Analyzing the new token governance system: Utilizing Balancer weighted pools to achieve deep liquidity and reduce impermanent loss.

Analyzing new token governance: Using Balancer pools for liquidity and reduced loss.

The common token governance model is the voting custody model, but it leads to poor liquidity in various exchanges. Now a new token governance system has emerged, and the cryptocurrency KOL Voxam has written an analysis to explain the principles and mechanisms of this system.

Solution: 80/20 Balancer Pool Token (BPT) as a governance token, where: 80% is represented by the native token (e.g. $RDNT), and 20% is represented by the quote token (e.g. $ETH).

Advantages of the model: 1) deeper liquidity, as users stake BPT instead of the tokens themselves, allowing for underlying liquidity to actively participate in exchanges. Once users stake their tokens, available trading liquidity increases rather than decreases. 2) better incentive programs and swap fees, eliminating the need to split liquidity across multiple markets and to disperse incentive measures and directly allocate them to multiple decentralized exchanges. 3) the protocol can dynamically set swap fees to its unique position, where a portion of the fee flows to LP as an incentive for providing liquidity.

You may ask: why 80/20 instead of 90/10, 70/30, or a simpler 50/50? The 80/20 pool seems to be the best option for facilitating trades while providing investors with: asymmetric exposure to the protocol token; reducing impermanent loss; and using the quote token as a hedge.

Maturity Adjustment (MA8020) variant: as positions mature, the protocol (e.g. Beethoven X) can increase voting power and rewards instead of rewarding token locking. Once reaching the highest level of maturity, users can unlock maximum power. Additionally, receipt tokens can be implemented to unlock additional levels of composability, such as secondary markets.

Reference: https://twitter.com/cryptovoxam/status/1678584923295485952

We will continue to update Blocking; if you have any questions or suggestions, please contact us!

Share:

Was this article helpful?

93 out of 132 found this helpful

Discover more

Blockchain

Babbitt exclusive | imToken built-in DEX upgrade independent, August will have heavy news release

Babbitt News, July 31, imToken built Tokenlon officially upgraded to an independent decentralized exchange (DEX) . It...

Blockchain

On the line in March, the daily trading volume broke through 100 million, and the FTX exchange that turned out to be so hot is so hot?

The huge potential of the derivatives market is beyond doubt. Mark Lamb, CEO of CoinFLEX, recently predicted that by ...

Blockchain

Part of the speculative platform, the blockchain heat is “revived”, and the regulators successively punched out virtual currency transactions.

Reporter Zhang Mo Beijing reports Source: Economic Information In response to the recent resurgence of some of the vi...

Blockchain

A new attempt at traditional finance, the technology of the Stock Exchange enters the currency circle

In January 2019, the London Stock Exchange Group announced a partnership with the digital asset trading platform AAX,...

Blockchain

How does the derivatives market fight on the platform of the 5-year-old exchange?

Derivatives trading has become a battleground for the military, and OKex, Huobi, Gate, Fcoin, which are well-known ex...

Blockchain

Did Michael Lewis's reputation 'crash' by showing mercy to SBF?

Source New York Times Compiled by LianGuaiBitpushNews Mary Liu Hiking is a common interview format for Michael Lewis....