As part of our ongoing commitment to transparency and user safety, we want to provide important information about the SaucerSwap WHBAR contract and its intended use.

The SaucerSwap WHBAR contract was specifically designed and deployed as an internal protocol component for SaucerSwap operations. While it has functioned reliably within our ecosystem since launch, we want to clarify its scope and important limitations for the broader community.

Key Points

Within SaucerSwap

Fully Functional — All WHBAR functionality within the SaucerSwap protocol remains secure and operates as intended. Users can continue to swap, provide liquidity, and interact with WHBAR through our interface without any concerns.

Ecosystem Context

Due to SaucerSwap’s position as a leading DEX on Hedera, our WHBAR contract has become widely adopted across the ecosystem. The contract was originally engineered exclusively for SaucerSwap’s internal mechanisms, where our specific safeguards ensure secure operation.

We recognize and appreciate the many projects that have successfully integrated with our WHBAR implementation. These projects have often implemented their own protective measures (such as WhbarHelper contracts) to ensure safe interactions. It’s important to note that without these protective measures, direct contract interactions can expose user funds to risk.

Understanding the Risk

For funds to be at risk, specific conditions must exist simultaneously:

• An account must have an open WHBAR allowance granted outside of an atomic transaction
• The account must be actively holding WHBAR tokens
• No protective mechanisms (like those used by SaucerSwap or WhbarHelper contracts) are in place

Within SaucerSwap and properly integrated third-party applications, these conditions are prevented through atomic bundling of operations. However, direct contract interactions without such safeguards can create these risk conditions.

This notice aims to help developers understand the importance of proper safety measures when working with the current implementation as the ecosystem evolves toward standardization.

Recent Events

We are aware of recent discussions regarding WHBAR contract interactions. Direct usage of the WHBAR contract by accounts which met the aforementioned risk conditions have exposed themselves to loss of funds. While we continue our investigation, we can confirm that the vulnerability described in this notice has existed since a 2023 network update.

Initial analysis suggests the impact is limited to a small number of accounts that directly interacted with the contract without proper safeguards. We are conducting a thorough review to determine the full scope and will provide updates as appropriate. Throughout this period, SaucerSwap users and properly integrated protocols have remained unaffected due to the protective measures in place.

For any developers who may have implemented direct contract interactions: our documentation has always specified the correct atomic bundling pattern required for safe usage. We encourage anyone who believes they may have been affected to contact us directly so we can assist in understanding what occurred.

Action Required?

SaucerSwap: No Action Required by Users

SaucerSwap retail users do not need to take any immediate action. Your funds and positions within SaucerSwap remain secure and unaffected.

Bonzo Finance: No Action Required for Retail Users

All funds and positions within the Bonzo Finance protocol remain secure and unaffected. Retail user accounts utilizing Bonzo Finance do not need to take any immediate action.

Bonzo Finance: Action May Be Required for Liquidation Bot Operators / Developers

If your developer accounts or contracts directly manages a balance of wHBAR issued by SaucerSwap’s wHBAR (0.0.1456986) contract, it’s strongly recommended to revoke any open allowances, if they exist. If not already implemented, please review and implement best practices for wHBAR usage throughout your liquidation bot operations. Not following best practices has the potential to result in loss of wHBAR funds.

Looking Forward

To better align with ecosystem growth and standardization, SaucerSwap is committed to supporting the official Hashgraph ERC20 WHBAR standard. We will keep the community informed as ecosystem standards develop.

What This Means

• Users trading, providing liquidity, or staking on SaucerSwap: No risk, no action needed
• Projects using WhbarHelper or similar protections: Currently safe, no action needed
• Direct contract integrations without protections: Immediate risk — migrate to WhbarHelper implementation immediately or discontinue use
• Users interacting with integrated protocols: Check with those protocols about their safety measures
• New projects: Do not integrate directly with SaucerSwap WHBAR — use WhbarHelper patterns or wait for ecosystem standards

For Developers

We advise all developers and integration partners to:

• New integrations: Do not use the SaucerSwap WHBAR contract directly — await the Hashgraph standard or implement WhbarHelper patterns if absolutely necessary
• Existing integrations: Verify your safeguards are properly implemented or migrate to WhbarHelper immediately — contact our team if you need assistance

We appreciate the patience and ingenuity of our ecosystem partners who have built on top of our infrastructure, and we remain committed to supporting the ecosystem’s evolution.

If you have any questions or concerns, please reach out to our team through our official channels.

Thank you for your continued trust and support.

The SaucerSwap Labs Team

Introduction

As we enter 2025, the decentralized finance (DeFi) landscape continues to evolve at a rapid pace. SaucerSwap, Hedera’s leading decentralized exchange, has shaped the network’s DeFi ecosystem from the start. Today, we’re thrilled to share our roadmap — one that builds on our proven foundations while charting an ambitious course for the future.

Where We Stand

Since launching in 2022, SaucerSwap has evolved from a nascent AMM into a cornerstone of Hedera’s DeFi infrastructure. We now command the majority market share among Hedera DeFi protocols, boasting approximately $130 million in Total Value Locked (TVL), over 165 million HBAR secured in our wrapped HBAR contract, and more than $2.4 billion in cumulative trading volume across seven million swap events.

Our late-2023 launch of SaucerSwap V2 introduced concentrated liquidity, setting new standards for capital efficiency on Hedera. Meanwhile, the Liquidity-Aligned Reward Initiative (LARI) has optimized incentive structures for liquidity providers, building a more sustainable and efficient model for market-protocol alignment.

Vision & Strategic Direction

Our mission is simple: build the most efficient, accessible, and secure decentralized exchange — on Hedera and beyond. As we look to 2025 and beyond, our roadmap centers on four core pillars:

1. Protocol Improvement & Innovation

We remain committed to expanding DeFi’s possibilities. Our immediate priority is optimizing existing systems to ensure fair rewards, robust core functionality, and a seamless user experience. We will also explore transformative features such as permissionless V2 pool creation, on-chain limit orders, and, eventually, perpetual futures trading.

2. User Experience & Accessibility

DeFi’s future relies on making complex tools universally accessible. Our roadmap emphasizes near-term improvements — faster charting, enhanced mobile responsiveness, and more intuitive transaction flows. We are also building comprehensive solutions like a dedicated mobile app and multi-currency support to serve our expanding global community.

3. Infrastructure & Security

As our protocol scales, our commitment to robust infrastructure deepens. We are improving app performance via global backup locations (Multi-AZ), expanding our data analytics capabilities (via a subgraph), and fortifying our security framework through integrations with leading providers like Chainalysis.

4. Ecosystem Growth

We aim to support the ecosystem in every possible way. By integrating bridge protocols like Axelar and LayerZero, we will attract more cross-chain liquidity and a broader user base. Enhanced token classification systems and a frictionless listing process will further empower token creators seeking to leverage SaucerSwap. Our goal is a more interconnected, efficient, and accessible DeFi ecosystem on Hedera.

Our Roadmap

Informed by these four key pillars, we have put together a roadmap that incorporates new ideas and highly-requested items from the community.

This roadmap outlines our development priorities across three timeframes:

Immediate Term

• LARI system refinement and automation
• — Streamlined campaign initiation and reward distribution
• — Data-driven reward weight optimization
• — Improved epoch analytics for liquidity providers

User Interface & Experience

• Global search functionality
• Comprehensive website redesign
• Swap widget implementation
• Transaction flow optimization
• Enhanced token menu with balance sorting
• Advanced charting integration
• — Higher-fidelity data for top-traded pairs
• — Technical indicators
• — Improved price feeds
• Mobile responsiveness improvements
• Expanded token information on swap pages
• — Market data integration
• — Analytics overlays
• — Key performance metrics

Infrastructure & Security

• Resilient, faster app performance via global backup locations (Multi-AZ)
• Launch of SaucerSwap subgraph, integrating with Dune Analytics and other key protocols
• SAUCE 300 implementation
• — Pool ranking system
• — Improved token classification system
• Basic user support system automation
• Transaction reliability improvements

Ecosystem Development

• Axelar bridge integration to enable cross-chain liquidity
• Strategic protocol partnerships
• Token classification system enhancements

Near Term

Protocol Features

• Auto-slippage implementation
• Permissionless V2 pool creation
• On-chain limit orders
• Automated Dollar-Cost Averaging (DCA) functionality
• Community Pools
• V2 compound and rebalance features
• Comprehensive pool performance dashboard
• — Position analytics
• — Earnings tracking
• — Historical performance metrics

User Experience

• Local timezone integration
• Push notification system
• Dedicated faucet interface
• iOS and Android mobile applications
• Pool performance analytics dashboard

Infrastructure

• Chainalysis and Chainabuse integration
• Developer documentation overhaul
• LLM-powered semantic search
• LayerZero integration

Market Expansion

• Community Pools launch
• SAUCELING NFT launch
• Localization for key markets
• — Spanish-speaking regions
• — Southeast Asia
• — Other high-growth areas

Future Development

Protocol Innovation

• SaucerSwap V3 development
• Perpetual futures platform
• HTS ↔ ERC-20 compatibility layer
• Hedera “ETF” contracts

Infrastructure

• Decentralized website mirrors
• Universal analytics dashboard
• Advanced trading tools
• Cross-chain security framework

Ecosystem Growth

• DAO-as-a-service infrastructure
• Sub-DAO framework
• Institutional partnerships program
• Cross-chain liquidity networks

Technical Implementation Notes

This roadmap’s execution considers several key technical factors:

Smart Contract Development

• Near-term protocol features requiring contract development (auto-router, community pools, and limit orders) are sequenced to ensure thorough testing and auditing.

Infrastructure Scaling

• Multi-AZ deployment and enhanced monitoring systems remain top priorities to support rising transaction volume and global user adoption.

Data Architecture

• Subgraph implementation will improve analytics, data retrieval, and third-party integrations.

Security Considerations

• Each phase includes matching security upgrades — from standard transaction monitoring to advanced cross-chain security frameworks.

New Vision for Community Pools

Background

Since our initial protocol launch in 2022, community pools have been a highly anticipated feature among SaucerSwap users. In Phase 1, we introduced SAUCE staking (to mint xSAUCE), enabling participants to earn passive APR on their SAUCE tokens.

However, Phase 2 — staking xSAUCE to earn external project tokens — was delayed as our attention turned to foundational improvements like SaucerSwap V2. Additionally, the slow pace of new token projects launching on Hedera in 2023 and early 2024 meant fewer opportunities to partner on meaningful community pool campaigns.

The Turning Point

Recently, we’ve witnessed a surge of new projects on Hedera. HeadStarter has been steadily onboarding promising ventures, and memejob.fun (analogous to pump.fun) has shown creativity in incubating community-driven tokens. With more projects seeking fast and efficient token distribution, the time is right for community pools to thrive.

Embracing Decentralization

Our new vision for community pools puts decentralization at the core. Rather than limiting these pools to a single launchpad or specific partnership model, we will enable multiple pathways for projects to create their own pools on SaucerSwap. Whether a token graduates from memejob.fun, is incubated by HeadStarter, or emerges from another community launchpad, the process should be accessible, fair, and transparent. This approach empowers teams of all sizes — from indie devs to larger DAOs — to leverage SaucerSwap for token distribution and liquidity growth.

How It Works

1. Stake xSAUCE in community pools to earn new project tokens.

• Projects looking to distribute tokens can use this mechanism to engage xSAUCE holders directly.

2. Boosted Rewards with SAUCELING NFTs (Phase 3).

• Future community pools will offer reward multipliers for those who hold and stake SAUCELING NFTs.

• SAUCELING NFTs themselves will be obtainable by exchanging legacy Planck Epoch NFTs, bridging our earliest supporters into this new rewards ecosystem.

Why Community Pools Matter

• Faster, More Efficient Token Distribution: Projects can tap into an established user base by incentivizing xSAUCE stakers with their tokens.

• Community-Driven Liquidity Growth: By distributing tokens directly to engaged users, new projects can bootstrap liquidity more effectively on SaucerSwap.

• Inclusivity and Innovation: Any project, regardless of its origin or size, can build community pools. This opens the door to a richer, more diverse Hedera ecosystem.

Next Steps

We recognize the community’s enthusiasm for this feature and regret the delays. SaucerSwap V2 needed our full attention to bring concentrated liquidity and improved capital efficiency to the ecosystem. But now that the DeFi landscape on Hedera is rapidly expanding, community pools are back in focus. We’re working on a decentralized framework to ensure minimal friction for projects that want to launch pools and maximum choice for xSAUCE stakers looking to diversify their rewards.

Stay tuned for further updates on Phase 2, where xSAUCE holders will be able to stake in community pools for project tokens — and Phase 3, where staking SAUCELING NFTs for boosted rewards will bring additional depth and opportunity to our rewards ecosystem.

Together, we’ll usher in a new era of community-driven DeFi on Hedera, where projects of all shapes and sizes can thrive on SaucerSwap.

Conclusion

This roadmap represents a technically grounded strategy for scaling SaucerSwap’s infrastructure, improving capital efficiency, and expanding cross-chain functionality. As the DeFi market evolves, we will refine timelines and specifics based on technological breakthroughs, market conditions, and community feedback.

We remain steadfast in our commitment to delivering an accessible, secure, and innovative DeFi experience — pioneering the next chapter of decentralized finance on Hedera and beyond.

For discussion, join us on:

• Discord: https://discord.gg/saucerswap
• Twitter: https://twitter.com/SaucerSwapLabs
• Governance Forum: https://gov.saucerswap.finance/

Introduction

As SaucerSwap solidifies its position as a leader in the decentralized finance space, our commitment to sustainable growth and community-driven governance remains unwavering. Reflecting on the progress made over the past months, this update not only highlights the expansion of the SaucerSwap DAO’s responsibilities but also introduces the upcoming implementation of an interface fee. These pivotal steps are part of a broader strategy to enhance the protocol’s long-term sustainability and governance framework, building on our past successes and setting the stage for future developments.

Governance Update

The SaucerSwap DAO, recently formed on-chain to govern key aspects of the protocol, has quickly expanded its responsibilities. Originally focused on managing V1 and V2 incentives, the DAO’s scope now includes treasury management, marking an important step in decentralized governance.

The SaucerSwap DAO now oversees:

• V1 Farm Creation: Governing the creation of yield farms and adjusting SAUCE and HBAR emissions for existing farms.
• V2 Pool Creation: Managing V2 pool creation to prevent liquidity fragmentation and handle technical overhead. The DAO sets protocol fees and selects fee tiers.
• V2 LARI Campaigns: Approving and managing LARI campaigns, including setting campaign durations and token allocations.
• Tokenomics Changes: Approving significant changes to SAUCE tokenomics proposed by core maintainers.
• Treasury Management: Governing key treasury activities, including fee switches, HBAR staking rewards, protocol fees, and SAUCE buybacks. The DAO also manages liquidity, farming, and staking activities within SaucerSwap and other protocols.

Furthermore, the DAO now controls several key accounts and contracts:

V2 Incentives (Unallocated): Manages unallocated SAUCE incentives, directing them to the DAO treasury.

• HBAR Staking Rewards: Adjusts allocations of staking rewards between Masterchef, the DAO treasury, and Brewsaucer.
• V1 and V2 Protocol Fees: Oversees the distribution of protocol fees for SAUCE buybacks, managing allocations to Mothership, SaucePaymentSplitter, and the DAO treasury.
• V2 Incentives (LARI): Curates and manages LARI campaigns, including project selection and reward allocation.
• V1 Incentives (Farm): Adjusts emission weights for V1 farm pools to ensure optimal distribution.

This expansion of the DAO’s responsibilities ensures alignment between the diverse interests of SaucerSwap’s various community members — token holders, liquidity providers, traders, and others. By giving the community direct control over treasury management, SaucerSwap fosters a balanced and sustainable governance model that drives the protocol forward.

Introducing the SaucerSwap Interface Fee: A Step Towards Long-Term Sustainability

As SaucerSwap continues to evolve and grow within the DeFi ecosystem, we’re taking a significant step towards ensuring the long-term sustainability of our protocol. Today, we’re announcing the implementation of an interface fee, a strategic move that aligns with industry standards and positions SaucerSwap for continued success and development.

The Interface Fee: What You Need to Know

Starting on Monday, August 19th, 2024, SaucerSwap will introduce a 0.4% interface fee on certain swap routes. This fee will apply to both v1 and v2 of our protocol and will be implemented specifically for trades executed through the SaucerSwap front-end interface (i.e., https://saucerswap.finance).

It’s important to note:

• This fee is specific to the saucerswap.finance interface and does not apply to other platforms or aggregators that might interact with SaucerSwap’s smart contracts.
• The fee will only be applied when swapping to the following output tokens: HBAR, HBARX, USDC, USDC[hts], USDT[hts], DAI[hts], WBTC[hts], WETH[hts]
• The fee is calculated based on the output amount. Mechanistically, the router contract receives the full output amount, sends 0.4% (0.004 * amount) to the fee collector, and transfers the remaining 99.6% to the user.
• All stablecoin-to-stablecoin swaps will remain exempt from this interface fee. For this purpose, stablecoins include USDC, USDC[hts], USDT[hts], and DAI[hts].
• This fee is separate from the 0.3% swap fee for trades in SaucerSwap v1 (which applies to all pools) and from the variable fee tier in SaucerSwap v2. Those fees are imposed at the core contracts, while the interface fee is set in the router contract, which is a periphery contract.

Driving Sustainability and Development

This interface fee represents a crucial step in SaucerSwap’s journey towards self-sufficiency. As we approach the end of SAUCE token vesting in a few years, when the maximum supply will equal the circulating supply, it’s essential that we establish sustainable funding mechanisms for ongoing operations and development.

The introduction of this fee will:

1. Reduce reliance on the SAUCE token for funding development and operations
2. Create a direct link between protocol utilization and revenue generation
3. Ensure continued development and improvement of the SaucerSwap platform

The revenue generated will go to SaucerSwap Labs to fund ongoing development and operations. Specifically, this revenue will sustain operations by paying for infrastructure costs, development, marketing, and other expenses incurred by SaucerSwap Labs in the maintenance and development of the SaucerSwap interface.

Balancing User Experience with Protocol Health

We understand that introducing a fee impacts our users, and this decision was not made lightly. To maintain transparency:

• This fee is specifically for using the SaucerSwap interface on saucerswap.finance.
• It is separate from any existing swap fees or fees charged by other platforms (e.g., HashPack, ETASwap) that might interact with SaucerSwap’s liquidity.
• Users interacting directly with SaucerSwap’s smart contracts through other means will not incur this specific interface fee.

Because liquidity providers and users of the SaucerSwap protocol rely on a well-maintained interface and a strong development team scaling the protocol, this interface fee directly supports those goals which directly impact users. By ensuring the long-term sustainability of the platform, we can continue to provide a robust, reliable, and innovative DeFi experience for our community.

Industry Standard, Proven Success

The implementation of an interface fee is not unprecedented in the DeFi space. Uniswap, a leader in the industry, introduced a similar fee structure which has proven to be a successful model for sustainable protocol development.

Our goal has always been to create a self-sustaining, robust protocol that can thrive independently of token emissions. This interface fee on saucerswap.finance is a critical component in achieving that vision. The revenue generated will go to SaucerSwap Labs to fund ongoing development and operations, ensuring that we can continue to innovate and serve our community for years to come.

Looking Ahead

Looking ahead, several significant initiatives are set to shape the future of SaucerSwap. These include the continuation of LARI campaigns and THF ‘Spring Incentives’, phases II and III of single-sided staking, a front-end bridge integration, further UI/UX development, LARI 300, and the delegation of voting power to DAO participants. Many of these initiatives are nearing completion and have strategic overlaps.

For instance, the HBAR granted through the THF Spring Incentives campaign is being leveraged to incentivize bridged liquidity, thereby accelerating Hedera’s adoption within the broader crypto community. Delegative governance will allow proposals to be submitted anonymously, eliminating the proposer’s need to meet the 100k SAUCE threshold for account funding. It also empowers passive users by enabling them to delegate their voting power to a trusted representative.

Details on LARI 300 are forthcoming, but this initiative is expected to streamline the onboarding process for projects wishing to list on SaucerSwap’s primary front-end while also improving the user experience for traders and liquidity providers managing their assets within the web app. Lastly, phases II and III of single-sided staking will become a central focus once these other initiatives are completed. This extension of the current staking system will streamline the onboarding of new projects to the ecosystem, while giving xSAUCE and Planck Epoch Collectible (PEC) NFTs additional use cases. More details will be provided as this initiative progresses.

As SaucerSwap continues to evolve, these initiatives underscore the protocol’s commitment to innovation and community-driven growth. By integrating new features and expanding governance capabilities, SaucerSwap is well-positioned to remain at the forefront of decentralized finance, offering a robust and dynamic platform for all participants.

Summary of Article

These initiatives represent crucial steps in SaucerSwap’s evolution, solidifying our path toward a more sustainable and community-driven protocol. By expanding the DAO’s responsibilities and introducing the interface fee, we are taking practical measures to secure the protocol’s future. As we prepare for the developments ahead, our priority remains clear: to support our community and maintain SaucerSwap’s position as a robust and adaptable player in the DeFi ecosystem.

Introduction

As DeFi continues to democratize financial systems, SaucerSwap leads the way with its on-chain governance system, powered by the Hedera Consensus Service (HCS). This system is embodied by the SaucerSwap DAO, which plays a pivotal role in managing key aspects of the protocol, particularly the alignment of incentives through reward allocation across both V1 and V2. While the protocol itself operates autonomously via immutable smart contracts, the DAO empowers the community to influence its adaptation to an ever-changing market.

With the launch scheduled for Monday, August 5th, at 18:00 UTC, this article explores the governance process within SaucerSwap, detailing how the community’s collective decision-making shapes the protocol’s development and future direction.

Token-Weighted Voting

At the heart of the SaucerSwap DAO is the power of its community, represented through the holdings of SAUCE and xSAUCE tokens. Voting power is determined by a user’s balance of these tokens, with xSAUCE converted to its SAUCE equivalent. The formula for calculating voting power is:

Vote counting and results will be updated every minute, with the final tally taken at the exact end of the voting period to ensure an accurate reflection of voting power throughout the governance process. This method ensures that the voting power accurately represents the most current token holdings for each proposal.

Governance Process

The governance process consists of three distinct phases: Request for Comment (RFC), Proposal, and Election. Each phase is designed to facilitate efficient, transparent, and meaningful community engagement.

1. Request for Comment (RFC) Phase

• Purpose: Gather initial feedback and refine proposals.
• Duration: Minimum of 3 days.
• Requirements: No minimum voting power required.
• Platform: Discussions occur on the SaucerSwap Governance Forum at gov.saucerswap.finance.

The RFC phase is an open forum where community members can present and discuss proposed changes. It’s a brainstorming stage with no minimum voting power requirement, allowing for diverse input and proposal refinement.

2. Proposal Phase

• Purpose: Formalize and submit proposals for voting.
• Duration: 2 days.
• Requirements: Minimum of 100k units of voting power to submit a proposal.
• Quorum: 10M voting power and majority to proceed with Election.
• Platform: HCS-based voting conducted via the SaucerSwap Interface.

After gathering feedback, a refined proposal is submitted for voting. To move forward, the proposal must reach a quorum of 10M units of voting power and a majority vote. Additionally, it requires a minimum of 100k units of voting power from the proposer.

3. Election Phase

• Purpose: Final community vote on proposals.
• Duration: 2 days.
• Requirements: 40M voting power quorum and majority for enactment.
• Platform: HCS-based voting conducted via the SaucerSwap Interface.

The final phase is automatically triggered if Proposal voting criteria is met. It involves another vote via HCS for enactment. An Election must achieve a quorum of 40M units of voting power and a majority vote to be enacted.

Technical Implementation

The HCS facilitates voting for SaucerSwap proposals and elections through a designated HCS Topic ID. Users connect their wallets to saucerswap.finance/governance to sign and submit voting messages in JSON format to HCS. Upon receiving a vote, SaucerSwap uses the Hedera mirror node to access the voter’s historical balances of SAUCE and xSAUCE at a specific UNIX timestamp. Users can vote multiple times, but only their final vote is counted. This system avoids smart contract risks while inheriting the speed and efficiency of the HCS.

Governance Scope

The governance scope includes:

• Default Token Listings: The default list includes larger and established projects, such as high-value bridged assets and prominent Hedera projects. To be added, projects must pass due diligence, a DAO vote, and meet liquidity requirements.
• V1 Farm Creation and Amendment: The DAO oversees the creation of new yield farms and the adjustment of emissions for existing farms. Projects must meet liquidity and trading volume criteria and pass a community vote to qualify for dual token emissions in SAUCE and HBAR.
• V2 Pool Creation: Initially permissioned to prevent liquidity fragmentation, new pools in SaucerSwap V2 are curated and governed by the DAO.
• V2 LARI Campaign Creation and Amendment: The Liquidity-Aligned Reward Initiative (LARI) allows liquidity providers to earn additional incentives. Proposals for creating or amending LARI campaigns are submitted to SaucerSwap Labs and require DAO approval.
• Tokenomics Changes: Any significant changes to SAUCE tokenomics proposed by core maintainers must be approved by the DAO.

Matters outside this scope, such as treasury management and meta-governance, are managed by the SaucerSwap core maintainers for the time being.

Conclusion

The SaucerSwap DAO empowers its community to participate in the protocol’s governance, ensuring that decisions are made collectively and transparently. From token listings to liquidity pool management, the DAO’s influence shapes the protocol’s future, reflecting the values and priorities of its members. As SaucerSwap continues to evolve, its DAO remains a cornerstone of its decentralized and community-driven ethos.

On Monday, June 3rd, SaucerSwap will launch the Spring Incentives Campaign in collaboration with The HBAR Foundation. This campaign, running for approximately three months with opportunity to extend, aims to boost liquidity, increase Hedera network participation, and reward the SaucerSwap community. The campaign will distribute a total of 23,125,000 HBAR through various initiatives, including liquidity rewards, network fee rebates, and a Discord faucet initiative. These efforts are designed to improve the health and efficiency of our protocol while supporting the ecosystem’s long-term growth and sustainability.

• 21,000,000 HBAR for liquidity rewards
• 1,875,000 HBAR for network fee rebates
• 250,000 HBAR for a faucet initiative

Liquidity Rewards

Farm

A third of the liquidity rewards portion of the grant, 7,000,000 HBAR, is designated for yield farm rewards in V1 pools. Starting June 3rd, 1,073,971 HBAR will be distributed over the first two weeks, across 28 pools including new additions like HBAR/BSL and HBAR/DAVINCI. Each farm will receive dual token rewards in SAUCE and HBAR based on the weighting schema detailed in Table 1.

The focus will initially be on supporting pools containing Hedera-native and hashport-bridged tokens, with the potential to extend incentives to other native projects and bridges in the future. The total HBAR emission rate and individual farm weights will be re-evaluated after two weeks. If the boosted incentives achieve the anticipated TVL increase while assuming APRs equilibrate at their current levels, a 40% TVL increase for V1 is projected.

Liquidity-Aligned Reward Initiative (LARI)

Two-thirds of the liquidity rewards portion of the grant, 14,000,000 HBAR, will fund LARI rewards in V2 pools. Commencing June 3rd, 2,333,333 HBAR will be distributed in the first two weeks (Epoch 15). To grow the DAO’s strategic reserve and reduce inflation, the rate of SAUCE emissions to LARI will be reduced by a factor of one-third during the campaign. Despite this reduction in SAUCE emissions, APRs will increase across the board due to the added HBAR incentives, assuming constant TVL.

The campaign will initially support 28 pools, including new ones like HBAR/KARATE 0.30% and HBAR/PACK 0.30%. Each V2 pool will receive dual token rewards in SAUCE and/or HBAR as per the weighting schema in Table 2.

Active liquidity partner campaigns will continue, offering additional incentives in project tokens. Similar to V1, the focus will initially be on Hedera-native and hashport-bridged token pools, with opportunities to expand to other native projects and bridges. The total HBAR emission rate and individual LARI weights will be reassessed after Epoch 15. Assuming the incentives drive a substantial TVL increase that equilibrates at current APRs, a projected 324% TVL increase for V2 would follow.

Network Fee Rebates

To incentivize trading on SaucerSwap, a network fee rebate system has been introduced. For both V1 and V2 router contracts, transaction fees incurred by accounts during swap interactions are recorded. Each month, 90% of these fees are rebated to the accounts via an airdrop, boosting trading activity and not requiring any user action on claims.

Note: Rebates are in HBAR and will be sent from account 0.0.4138717.

Faucet Initiative

The SaucerSwap Discord server features a faucet bot dispensing small amounts of HBAR. To access this:

1. Open Discord and navigate to the SaucerSwap server.
2. Follow the Wickbot prompts to verify your Discord account.
3. After verification, navigate to the faucet bot channel and enter !sparechange <YOUR_ACCOUNT_ID>, using your Hedera account ID or EVM address from MetaMask.
4. Your account will receive a one-time allotment of $0.275 worth of HBAR, intended to cover network fees for initial transactions.

For more detailed instructions, see the Tutorial.

Other Remarks

SaucerSwap has recently integrated Moonpay, a leading crypto-to-fiat gateway, enabling direct crypto purchases from bank accounts. Currently, Moonpay has waived its fees, allowing users to buy HBAR and Hedera-native USDC easily and cost-effectively.

Stader, another project involved in The HBAR Foundation’s Spring Incentives Campaign, is offering 4.63% APR on HBAR liquid staking via their yield-bearing HBARX token. This is significantly higher than the native staking rate of 0.282% (as of the date of publication). HBARX can be paired with HBAR or other HTS assets and supplied in SaucerSwap to compound yield.

Summary

The 2024 Spring Incentives Campaign represents a significant collaboration between SaucerSwap and The HBAR Foundation, allocating 23,125,000 HBAR to various initiatives. With 21,000,000 HBAR for liquidity rewards, 1,875,000 HBAR for network fee rebates, and 250,000 HBAR for a Discord faucet initiative, the campaign aims to drive substantial growth in TVL and trading activity. Key initiatives include yield farming, the Liquidity-Aligned Reward Initiative, and a network fee rebate system, all designed to support the long-term sustainability and growth of the SaucerSwap ecosystem.

Introduction

Auto Pools, a feature of SaucerSwap V2 leveraging ICHI’s ‘Yield IQ’ for Active Liquidity Management (ALM), are launching in March 2024. This feature simplifies concentrated liquidity provision by allowing users to deposit a single token into an automated vault. These vaults allocate funds across specific price ranges in the underlying liquidity pool to optimize fee earnings and mitigate impermanent loss risk, making the process efficient and user-friendly.

The term ‘ichi,’ meaning ‘one’ in Japanese, aptly reflects their defining single-asset deposit mechanism, requiring users to provide just one token for liquidity, from which the protocol takes over the management process to keep liquidity concentrated around the active tick.

Auto Pools are set to integrate with all SaucerSwap V2 pools, with most pools offering two vaults (one for each token in the pool). Despite Auto Pools supporting all V2 pools, users will always have the flexibility to create a manual position in any SaucerSwap V2 pool if they prefer. For instance, the WBTC[hts]/HBAR pool has vaults for both WBTC[hts] and HBAR. The SAUCE/HBAR and SAUCE/USDC pools are exceptions, offering vaults specifically for HBAR and USDC, respectively.

Key Features of Auto Pools

Single-Token Deposit: Users can contribute to liquidity pools using just one asset, receiving ERC-20 LP tokens in return. This simplification enhances accessibility and convenience.

Dynamic Rebalancing: Auto Pools employ a rebalancing algorithm that adjusts to market conditions through five operational states — Healthy, Over-Inventory, Under-Inventory, High Volatility, and Extreme Volatility — maximizing efficiency and minimizing risk (details below).

Dual Vaults: Each V2 pool has two vaults, allowing for a more tailored approach to liquidity management, with a special exception made for SAUCE/HBAR and SAUCE/USDC pairs.

LARI: Participation in Auto Pools qualifies for LARI rewards, making liquidity providers (LPs) eligible for heightened rewards based on the vault’s liquidity management efficiency, the depositor’s share, deposit duration, and the LARI weight of the underlying pool.

Operation and Mechanism of Auto Pools

Auto Pools simplify the liquidity provision process in SaucerSwap V2 by allowing LPs to deposit a single asset into a vault. Upon deposit, LPs receive fungible ERC-20 LP tokens, representing their share of the vault. These assets are strategically deployed into SaucerSwap V2 concentrated liquidity pools, with Auto Pools adjusting positions based on market conditions to optimize fee earnings and reduce the risk of impermanent loss.

LPs earn trading fees from the pools’ activities and can experience potential appreciation of their assets. The protocol ensures flexibility, allowing for the withdrawal of the initial deposit and any accrued earnings at any time.

Auto Pools apply a 14% management fee on earned fees, distributed to ICHI Protocol and related entities.

The heart of Auto Pools lies in its dynamic rebalancing strategy, crafted to navigate market movements effectively. The vaults adapt through five operational states — Healthy, Over-Inventory, Under-Inventory, High Volatility, and Extreme Volatility — each tailored to optimize performance and mitigate risk.

• Healthy: Aimed at maintaining an optimal balance between the deposit and paired tokens to ensure stable returns. Example composition: 20% paired token / 80% deposit token.
• Over-Inventory: Triggers when excess deposit tokens accumulate, prompting a strategy to sell the deposit token and return to a healthy state. Example composition: 12% paired token / 88% deposit token.
• Under-Inventory: Triggers when excess paired tokens accumulate, prompting a strategy to sell the paired token and return to a healthy state. Example composition: 25% paired token / 75% deposit token.
• High Volatility: Differences between fast 5-min and slow 60-min time-weighted average prices (TWAPs), as well as between current price and fast TWAP is used to detect such price movements. The liquidity will be spread out into full range for both tokens. Example composition: 50% paired token / 50% deposit token.
• Extreme Volatility: In cases of severe market fluctuations, the protocol halts further deposits, requiring manual intervention for rebalancing.

For a more in-depth explanation, see the ICHI docs.

Conclusion

Auto Pools in SaucerSwap V2, developed in collaboration with ICHI, streamline liquidity provision. These vaults utilize a rebalancing algorithm to optimize capital allocation, enabling users to deposit a single token for automated liquidity management. Auto Pools aim to make concentrated liquidity more efficient, user-friendly, and powerful.

As we bid farewell to 2023, we reflect on a remarkable year for SaucerSwap and the broader Hedera DeFi ecosystem. The year, marked by groundbreaking developments, substantial community growth, and significant technological advancements, was pivotal. Here is a retrospective of our year and a preview of what lies ahead.

Key Developments and Achievements

Defining the year was the launch of SaucerSwap V2, a unique concentrated liquidity market maker that leverages the Hedera network’s unmatched advantages. Even before the November launch of V2, SaucerSwap achieved remarkable growth and expanded into the broader DeFi ecosystem through various integrations, partnerships, and milestones.

The year commenced with an announcement in January of a partnership with Ledger Works Sentinel DNaaS, enabling a more robust event-listening architecture for improved scalability. In February, we smoothly transitioned away from the HBAR Foundation grant by extending HBAR rewards to yield farmers indefinitely via a novel yield-bearing WHBAR contract that takes advantage of Hedera’s Proof-of-Stake rewards. This pivotal moment for SaucerSwap served as a harbinger of further sustainability developments later in 2023. In the following months, SaucerSwap integrated with data aggregators and accessibility platforms such as, Mises dApp browser, GeckoTerminal, DexScreener, and CoinMarketCap. Our presence expanded further by attending the Permissionless II web3 conference in Austin, TX alongside Hedera.

Throughout 2023, SaucerSwap more than doubled its Total Value Locked (TVL) to $60 million, ascended from #45 to #29 in Top DEX rank on DeFiLlama, and increased its daily average volume by over 300% to $3 million. With the integration of MetaMask and enhanced capital efficiency through SaucerSwap V2, we observed an increase in website traffic exceeding 250%. Additionally, with the publication of extensive developer documentation, we anticipate more dApps will be developed on SaucerSwap V1 & V2 in the near future, as evidenced by the heightened activity in our developer forums.

As we approach 2 million total trades, SaucerSwap has facilitated interaction for users of all types with Hedera DeFi in a permissionless and non-custodial environment. With an average transaction speed of 5 seconds and a cost of less than $0.10 (fixed in USD, regardless of network traffic), SaucerSwap has realized its vision of decentralized access to a fair, accessible, and efficient trading protocol on Hedera, the most performant network in web3.

In 2023, SaucerSwap’s social network presence saw significant growth, evidenced by a 500% increase in Twitter followers and a 250% rise in impressions. Furthermore, the SaucerSwap Labs team conducted 16 AMAs throughout the year, maintaining an active dialogue with the community.

Most importantly, SaucerSwap attained a crucial 2023 goal: reducing reliance on token emissions and transitioning to real-yield incentives. Following the successful implementation of SaucerSwap Tokenomics V2, SAUCE token emissions were reduced by 60%, along with an 80% reduction in V1 yield farms. Despite this substantial reduction in the inflation rate of newly-minted SAUCE, APRs remain competitive, driven by increased trading volume and consequently higher fees for liquidity providers, as well as the development of the Liquidity-Aligned Reward Initiative (LARI). This shift towards a more sustainable model marks a remarkable achievement for SaucerSwap and a significant victory for Hedera DeFi.

Presented below is a detailed list of key events, milestones, and developments for SaucerSwap in 2023:

• January 4: Announced partnership with Ledger Works Sentinel DNaaS for scalability.
• January 12: Achieved 500,000 all-time trades.
• January 14: Held SaucerSwap AMA; released Discord price bots for default listed tokens.
• January 17: Reached $25M in Total Value Locked (TVL).
• January 20: TVL reached $30M.
• January 28: SaucerSwap AMA.
• January 29: Published Japanese documentation.
• February 3: Published Turkish documentation.
• February 4: Achieved $100M in total trade volume.
• February 11: SaucerSwap AMA; announced post-grant extension of HBAR mining incentives via staking in WHBAR contract.
• February 26: Integrated into Mises dApp browser.
• March 1: Open-sourced LP token timelock smart contracts.
• March 7: Released an overhauled web-app.
• March 11: SaucerSwap AMA.
• March 13: Upgraded HTS charts for price, liquidity, and volume in terms of HBAR.
• March 25: SaucerSwap x Citadel Wallet AMA.
• March 26: Announced partnership with Citadel Wallet.
• March 30: Launched SAUCE buyback Discord price bot.
• April 9: Achieved $150M in total trade volume.
• April 22: SaucerSwap AMA.
• April 28: Achieved 1M all-time trades; integrated as an exchange on CoinMarketCap.
• May 6: SaucerSwap AMA.
• May 11: Updated SaucerSwap Token Listings methodology and documentation.
• May 17: Announced upcoming SAUCE Pro feature.
• May 20: SaucerSwap AMA.
• June 3: SaucerSwap AMA; collaborated with CoinMarketCap to create a ‘Hedera ecosystem’ category.
• July 1: Announced plans to navigate HSCS security update via token allowances.
• July 10: Published tutorial video for navigating HSCS security update.
• July 12: SaucerSwap V2 passed all unit tests.
• July 15: SaucerSwap AMA; published ‘SaucerSwap Tokenomics Model V2’ proposal.
• July 29: SaucerSwap AMA.
• August 5: Celebrated SaucerSwap’s one-year anniversary.
• August 9: ‘SaucerSwap Tokenomics Model V2’ officially confirmed by SaucerSwap DAO.
• August 12: SaucerSwap AMA.
• August 16: Published job opening for front-end software engineer.
• August 18: Achieved $200M in total trade volume.
• August 26: SaucerSwap AMA.
• September 9: SaucerSwap AMA.
• September 11: Attended Permissionless II with Hedera.
• September 17: Featured on the main stage at Karate Combat KC41.
• September 26: Announced LARI (Liquidity-Aligned Reward Initiative).
• September 28: Achieved 200M HBAR balance in WHBAR contract.
• September 29: Published SaucerSwap V2 audit results.
• October 1: Integrated into GeckoTerminal.
• October 2: Achieved 500 unique liquidity pools.
• October 4: Unveiled SaucerSwap V2 UI.
• October 13: Announced SaucerSwap V2 volatility strategies.
• October 14: SaucerSwap AMA; announced SaucerSwap V2 testnet public beta and bug bounty.
• October 19: Published overhauled ‘SaucerSwap Docs V2.0’.
• October 25: Published “SaucerSwap V2: Create Position” and “SaucerSwap V2: Manage Position” video tutorials; released SaucerSwap V2 Core Whitepaper.
• October 28: Launched SaucerSwap V2 Testnet Beta.
• October 30: Published written tutorials for SaucerSwap V1 & V2 in official documentation.
• November 1: Announced SaucerSwap DAO legal wrapper established in the state of Florida.
• November 4: Concluded SaucerSwap V2 Testnet Beta.
• November 6: Published “SaucerSwap V2: Depth Chart” video tutorial; distributed rewards for SaucerSwap V2 Testnet Bug Bounty program.
• November 8: Secured #35 Top DEX spot on DeFiLlama.
• November 11: SaucerSwap AMA; announced SaucerSwap V2 launch date.
• November 15: Announced MetaMask integration into SaucerSwap web-app.
• November 16: Published “SaucerSwap V2: MetaMask” video tutorial.
• November 17: Published “SaucerSwap V2: Migrate Liquidity” video tutorial; published “SaucerSwap V2 Launch: What to Expect” article; launched SaucerSwap V2; commenced LARI Epoch 1; initiated Phase I of SaucerSwap Tokenomics V2.
• November 18: Achieved $5M TVL in SaucerSwap V2.
• November 19: Achieved $10M TVL in SaucerSwap V2.
• November 20: Published extensive Developer Documentation for V1 & V2.
• November 29: Integrated into DexScreener and KarateCombat iOS & Android apps.
• December 1: Commenced LARI Epoch 2.
• December 3: Created CLXY-HBAR V2 pool.
• December 5: Achieved $40M TVL.
• December 8: SaucerSwap V2 integrated into CoinGecko and GeckoTerminal; initiated Phase II of SaucerSwap Tokenomics V2.
• December 15: Commenced LARI Epoch 3; announced partnership with The Creator’s Galaxy for LARI rewards in CLXY token.
• December 16: Announced weekly trading volume all-time high.
• December 21: Achieved $50M TVL.
• December 23: Created SaucerSwapEs X account for Spanish users.
• December 24: Secured #29 Top DEX spot on DeFiLlama.
• December 27: Announced SAUCE buyback record.
• December 29: Initiated LARI Epoch 4; announced expansion of CLXY rewards to multiple pools; commenced Phase III (final) of SaucerSwap Tokenomics V2.
• December 30: Achieved all-time high in weekly trade volume.

2024 Prospective

Looking forward to 2024, SaucerSwap Labs is thrilled to continue developing the SaucerSwap protocol. Although not comprehensive, here are some select highlights from our 2024 roadmap:

In Development (projects actively being developed):

• SAUCE Pro
• Active Liquidity Management Protocol Integration
• Upgraded Buyback Program
• Initiate more Custom-Tailored LARI Campaigns
• Improved LARI Analytics
• Ongoing Web-App Optimizations

Planned for Development (projects that are on the near-term roadmap):

• Token-Weighted Voting System
• Auto Router

Prioritized for Development (projects that are prioritized but not yet planned for development):

• Community Pools
• On-Chain Limit Orders
• Front-End Bridge Integration
• Fiat Onramp Integration
• Batch Transactions (HIP-551)
• Hedera WalletConnect Integration

Generally speaking, our overarching goals for 2024 are to expand and improve accessibility, increase reach and presence within the larger web3 ecosystem, and leverage the unique benefits of the Hedera network to develop technologically superior and user-friendly solutions to push forward the realm of decentralized finance.

Conclusion

The extraordinary growth in 2023 has set a new benchmark for SaucerSwap’s potential. We extend our profound gratitude to our community, partners, and team members, whose contributions have been pivotal in this success. As we enter 2024, we are enthusiastic about further innovating and expanding Hedera DeFi together.

Wishing a Happy New Year and a fruitful 2024!

SaucerSwap V2 is scheduled to launch on the date of this publication: Friday, November 17th at 21:30 UTC / 16:30 ET. This upgrade introduces a concentrated liquidity market maker (CLMM) protocol, an overhauled web-app, MetaMask support, an updated tokenomics model, and the Liquidity-Aligned Reward Initiative (LARI).

V2 liquidity provision opens at 21:30 UTC

Phase I of the updated tokenomics model is enacted between 21:30 and 23:30 UTC

Epoch 1 of LARI commences at 23:30 UTC

Swapping in V2 pools is enabled at 23:30 UTC

Concentrated Liquidity

The key innovation in SaucerSwap V2 is concentrated liquidity. Unlike in V1, where liquidity is uniformly distributed across all possible prices (0, ∞), concentrated liquidity allows liquidity providers (LPs) to allocate capital within specified price ranges. For example, LPs can focus their capital around the peg of a stablecoin pair like USDC/USDT, leading to more efficient capital use and increased fee earnings.

Each liquidity position is uniquely represented by a non-fungible token (NFT). The flexibility of setting multiple positions means LPs can adapt to market conditions more effectively, concentrating their liquidity where it’s most likely to be utilized, and thus maximizing fee earning potential.

Key advantages include:

• LPs have the capacity to provide liquidity with up to 4,000x capital efficiency in comparison to SaucerSwap V1, thus receiving elevated fee earnings on their capital.
• Capital efficiency allows for trades to be executed with greatly reduced price impact in comparison to both centralized exchanges and stablecoin-focused AMMs.
• LPs have the opportunity to increase their exposure to desired assets and mitigate their downside risk.
• LPs have the ability to trade one asset for another by depositing liquidity into a price range entirely above or below the current spot price, emulating a fee-earning limit order that executes along a smooth curve.

A more comprehensive list of unique advantages can be found in the SaucerSwap documentation.

V2 offers a multi-tiered fee structure, allowing LPs to be appropriately compensated for taking on varying degrees of risk.

• 0.05% — Highly stable pairs: These are typically stablecoin pairs where both assets aim to peg their value to an external stable source, like the U.S. dollar.
• 0.15% — Moderately stable pairs: These can be a combination of a stablecoin and a relatively less volatile cryptocurrency. Their price can fluctuate, but not as wildly as more exotic pairs.
• 0.30% — Volatile pairs: Token pairs that have notable price swings within short time frames, but they are relatively well-known or have larger market caps.
• 1.00% — Highly volatile pairs: These pairs might include new or less-known tokens. Their prices can be highly unpredictable, and they often come with higher risk of impermanent loss.

Finally, traders are charged a fee based on the pool’s fee tier. As with SaucerSwap V1, 5/6 of the collected fee is allocated to LPs, and the remaining 1/6 is directed to the protocol. The protocol’s share is used for SAUCE token buybacks. The repurchased tokens are then distributed among the DAO and as rewards for single-sided staking. Unlike V1, LPs are rewarded directly in the tokens that constitute the pool. For example, if liquidity is provided to a USDC/HBAR pool, rewards are claimed as USDC and HBAR.

For a deeper understanding of concentrated liquidity, refer to the SaucerSwap documentation.

Revamped Web-App

The SaucerSwap web-app has been completely redesigned to integrate both V1 and V2 functionality, along with analytics. The web-app introduces volatility strategies — preset price ranges specific to each fee tier, designed to suit various LP approaches for streamlined liquidity provision. It also introduces the depth chart, which is a graphical representation that displays the liquidity available in a specific pool across different price ranges. For guidance, consult the tutorials available in the SaucerSwap documentation or view them on YouTube.

MetaMask Support

MetaMask is fully integrated in the SaucerSwap web-app, enabling over 21 million daily active users to easily onboard and participate in Hedera DeFi for the first time ever. Furthermore, the core maintainers have added an HBAR faucet bot in the SaucerSwap Discord server to optimize the onboarding flow. More details can be found in the SaucerSwap documentation.

Updated Tokenomics Model

The issuance rate of new SAUCE tokens will decrease by 60% across a six-week period after the launch of SaucerSwap V2. This adjustment extends the SAUCE release schedule from 3 to 6 years, starting from August 2022. This updated tokenomics model is enabled by heightened capital efficiency of the CLMM, which is expected to boost trading volume and, consequently, fee generation for LPs. As a result, LPs will be less reliant on inflation-driven yields.

The SAUCE token’s inflation rate reduction and its reallocation in the updated tokenomics model are structured as follows:

Current:

• Total mint rate: 317.10 SAUCE / min
• Emitted to yield farmers (V1 incentives): 288.27 SAUCE / min
• Emitted to devcut: 28.83 SAUCE / min
• Emitted to DAO + LARI (V2 incentives): 0.00 SAUCE / min

Phase I (0–3 weeks):

• 20% reduction in inflation compared to current level
• Total mint rate: 253.68 SAUCE / min
• Emitted to yield farmers: 175.13 SAUCE / min
• Emitted to devcut: 23.06 SAUCE / min
• Emitted to DAO + LARI: 55.49 SAUCE / min

Phase II (3–6 weeks):

• 40% reduction in inflation compared to current level
• Total mint rate: 190.26 SAUCE / min
• Emitted to yield farmers: 117.47 SAUCE / min
• Emitted to devcut: 17.30 SAUCE / min
• Emitted to DAO + LARI: 55.49 SAUCE / min

Phase III (6 weeks and onwards):

• 60% reduction in inflation compared to current level
• Total mint rate: 126.84 SAUCE / min
• Emitted to yield farmers: 59.82 SAUCE / min
• Emitted to devcut: 11.53 SAUCE / min
• Emitted to DAO + LARI: 55.49 SAUCE / min

This updated tokenomics model is more sustainable, ensuring the longevity of the SaucerSwap protocol as Hedera continues to gain adoption. For more information, please see the tokenomics section of the SaucerSwap documentation.

Liquidity-Aligned Reward Initiative (LARI)

While SaucerSwap V2 has the potential to generate higher real yields for LPs, token incentives remain vital for bootstrapping liquidity, broadening the distribution of the SAUCE token, and reinforcing protocol governance.

The Liquidity-Aligned Reward Initiative (LARI) offers LPs token incentives for efficient liquidity contributions. This system addresses certain limitations of the SaucerSwap V1 yield farm. Notably, the obligatory staking of LP tokens, which transfers LP custody, is not optimal. Moreover, it is inefficient to reward LPs without accounting for their relative performance. Every reward token, such as SAUCE or HBAR, should not only incentivize liquidity, but also ensure its optimal use, with rewards reflecting this objective.

LARI addresses these design shortcomings. LPs do not have to stake their liquidity position NFTs to begin earning token incentives. Once an LP provides liquidity to a V2 pool, LARI is activated for their position. Furthermore, rewards are automatically distributed at the end of each 2-week reward period, or ‘epoch,’ greatly simplifying the UX and optimizing for gas efficiency.

Unlike the SaucerSwap V1 yield farm, which only supports SAUCE and HBAR rewards, LARI can be configured to emit any number of HTS tokens for each pool. This enables projects to tailor campaigns for their liquidity pools, rewarding LPs with their protocol token.

As a recap, the system functions by recording on-chain events and calculating rewards based on the duration a position remains within the range of the active tick. Rewards accumulate only while the position’s liquidity is in-range. At the conclusion of each 2-week epoch, participants automatically receive their rewards through an airdrop. A more detailed explanation can be found in the SaucerSwap documentation.

The entire ‘DAO + LARI’ allocation of emissions (55.49 SAUCE / min) will go towards LARI for the first four epochs (8 weeks). For subsequent epochs, half the allocation will go towards LARI, while the other half is retained by the DAO for future use.

V2 Pools and LARI Weights

The initial set of V2 pools and their LARI weights for Epoch 1 (Nov 17th 23:30 UTC — Dec 1st 23:30 UTC) are as follows:

The initial selection of V2 pools, and their associated LARI weights, has been carefully chosen to reduce liquidity fragmentation and enhance trading volume. This approach also ensures an appropriate pairing of tokens with their respective fee tiers and aligns incentives efficiently. As a reminder, the introduction of additional V2 pools will be subject to votes by the DAO.

V1 Farm

During phase I of the updated tokenomics, farm rewards for certain V1 pools will end. Specifically, the pools affected are USDC[hts]/USDC, USDC[hts]/USDT[hts], and USDC[hts]/DAI[hts], as the majority of stablecoin liquidity is expected to migrate to V2. The revised farm weights, which will be implemented on November 17th between 21:30 and 23:30 UTC, can be found in the SaucerSwap documentation.

Conclusion

SaucerSwap V2 is scheduled for launch on the date of this publication, November 17th at 21:30 UTC / 16:30 ET, introducing a suite of enhanced features including a CLMM protocol and the Liquidity-Aligned Reward Initiative (LARI). Swapping in V2 pools will commence at 23:30 UTC, a strategic two-hour delay post-launch to stabilize markets during the initial bootstrapping period. Simultaneously, LARI will activate, enabling in-range liquidity providers to start accruing rewards immediately, to be distributed at the end of the 2-week epoch. Finally, the liquidity provider reward rate, or Fees APR, will be displayed after 24 hours of data is collected, ensuring accuracy and reliability in the metrics displayed on the front-end.

The launch of SaucerSwap v2 is fast approaching, pending the release of a final audit report by Omniscia and some remaining work on the front-end. In the meantime, the SaucerSwap core maintainers are excited to introduce the Liquidity-Aligned Reward Initiative (LARI), a novel feature of SaucerSwap v2 that will be available at launch.

SaucerSwap v2, a concentrated liquidity market maker (CLMM), affords liquidity providers (LPs) the potential for higher real yields through increased capital efficiency. However, token incentives are still crucial for bootstrapping liquidity, ensuring a broad distribution of SAUCE, and strengthening protocol governance.

LARI provides users with token incentives for their active and efficient liquidity contributions. This system represents an advancement from traditional yield farming, addressing certain limitations of SaucerSwap v1’s Masterchef contract. Notably, the obligatory staking of LP tokens, which transfers LP custody, is not optimal. Moreover, it is inefficient to reward LPs without accounting for their performance. Every reward token, such as SAUCE or HBAR, should not only incentivize liquidity but also ensure its optimal use, with rewards reflecting this objective.

LARI addresses these design shortcomings. As with swap fees, LPs no longer have to stake their assets to begin earning token incentives. Once an LP provides liquidity to a v2 pool, LARI is activated for their position. Furthermore, rewards are automatically distributed at the end of each two-week reward period, or ‘epoch’, greatly simplifying the UX and optimizing for gas efficiency. Unlike the SaucerSwap v1 implementation of Masterchef, which only supports SAUCE and HBAR rewards, LARI can be configured to emit HBAR and any number of HTS tokens for each pool. This enables projects to tailor campaigns for their liquidity pools, rewarding LPs with their protocol token.

How it works:

• Initialization: Before the epoch begins, each liquidity pool is assigned a weight of token emissions. For example, the HBAR/USDC pool may receive 15% of the total SAUCE rewards over this 14-day period.
• Monitoring: During the epoch, the v2 pair contracts are continuously listened to for liquidity mint and burn events; these events are captured and stored. By epoch-end, each LP’s number of ‘liquidity hours’, representing liquidity in the active ticks (corresponding to token price), is multiplied by the time passed in hours.
• Reward Calculation: As the active tick changes, the LP’s liquidity position may fall in and out of range. SaucerSwap’s algorithm for calculating rewards takes into account the position’s time spent within range of the active tick and only accumulates rewards while the position’s liquidity is being used. The final distribution of rewards to LPs per epoch is calculated by:

• Distribution: At the end of each epoch, rewards are automatically sent to the participants via an airdrop. If any issues arise, such as a token not being associated, the distribution specific to an LP is rescheduled for the next epoch.

This system ensures maximal efficiency by only rewarding active liquidity. This focus not only improves the overall health of liquidity pools but also maximizes the utility and efficiency of each token distributed as a reward.

Example:

Alice and Bob both decide to provide liquidity to the USDC[hts]/USDT[hts] pool on SaucerSwap v2. This pool has a 0.05% fee and a tick spacing of 10, where every tick represents a 0.01% change in price.

Alice’s Strategy: Alice has a relaxed strategy and provides $10k of liquidity over a wide price range of $0.95 to $1.05, or 1,000 ticks.

Bob’s Strategy: Bob, on the other hand, has a more focused strategy. He provides $10k of liquidity over a much narrower price range of $0.9995 to $1.0005, or 10 ticks.

We assume that, throughout the epoch, the price of the pool remains stable and stays entirely within the $0.9995 — $1.0005 range.

Given his focused strategy and the price staying within his range, Bob accumulates 336,000,000 liquidity hours over the 14-day epoch. Even though Alice and Bob provided the same capital, Alice’s liquidity hours in the active price range tally up to only 33,600, given the distribution of her liquidity.

Bob’s decision to provide liquidity in a narrow, focused range where he anticipated price activity led him to outperform Alice in terms of rewards by a factor of 10,000. Alice’s broader strategy, although safer in terms of exposure to price movement, did not capitalize as efficiently on the rewards during this particular epoch.

See the table below for a breakdown:

It’s worth noting that the probability of USDC[hts]/USDT[hts] consistently trading within the $0.9995 — $1.0005 range over a 14-day epoch is low. In a real-world scenario, Bob’s accumulated liquidity hours would likely be less than the theoretical maximum provided in this example.

Tokenomics:

As the community will recall from the Tokenomics v2 Proposal, there will be a 60% cut to the inflation rate of SAUCE and a reallocation of SAUCE emissions as follows:

• 90.91% → 47.16% to v1 farm rewards (decrease)
• 9.09% → 9.09% to devcut (no change)
• 0% → 43.75% to the DAO treasury (increase)

The full 43.75% DAO allocation (55.49 SAUCE / min) will go towards LARI for the first four epochs. For subsequent epochs, half the allocation will tentatively go towards LARI, while the other half is retained by the DAO for future use.

At the beginning of SaucerSwap v2’s launch, the rewards will be highest. This will boost yields and facilitate a seamless migration of liquidity to the v2 pools. Rewards will then be gradually tapered, stabilizing at approximately 559k SAUCE per epoch by week eight.

Summary:

SaucerSwap v2 introduces the Liquidity-Aligned Reward Initiative, or LARI. This revamped system not only rectifies the shifted custody concerns for LPs, but also aligns rewards with LP efficiency and broadens the scope by accommodating HBAR and any HTS token as rewards.

Additionally, LARI integrates well with the updated tokenomics model, especially as the DAO now receives an allocation of SAUCE minted by the Masterchef contract. Directing a portion of this SAUCE to v2 pools via LARI results in a balanced, equitable, and streamlined incentive framework post-inflation adjustment.

In short, LARI aims to ensure a smooth transition to the CLMM and an enhancement in overall functionality and user experience on SaucerSwap.

This article will introduce the upcoming SaucerSwap v2 protocol and discuss the motivation for and proposed structure of an updated SAUCE tokenomics model.

Background

SaucerSwap is launching a concentrated liquidity market maker (CLMM) protocol based on Uniswap v3. This CLMM, referred to as SaucerSwap v2, gives individual liquidity providers (LPs) granular control over what price ranges their capital is allocated to. Individual positions are aggregated together into a single pool, forming one combined curve for users to trade against.

In turn, this can generate more trading fees for LPs within the active price range. Furthermore, SaucerSwap v2 introduces a multi-tiered fee structure. This allows LPs to be appropriately compensated for taking on varying degrees of risk.

SaucerSwap will therefore inherit the flexibility and capital efficiency of Uniswap, the leading DEX by market share; while also leveraging the innate benefits of the Hedera network and an intuitive UI/UX.

Key advantages include:

• LPs have the capacity to provide liquidity with up to 4000x capital efficiency in comparison to SaucerSwap v1, thus receiving elevated returns on their capital.
• Capital efficiency allows for trades to be executed with greatly reduced price impact in comparison to both centralized exchanges and stablecoin-focused AMMs.
• LPs have the opportunity to increase their exposure to desired assets and mitigate their downside risk.
• LPs have the ability to trade one asset for another by depositing liquidity into a price range entirely above or below the current market price, emulating a fee-earning limit order that executes along a smooth curve.

Additional benefits:

• Transactions are fairly-ordered (no MEV / front-running) and confirmed with finality in seconds.
• Due to Hedera’s absence of blocks, high-throughput, and low, predictable fees, SaucerSwap v2 is not subject to the cost-prohibitive nature of protocols on most other layer-1s. Therefore, it will prove greater accessibility and market competitiveness during periods of high DEX-usage across the industry (e.g., volatility, bull markets).

Since the CLMM is expected to generate higher real yields, SAUCE token emissions will no longer serve as the primary liquidity incentive.

Let us explore a hypothetical scenario to understand the potential for diminished reliance upon liquidity incentives as a result of increased SaucerSwap v2 fees. Assume $11.8M in TVL (some liquidity will remain in v1 pools) and a volume / liquidity ratio of 29.83% (median of Uniswap v3 comparables). When setting the protocol fee to ⅙, the $3.5M daily projected volume translates into $1.8M in supply-side fees (i.e., fees to LPs) and $370k in protocol revenue per annum. For comparison, SaucerSwap v1 has $19M in TVL and generates $483k in supply-side fees and $97k in protocol revenue per annum. It follows that, under this hypothetical, SaucerSwap v2 returns a 15.64% average real yield APR versus the 2.47% average APR currently offered by SaucerSwap v1. Even when accounting for the 12.04% average farm APR of the current protocol, SaucerSwap v2 has the potential to offer greater overall incentives to LPs. Moreover, LPs in v2 pools will be primarily compensated in tokens underlying the respective pool (e.g., HBAR and USDC for an HBAR/USDC pool) — these tokens can be claimed directly.

Proposed Tokenomics

SAUCE Emissions

SaucerSwap proposes a 60% cut to the inflation rate of newly-minted SAUCE. Coinciding with the launch of SaucerSwap v2, this cut would be effectuated incrementally over a period of six weeks to facilitate a seamless migration of liquidity to the v2 pools.

It is important to note that SaucerSwap v1 will continue to be maintained; v1 pools serve an integral role in long-tail asset markets and price discovery. As such, the farm contract will not be deprecated. Rather, the liquidity incentives for v1 pools will be reduced, with a portion of those emissions redirected to the DAO treasury.

After accounting for the decreased rate of inflation, the proposed reallocation of emissions is as follows: 47.16% to v1 pools, 9.09% to devcut, and 43.75% to the DAO.

The farm contract, which is the sole account with SAUCE minting rights, will bring 190.26 less SAUCE into circulation each minute by the end of this six-week period. This is 40% of the current rate, or a 60% reduction. The SAUCE will then be emitted to yield farmers in v1 pools at 20.75% of the current rate, or a 79.25% reduction; to devcut at 40% of the current rate, or a 60% reduction; and to the DAO.

As mentioned, 43.75% of newly-minted SAUCE will be allocated to the DAO treasury. Overall, the allocation of SAUCE to the DAO will increase from 54M to 200M upon completion of the release schedule. There is an opportunity for a portion of the DAO treasury’s allocation to be distributed as v2 liquidity incentives. In addition to bootstrapping liquidity and attracting new users, a mining campaign would play a role in governance (i.e., aligning incentives), continued fair token distribution, and core CLMM functionality. The underlying principle is to avoid rewarding LPs indiscriminately, irrespective of their performance. Every SAUCE spent should not only incentivize TVL, but incentivize for maximum efficiency of that TVL, and be rewarded accordingly.

Additionally, it should be noted that the rates at which SAUCE is vested from the core, marketing, advisor, and DAO contracts will remain unchanged due to their non-upgradability. As a result, SAUCE will be fully vested from these contracts by the end of year three. When accounting for SAUCE minted by the farm contract, the circulating supply will reach the maximum supply of one billion SAUCE six years from August 2022.

HBAR Emissions

Currently, the farm contract receives a transfer of approximately 3.12498 HBAR per minute from the hbarPaymentSplitter. These tokens are then emitted to yield farmers in v1 pools as part of the ongoing distribution process. To align with SAUCE rewards, this would be reduced to 0.6484 HBAR per minute, which is 20.75% of the current rate.

The remaining 2.4765 HBAR per minute (79.25%) will be sent to the DAO treasury, resulting in an additional protocol revenue of ~1.3M HBAR or $65k per annum. As with SAUCE, a portion of the DAO’s HBAR could be allocated towards v2 liquidity incentives.

Single-Sided Staking

As a reminder, single-sided staking yield is derived from three distinct sources: swap fees across all liquidity pools, SAUCE emissions, and HBAR native staking rewards. Of this total yield, the reward contribution can be broken down as follows: 17.92% from swap fees, 8.13% from SAUCE emissions, and 73.95% from HBAR native staking rewards; where the SAUCE emissions are tied to liquidity incentives from the farm contract.

Upon reducing incentives to yield farmers in v1 pools by 79.25% and after factoring in the ~300% increase in protocol revenue from our earlier hypothetical scenario, the new contributions are 51.46%, 1.08%, and 47.45%; respectively. Both buybacks and single-sided staking APR would therefore increase by ~50%, assuming constant prices and TVL.

Summary of Proposal

Conclusion

With the opportunity of increased capital efficiency and a shift to real yield incentives, SaucerSwap proposes an updated SAUCE tokenomics model to coincide with the launch of SaucerSwap v2. Built upon the strengths of Uniswap v3, and taking full advantage of the Hedera network, SaucerSwap introduces a next-generation CLMM, enabling increased trading volume and concomitant fees for LPs.

At the heart of the update lies the significant reduction in SAUCE emissions, implemented over a six-week period. This alignment of incentives with the upgraded protocol better allocates the remaining supply of SAUCE which has yet to enter circulation. The reliance on token emissions as a primary liquidity incentive is substantially diminished, enhancing real yield potentials.

Given the breadth and significance of this tokenomics proposal, it is important that the SaucerSwap community is satisfied with the new model. For this reason, we encourage all holders of Planck Epoch Collectible (PEC) NFTs to participate in a discussion in the #pec-gen channel of our Discord. If newly-proposed ideas gain traction in this channel, they will be considered to be implemented in the updated tokenomics model.

The core maintainers of the SaucerSwap protocol are excited to experience the launch of SaucerSwap v2 along with the community, and look forward to the bright future of DeFi on Hedera. Join our community by following us on Twitter and hopping into our Discord.