sTRX Swap Pool Liquidity Incentives

Motivations

An on-ramp venue to access and exit Oikos.exchange is critical to the success of the platform. Users must be able to convert TRX and other cryptocurrencies to Synths (sUSD primarily) to start their trading activities. Oikos Swap fulfills this role and provides such a service, allowing anyone to swap between TRX and TRC-20 pairs, including our synths (sUSD, sTRX, sBTC, sETH, etc.).

Price stability

Oikos swap requires balanced liquidity between both sides of the swap pools, in order to maintain a stable price. Low liquidity results in slippage between the quoted price and the actual price paid for the swap, even for small purchases. As such, providing liquidity is encouraged by sharing the 0.3% exchange fees entirely with liquidity providers. Users willing to take on this role must deposit a desired amount of TRX and their counter-value in the chosen token.

E.g: if providing liquidity on the TRX/OKS pair for 10,000 TRX, the amount of OKS needed, assuming $0.017 TRX/USD and $0.025 OKS/USD is:

10,000 * $0.017 / $0.025 = 6800 OKS

Additional incentives

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Providing liquidity is not entirely risk-free and an additional incentive is assigned to users participating in this role. A portion of the weekly inflationary supply is rewarded automatically to liquidity pool (LP) providers. Deep liquidity will increase confidence in the on-ramp and off-ramp to Oikos Exchange and reduce trader losses due to slippage (when exchanging from synths to TRX). We will allocate around 7% of the weekly minted supply (around 109,000 OKS) for this purpose, which will be distributed proportionally across liquidity providers (starting with the sTRX/TRX pool).

The specific distribution rules will be as follows:

  1. OKS tokens will be distributed proportionally to each wallet based on the percentage of liquidity tokens in the pool at the end of each fee period.
  2. Once you have staked your LP tokens you will begin to accrue balance, as soon as the OKS rewards are deposited to the contract at the end of the transition period.

Network effect

Using seigniorage is a practice used by multiple DeFi projects (Balancer, Curve, Thorchain, Bancor, Kava, Compound) which allows a startup to use the future earnings of the network, substantiated by the actual economic value of its token, to actively fuel network utility. Those who don’t participate in a meaningful way see their shares diluted. In conclusion, as a result of this strategy, users have an incentive to participate in network activities.

Conclusions

Token-based network bootstrapping is effective because it increases user engagement levels and rewards participants with an asset directly tied to the network value. From this perspective, it can be seen as a pseudo equity. Some participants may sell these rewards. However, those that hold are essentially converted into “network shareholders”. These holders are more aligned with the long term prospects of the project and have the potential to contribute meaningfully to it, by adding value for both users and investors.

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Oikos is an initiative to bring key DeFi applications to the Tron network.

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