One of the key advantages for veEQUAL holders is the opportunity to receive 100% of the trading profits generated on EQUITY. This revenue is seamlessly integrated into Equalizer's gauge system, ensuring direct benefits for veEQUAL holders. The introduction of EQUITY tokens, aligned with the widely adopted multi-asset liquidity type, further enhances the trading experience. Advanced trading tools like stop-loss and take-profit orders are also available, empowering users with improved risk management capabilities.

EQUITY represents a paradigm shift in decentralized trading, offering unparalleled experiences free from traditional limitations. The introduction of EQUITY and its utility within Equalizer can have a significant positive impact on the EQUAL price (as veEQUAL holders benefit from increased trading activity and revenue, it amplifies the value proposition of EQUAL), making it more appealing to investors and fostering TVL growth.

Conclusion 

In the rapidly evolving world of DeFi, liquidity is a key driver of success, and finding the right balance between short-term and long-term incentives remains a challenge. Equalizer on Fantom stands out as a Solidly fork that is built with a focus on retail investors and accessibility in mind. By reimagining ve(3,3) model and addressing its limitations, Equalizer introduces unique improvements to enhance liquidity retention. Time will tell how the ve(3,3) model evolves but for now, it surely looks promising. 


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