Tokemak is a liquidity direction protocol that allows DAOs to direct project liquidity through staking $TOKE. It also has a liquidity amplification effect, where $ value of TOKE staked is able to direct much higher liquidity value.
Basically, liquidity providers are able to supply single-side $Asset liquidity to a Tokemak reactor. Then liquidity directors stake $TOKE to that reactor, and based on the proportion of $TOKE they stake vs anyone else who stakes $TOKE to that reactor, they direct an equivalent amount of $Asset liquidity to any market. As Tokemak will also have “Genesis” pools, which hold the settlement currencies of the most popular AMMs, when LDs pick a venue to direct liquidity, the settlement currency is automatically paired with the $Asset in the reactor.
I think the THORStarter DAO could benefit from using the Tokemak protocol to establish it’s XRUNE/Settlement pools on non-ETH chains. For example, right now the XRUNE/WETH pool on sushi is struggling to grow liquidity because most $XRUNE holders do not also have big $ETH bags, and are also wary of being subject to IL on Sushi. If instead XRUNE holders were able to set up an XRUNE reactor on Tokemak and the THORStarter DAO held an allocation of $TOKE, the XRUNE LPs could benefit from IL-free single-side staking and the THORStarter DAO could stake it’s TOKE to the reactor and direct the liquidity to Sushi, or even Uni if the pool was deep enough to warrant it. This same strategy could be used to create the initial XRUNE pools on other chains like Solana, Terra, etc.
Yes, THORStarter plans to primarily use THORChain to facilitate cross-chain liquidity, but Tokemak and $TOKE could be a beneficial tool to ensure liquidity redundancy on non-ERC AMMs.
Right now Tokemak is in the middle of its initial token sale, there’s currently 4 days left in the process. Tokemak devs are whitelisting DAOs, maybe y’all could reach out and get some XRUNE holders whitelisted to build $TOKE liquidity among our members. Additionally, Tokemak appears to have some of it’s coin allocation set aside for DAO sales, if interested, it might be possible for the THORStarter DAO to buy $TOKE outside of the current sale.
Just some brainstorming, more info on Tokemak can be found here:
Wanted to bump this Proposal with some added information.
Providing XRUNE liquidity via Tokemak should still allow for vXRUNE minting. Tokemak will issue tAssets for all Assets deposited into Reactors. Therefore the workflow for THORStarter DAO members would be:
THORStarter DAO member receives $Toke emissions for providing liquidity on Tokemak and vXRUNE rewards for staking their tXRUNE for vXRUNE on THORStarter and is protected from IL by Tokemak’s Protocol Controlled Assets and $TOKE stakers
THORStarter DAO may want to secure $TOKE to ensure the XRUNE liquidity is directed where it wants, but at the same time, there are only so many places that liquidity could be directed, so the sushi pool is going to get the liquidity it needs even if THORStarter isn’t doing the directing itself.
Hey OIGregg, I love Tokemak and am invested so I like the idea but have some questions:
As you mentioned, in order to direct liquidity, Thorstarter will need to buy enough $TOKE to be able to control the XRUNE reactor. Do we have any sense for how much TOKE that is? Also, that money would have to come from the TS treasury so there will obviously be a dilutive effect in using non-circulating TS treasury funds to purchase ETH to purchase TOKE.
Assuming TS buys enough $TOKE to be able to direct the XRUNE reactor towards the XRUNE-ETH pool, who provides the ETH side of the liquidity pool? I would assume what’s missing here is actually the ETH side. Wouldn’t Thorstarter then need to buy enough $TOKE to be able to direct both the ETH reactor as well as the XRUNE reactor? Any idea of how much that would cost to drive let’s say $10m in liquidity?
Is there a risk going forward that someone could buy and deposit enough $TOKE in either the XRUNE or ETH reactors to redirect the liquidity? I think there’s less incentive for someone to do so for XRUNE but it seems like everyone would be competing to direct the liquidity in the ETH reactor.
Tokemak has stated that the target direction ratio is 10:1, so $1 TOKE directs $10 liquidity. So TS would in theory want to secure enough TOKE to direct 10x that amount in liquidity. So whatever goal pool depth TS has, they need 1/10th that amount in TOKE. However, there are a few other factors to consider.
a) First, there’s only so many venues for people to direct liquidity to, so it’s likely that other holders of TOKE will also be directing liquidity to the Sushi pool.
b) Second, non-THORStarter associated holders of TOKE are going to be chasing the highest APR in reactors, so even if there’s a decent number staking to the XRUNE reactor, THORStarter’s allocation will be stickier as it will stay in that reactor regardless of the reactor APR. I elaborate more on this point in response 3 below.
c) Third, not all TOKE holders are going to stake to specific reactors, some will choose a generalized stake that gives them exposure to all reactors, but doesn’t provide specific direction for individual reactors. What this means is that TS’s TOKE will likely direct even more than 10x the liquidity as other TOKE in the reactor may not have directionality attached.
d) Finally, as TS branches onto new Chains and needs to seed new pools on those chains, it will still be able to use the same original TOKE to do so. Pools only need to be deep around the time of the IDOs, TS should be able to schedule its IDOs in such a way that it is able to most efficiently use it’s TOKE to deepen specific pools when necessary, and spread around the liquidity when it’s not.
The ETH side of the pool is provided by Tokemak LPs. There’s two subsets of LP providers on Tokemak: Genesis Pools, which provide the settlement currency for AMMs (USDC, ETH, USDT, potentially RUNE) and Reactors, which provide the actual Assets, like XRUNE. The Genesis pools don’t need TOKE for direction, they are automatically directed based on how the Reactors are allocated.
This is a risk I mentioned in 1.b. above, but I can elaborate more here. Reactor returns are based on the balance of TOKE and ASSET, if there is too much TOKE in a reactor (in comparison to the amount of Asset), the returns for the LPers will increase and returns for the LDs (Liquidity Directors, or TOKE stakers) will decrease. In this situation, either more XRUNE will be added to the reactor, or more likely, the 3rd party TOKE will leave for a different reactor with higher APR. TS’s TOKE will be stickier to the XRUNE reactor than any other potential LD.
Makes sense. I don’t think I quite understood the fact that, when liquidity is directed from a reactor, an equal amount is directed from the Genesis pools so that liquidity is provided in a symmetrical way.
It seems then that the TOKEMAK reactors would be most useful for the relay pools (XRUNE-ETH, XRUNE-RUNE, and any other relay pools on other chains). The TKN-XRUNE pools should be seeded by the TKN project and Thorstarter itself using TKN and XRUNE (rather than ETH or SUDC or USDT).
I really like the idea of depositing XRUNE in the reactor and receiving tXRUNE which can then be staked with TS for vXRUNE. This makes single staking actually useful to Thorstarter because it allows the liquidity to be directed by Thorstarter to specific places as the need arises (vs. trying to finesse it with liquidity mining, which is imprecise, sometimes not effective, and overall dilutive and unsustainable). Of course, until TOKEMAK actually has cross-chain capabilities, the only place it can be directed is the XRUNE-ETH pool for now, correct?
I think there are probably two issues: (1) being so dependent upon another project for liquidity, especially one that isn’t yet launched or proven, is a risk to be evaluated when making a decision and (2) what would it cost Thorstarter to buy enough TOKE to make effective use of the XRUNE reactors? For #1, we can perhaps mitigate this risk by continuing to maintain rewards for the sushi pool so that we are not 100% dependent on the TOKEMAK reactors. For #2, perhaps we can use whatever is gained from THORChain in the OTC deal they’re executing to make TC LPs whole?
Agreed, the Reactors would only be useful for the relay XRUNE/ETH and XRUNE/Rune pools (assuming RUNE is eventually added to Tokemak’s Genesis Pools). The only way it could be used for XRUNE/TKN anyway would be if XRUNE was added as a Genesis Pool asset, which is highly unlikely.
Agreed on the risk of being dependent on another project for liquidity, but I see this as more of a security risk from Tokemak being new than a real dependency risk as TOKE gives TS some level of control over the XRUNE in the Reactor. Fortunately Tokemak seems to be taking their time with pushing updates and is good about code audits.
For your second point, I don’t know what it would cost as the price of TOKE keeps going up, but I also don’t know if Tokemak will have a separate OTC price for DAOs that has 2 year vesting, they have token allocations set aside for DAOs in their Tokenomics, but haven’t talked about what price that TOKE will be sold at.
We’ve been in contact with Tokemak since reactors were initially proposed. Unfortunately XRUNE is not a priority and our treasury doesn’t have the funds to buy enough TOKE to put us in the front of the line.
Nevertheless we are regularly following up with them and waiting our turn.