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Will Bunni's new LP incentive mechanism be the ultimate solution to Uniswap V3 liquidity?

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A month ago, Timeless Finance opened the airdrop application page for early Timeless, Bunni and some Uniswap v3 LPs. For a period of time after the airdrop ended, Bunni's cumulative trading volume continued to rise.

Timeless, a DeFi income protocol that has been launched on blockchains such as Ethereum, Arbitrum, Optimism and Polygon, has established a new protocol - Bunni, which It can help liquidity providers (LP) to obtain income more effectively, making it easier for Uniswap liquidity to be added to other applications, thereby driving Timeless Finance to establish a flywheel effect. According to official news, Timeless Finance opened the airdrop application page for early Timeless, Bunni and some Uniswap v3 LPs a month ago. In the period after the airdrop ended, Bunni's cumulative trading volume continued to rise. What problem does Timeless Finance's Bunni solve and how does it work? How to interact? BlockBeats made a brief summary of this.

Bunni Basics

Timeless is a revenue tokenization protocol, which provides interest-bearing Token (PYT), which gives its holders permanent rights to claim the revenue generated by the underlying principal. Timeless also provides Negative Yield Token (NYTs), which is a protocol-native way to short yield.

Most liquidity providers on Uniswap are losing money even with TVL and volume dominance, Swap fees are usually not enough to offset impermanent losses, especially for centralized and passive liquidity, it is difficult for liquidity providers to provide Uni V3 liquidity without token incentives.

Bunni believes that the current token incentive scheme is unsustainable. The sex provider will slowly evaporate. Bunni hopes to use itself as a liquidity engine to stimulate Uniswap v3 liquidity in a new way.

How it works

Uniswap uses NFT to represent liquidity funds, and because of the permissionless nature of the Uniswap core protocol, anyone can build a contract here, ERC-721 NFT, ERC- Uniswap funds are represented in the form of 1155 NFT or ERC-20 token.

So the way Bunni works is simple: enable projects to create ERC-20 LP tokens on Uniswap V3, and insert them Existing liquidity incentive contract designed for Uniswap V2/Sushiswap.

The project creates Bunni LP token contract and equity contract to motivate LP to provide liquidity, obtain LP token, and in the pledge contract LP tokens can be pledged to obtain rewards. This process has similar functionality to traditional Uniswap V2 liquidity mining. LP provides liquidity, and Bunni's smart contract will have all the liquidity funds; when transaction fees are collected from Uniswap, these fees first enter the Bunni smart contract, and Bunni can also collect agreement fees during the process; and the remaining The transaction fee will be distributed to LP itself as a reward.

By using Bunni instead of Uniswap V2, projects can merge their liquidity directly into a Uniswap V3 pool without Like the split liquidity between Uniswap V2 and V3, it greatly reduces the slippage of traders and makes the transaction smoother. In addition, LPs will also be more interested in providing liquidity on Uniswap V3, because they know that most of the trading volume will be completed through Uniswap V3, so that they can obtain more complex strategic benefits that match it.

Advantages and functions

The advantage and feature of Bunni is that it has a protocol that can package Uniswap liquidity funds as an alternative to ERC-20 tokens, and a veToken economics system for motivating Bunni liquidity. Bunni hopes to help traders generate less slippage in this way, making LPs more willing to provide liquidity on Uniswap V3 and use more complex strategies.

Bunni uses ERC-20 token to represent the packaging contract of Uniswap funds to replace NFT. The functions are as follows:

Reduce GAS cost: LPs using the same price range and pool will share the same ERC-20 token, so that the GAS cost of providing liquidity can be shared among all LPs , so that the cost of GAS is greatly reduced.

Easy to combine: Although many financial applications can be built on Uniswap NFT, since most financial applications currently It is designed in the form of tokens, so it will be easier to use ERC-20 LP tokens to build Lego-style financial applications.

Tokenomics

LIT

LIT is Bunni's native token, used to motivate Bunni's liquidity, with a total supply of 1 billion, Bunni has improved Curve uses veToken economics to reduce the selling pressure brought about by DeFi harvesting.

Bunni uses an improved veToken economics system to incentivize LPs to use the liquidity incentive token (LIT). Improved measures reduce dumping behavior and encourage long-term liquidity provision by aligning the interests of LP and LIT holders.

oLIT&veLIT

oLIT is the call option token of LIT, Provided as rewards to Bunni liquidity providers. Unlike regular options, oLITs do not expire. Users can provide liquidity on Bunni and stake in gauges to earn oLIT rewards. oLIT holders can purchase LIT at a discount to the market price, the current discount is set at 50%, and this value may be changed through governance in the future. Bunni believes that when using LIT's option token oLIT instead of LIT as a reward, the agreement can accumulate a large cash reserve regardless of market conditions, and more holders can purchase LIT at a discounted price.

veLIT is based on Curve's veCRV, which is used as a voting escrow token for LIT to vote on governance proposals and measure weight. Users obtain veLIT by locking LP Token.

Interaction process

Enter Bunni official website, click Add Pool, select token and fee level and price range, provide liquidity, and the amount of liquidity can be small, such as 0.01 US dollars.

Click on the pool for which you want to deploy the meter, no license is required to deploy the Bunni meter. Go to the Advanced tab, click one of the deploy buttons, and deploy a meter with a 2% emissions cap, which makes it easier to get approved for governance votes, and finally, submit the transaction from your wallet. After a meter is deployed, veLIT holders must approve the meter through a governance vote in order to allocate oLIT incentives to the meter.

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