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Summarize three liquidity solutions: Olympus, Tokemak and Fei&Ondo

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How projects such as Fei, Ondo Finance, OlympusDAO and Tokemak address liquidity issues in the next DeFi wave.

Read three Liquidity Solutions: Olympus, Tokemak and Fei&Ondo

Originally written by Joey Santoro, founder of Fei Protocol

Hu Tao, Chain Catcher

Improving liquidity is one of the main objectives of any developed financial market. Essentially, "I want to make this deal as cheap as possible, and I need liquidity on the other side." This applies not only to trading tokens, but also to lending, derivatives and structured products.

Mobility is especially important for young DeFi projects. They hope that new users and pledgers will enter the market as they grow.

This article shows how DeFi has addressed the liquidity issue in the past, and how projects such as Fei, Ondo Finance, OlympusDAO, and Tokemak can address it in the next DeFi wave.

Mobile mining and employment capital

A big catalyst for DeFi was when Compound began issuing COMP tokens to suppliers and borrowers in its lending market. This was the first "liquidity mining" - the exchange of project ownership for temporary liquidity.

The problem is that liquid mining is expensive and costly.

From the consumer's point of view, income farming is the best strategy to move money to where liquidity mining rewards pay the most. But it also leads to a tendency for capital to leave immediately after the awards end, and a slow bleeding effect as tokens are constantly dumped onto the market. As we all know, competition is great for consumers, but tough for businesses. Competition also encourages innovation, as we will see later in this article.

Even at a high cost, navigating a user base is never easy. In the summer of 2020, DeFi saw a wave of growth. New projects just need to launch a token and give away 10-50% of it to instantly have hundreds of billions of TVL. Driven by innovative approaches such as farming, DeFi's new projects ushered in the Cambrian explosion.

But this is unsustainable. Project parties and investors are increasingly aware of the damage liquidity mining can do to the long-term development of projects and are looking for solutions.

New ways to improve liquidity

How to address these issues of employed capital is also part of DeFi's future development, recently dubbed DeFi 2.0. These new protocols are higher up the DeFi stack. They can leverage the scale and network effects of the base-layer DeFi protocol to solve liquidity problems and achieve greater market efficiency.

Project owners, who previously had to pay high fees for employment mobility, can now take the following measures:

1. Buy their liquidity directly

Hire from an agreement that provides the cheapest and highest quality liquidity

The former is known as agreed-upon controlled liquidity (or agreed-upon controlled value, agreed-upon controlled assets). For example, Fei Protocol, OlympusDAO, and Frax Finance are all supported in this way, and their tokens have extremely high liquidity per unit of TVL.

The latter way of leasing liquidity is called liquidity as a service (LaaS). LaaS can be very efficient when services are provided by specialized protocols, such as Fei and Tokemak.

Note: There are many ways to solve the employment capital problem, including options and lock-ups. This article focuses only on a few approaches to popular projects.

Liquidity through the Olympus Pro agreement

Olympus Pro provides projects with the opportunity to obtain liquidity of their own agreements by using the OlympusDAO bond mechanism. Project parties can exchange their tokens for any type of LP token or underlying asset they want at a discounted price. This is a huge improvement over traditional liquid mining, where the project side could not retain any liquidity of employed capital.

The underlying tokens in Olympus Pro bonds need not have any relationship to OHM tokens, but projects can be paired with OHM or sOHM to access the OlympusDAO ecosystem.

Traditional liquidity mining requires high upfront costs and no return. Olympus Pro reverses the way liquidity mining rewards costs by shifting the burden of agreements to the liquidity of more sustainable agreements. Here, protocols can use native tokens to obtain liquidity in perpetuity without fear of loss.

If you only want liquidity but do not need to own your project outright, you can explore leasing alternatives to traditional liquidity mining processes such as Tokemak and Fei.

Tokemak sustainable mobility

Tokemak introduces a liquidity-as-a-service approach. Tokemak allows the project to provide a single token to the TokemReactor and then pair it with base assets such as ETH and USDC in the liquidity pool, and possibly FEI in the future. TOKE holders direct this liquidity to where it is most needed and cover any non-permanent losses incurred by the project.

This protection has brought huge benefits to savers. Tokemak builds assets for himself through transaction fees. This ultimately enhances its ability to provide sustainable liquidity. TOKE was originally released as a reward to users, with TOKE holders ultimately owning ownership of Tokemak Protocol Control Assets (PCA).

TOKE tokenomics encourages long-term, value-oriented participants to enter the network. By taking a share of TOKE, project parties can direct their liquidity wherever they need it. As an upfront investment in a project, this approach is much better than traditional liquid mining.

For projects looking for long-term sustainable liquidity, the best approach is to acquire TOKE shares and plant seeds for Tokemak Reactor. In liquid markets, they can use TOKE to pair any project tokens they support without the risk of permanent loss. Voting for the Tokemak CoRE2 campaign will begin on November 1.

Liquidity as a Service (LaaS) through Fei and Ondo

The Fei protocol supports Fei, which is a fully decentralized and scalable stablecoin supported by on-chain reserves. Fei can use its PCV to support liquidity provision denominated on a Fei basis.

Fei Protocol is working with Ondo Finance to provide a cost-effective LaaS product with flexible terms. In essence, project parties can deposit their project tokens into a flexible term Ondo liquidity vault, and Fei Protocol will match their deposits with an equal amount of newly minted Fei, and the tokens will be in & NBSP; Uniswap Or automated market-maker trading schemes on decentralized exchanges such as SushiSwap.

In essence, Fei Protocol can double the liquidity of a project and eliminate all of its upfront capital costs. At the end of the window, the Vault returns FEI and all remaining tokens to the project, plus a small fixed fee.

Ondo Vault handles all the accounting behind it, all transaction fees and any non-permanent losses that the project will leave behind.

Fei Liquidity as a Service (LaaS) is a fast and inexpensive way to obtain DOLLAR-denominated liquidity for a project.

conclusion

Project parties can now choose between liquidity owned through Olympus Pro's investment agreement, liquidity aligned with long term value through Tokemak, or cost-effective liquidity as a service through Fei and Ondo.

These products represent significant improvements over traditional liquid mining projects and we expect new projects to move towards products tailored to the needs of different stages of their growth.