ve(3,3) Tokenomics
Understanding the Solidly Model
Last updated
Understanding the Solidly Model
Last updated
The ve(3,3) model aims to balance the challenges of incentivizing liquidity providers (LPs) who are rewarded with an inflating asset, while also facing nearly limitless sell pressure. Our innovative approach spins the flywheel backwards, building a self-sustaining system that promotes long-term growth and stability though known, projectable rewards for our protocol participants.
Incentive alignment is a fundamental driver to activity in crypto. Nothing moves forward unless everyone has something to gain from it. Traditional DEXs, like Uniswap, face issues providing sufficient incentives for LPs and governance token holders.
The ve(3,3) model solves these issues through a unique fee and incentive structure, balancing rewards distributed in an inflating governance token with appropriate incentives to lock these tokens, reducing sell pressure to maintain token value and protocol-wide APRs:
Incentivizing LPs with unlocked governance token emissions
Directing trade fees to users who lock these tokens (veToken holders)
Allow for protocol emissions to be distributed unequally to pools and let protocols bribe locked token holders to vote for emissions to flow to the pools with their tokens
This structure ensures high utility and rewards for holding and locking the governance tokens, which in turn helps maintain the tokens price, resulting in sustained liquidity.
The ve(3,3) model aligns the incentives of all participants in Pearl. This includes $vePEARL voters, liquidity providers, traders, and protocols.
$vePEARL Holders: Incentivized to vote for either the highest volume pools (the higher the volume, the more fees they'll earn as a result) or the ones bribed by protocols looking to bootstrap their liquidity. The fee vs bribe game theory helps to keep the stakes equal for high-volume pools and those that are bribed.
Liquidity Providers (LPs): Are incentivized with emissions driven provided in $PEARL which they can lock for additional incentives (see above).
Traders: Benefit from the low slippage thanks to the deep liquidity of large pools, in combination with efficient, battle-tested vAMM / sAMM exchange algorithms.
Protocols: Get access to a cooperation-oriented liquidity layer. They benefit from capital efficient trading conditions for their tokens and the ability to incentivize liquidity via bribes offered to $vePEARL holders. They can control their future liquidity within this system.