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We’ve migrated from Medium! was originally published in Tokemak on Medium, where people are continuing the conversation by highlighting and responding to this story.

Validator Penalties, Slashing, and their Impact on Tokemak v2

Tokemak — Thu, 20 Jul 2023 20:27:35 GMT

Background

This article aims to provide a firm understanding of penalty and slashing mechanisms, which are crucial in the Ethereum consensus layer. These mechanisms play a vital role in preserving network integrity and deterring malicious activities. Specifically, we will delve into the details of penalties and slashing and assess their potential implications for Tokemak v2, also considering various scenarios that have occurred in the past.

Penalties and Slashing

In the Ethereum consensus layer, misbehavior is met with two forms of retribution: penalties and slashing. Below, we will explore the distinctions and some details of each of these mechanisms.

Penalties

Ethereum utilizes penalties as a means to address non-malicious technical problems which can be outside of the validator’s control and not for possibly malicious attacks on the network.

Validators are required to submit correct and timely attestations (containing their view of the target and source checkpoint of the chain) once per epoch (every 32 blocks, which is an equivalent of roughly 6.4 minutes). For example, in Epoch 209418 the target checkpoint was 6,701,407 and (block 17,518,997) and the source checkpoint was 6,701,376 (block 17,518,966).

After a delay of 32 slots there starts to be penalties for late but correct attestations.

Missing attestation can happen for reasons both inside and outside the validators control.

Penalties are generally benign and small and are not expected to have a significant impact on the performance of an LST or Tokemak as a participant in the LST space.

“Note that the attester does not have full control over whether it receives rewards or not. An attester may behave perfectly, but if the next block is skipped because the proposer is offline, then it will not receive the correct head block reward. Or if the next proposer happens to be on a minority fork, the attester will again forgo rewards. Or if the next proposer’s block is late and gets orphaned — subsequent proposers are supposed to pick up the orphaned attestations, but there can be considerable delays if block space is tight. There are countless failure modes outside the attester’s control.”

Source: https://eth2book.info/capella/part2/incentives/rewards/

Slashing

Slashing is a more severe punishment that serves as a deterrent against malicious behavior within the Ethereum network and is applied when consensus rule violations occur that could indicate an attack on the network. Validators can be slashed for the below offenses, which are all treated the same:

Related to Casper FFG consensus,

Making two differing attestations for the same target checkpoint, or
Making an attestation whose source and target votes “surround” those in another attestation from the same validator.

2. Related to LMD GHOST consensus,

Proposing more than one distinct block at the same height, or
Attesting to different head blocks, with the same source and target checkpoints

When a validator is slashed, they lose 1 ETH in an initial penalty and are unable to earn rewards for approximately 36 days. Additionally, a correlation penalty is imposed around day 18, scaling with the number of validators slashed within a timeframe of approximately 18 days on either side of the slashing offense .

Slashing Scenarios and their Impact on Tokemak v2

During an incident on April 3, 2023, Flashbots was exploited, resulting in the drainage of $20M from multiple sandwich bots. In this particular case, a validator intentionally submitted an invalid block, including a bait transaction targeted at the sandwich bots. As a consequence, the validator faced slashing, losing 1 ETH. However, considering the substantial profits gained from exploiting the sandwich bots, which amounted to $20M, the validator deemed the slashing penalty to be a worthwhile trade-off.

External Incentives Make Slashing Profitable

This type of slashing poses a minimal risk to Tokemak for several reasons:

The slashing incident affected only a single validator.
The slashed validator was not associated with an LST protocol.
Large-scale third-party exploits are generally infrequent.
The primary targets of such exploits are typically not the LST protocols themselves, but rather third parties, such as the sandwich bots that relied on Flashbots’ trust.

Considering these factors, the specific slashing incident described does not present a significant risk to Tokemak.

Node Operator Unintentional Technical Mistake

Accidental technical errors by LST node operators have been a primary cause of slashing events. These events typically arise from configuration errors or bugs specific to a single operator, rather than system-wide issues:

On April 13, 2023 a Lido Node Operator named RockLogic had 11 of their validators slashed. This was because of a bug where they accidentally had several nodes with duplicate validators keys.
On February 2, 2021 Staked had 75 of their validators slashed by accidently signing a single block twice. Because this was earlier in the beacon chain development the initial penalty for slashing was less at .25 ETH so they only lost 18 ETH to the slashing.

Multiple safeguards are implemented to mitigate the occurrence of large-scale accidental slashing incidents resulting from minor bugs. In the aforementioned cases, the slashing of validators was attributed to configuration errors made by a single node operator, rather than a widespread system-wide bug. These safeguards play a crucial role in minimizing the likelihood of such incidents.

LST protocols, along with Ethereum validators in general, strive to foster diversity among node operators and client software. This approach aims to mitigate the potential risk of a bug leading to simultaneous slashing of numerous validators. This is a report on the consensus layer client diversity of Lido in Q1 of 2023.

Occasional accidental technical errors are not anticipated to have a substantial impact on slashing. Moreover, numerous protocols incorporate an additional layer of protection through an “insurance fund.” For instance, Lido has established its insurance fund, Rocket rETH, utilizes staked RPL as a form of insurance for each node to safeguard against significant slashing events. These measures provide an added level of security and mitigate the potential consequences of slashing incidents.

These inadvertent minor slashing events do not pose a significant risk to Tokemak due to several factors:

There is a high level of diversity among node operators, LST protocols, client software, and consensus software. This diversity reduces the likelihood of large-scale slashing events, making them relatively infrequent and limited in scope. Bugs are thus more likely to have a localized impact.
As of June 21, 2023, a total of 260 validators have been slashed, with 242 of those incidents attributed to “Attestation rule offense.” When a bug is detected, node operators can promptly and easily pause new attestations. This proactive response was the immediate action taken by both organizations during the significant slashing events mentioned above.

Considering these factors, the accidental occurrence of minor slashing events poses no serious threat to Tokemak’s operations and security.

Inactivity Leak

In the event where at least one-third of validators cease to submit attestations, the consensus layer becomes unable to finalize. Consequently, the offline validators will experience a gradual reduction in their balances until the effective balance of the online validators surpasses two-thirds of the total staked ETH.

While it is true that such a scenario would pose a significant risk to Tokemak, it is important to highlight that the conditions necessary for LST protocols to encounter significant slashing resulting from an inability to meet attestation obligations, are exceedingly rare and would arise in extremely severe circumstances (such as global conflicts or comparable catastrophic events).

Coordinated Massive Attack on the Network

The slashing mechanism is designed to impose smaller penalties in cases where it is not perceived as an attack on the network, while imposing more significant penalties in situations where it appears to be part of a coordinated attack. This mechanism incorporates the concept of the “correlation penalty.” If a substantial number of validators are slashed within a ~36 day period, they will all receive a heightened penalty that scales based on the proportion of validators slashed during that time frame.

There are a couple of ways in which this can occur. One possibility is if malicious actors gain control over a large LST, another scenario could arise if an unnoticed bug in a consensus layer client, such as Lighthouse, starts causing issues after being adopted by a substantial portion of node operators. These scenarios would pose a significant risk to Tokemak.

Conclusion

Thus far, no slashing events have occurred due to the correlation penalty. The instances of slashing that have taken place were minor and accidental, resulting from configuration errors or unfavorable incentives associated with MEV. Penalties arising from missed attestation votes are also minimal and can be attributed to random issues beyond the validators’ control.

Considering the diversity of LSTs, node operators, and software, it is unlikely that a technical error would significantly impact the required number of nodes for a consensus penalty.

The main slashing risk to Tokemak lies in holding an LST controlled by a malicious actor actively engaging in network attacks.

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Validator Penalties, Slashing, and their Impact on Tokemak v2 was originally published in Tokemak on Medium, where people are continuing the conversation by highlighting and responding to this story.

Tokemak x Zealy Campaign & Upcoming Awareness Initiatives

Tokemak — Tue, 23 May 2023 00:36:13 GMT

Pilots: the veil has been lifted on the next iteration of Tokemak and it’s time to kick things into gear. To read more about Autopilot, LMPs, and Tokemak’s DAO Liquidity Marketplace, start with our previous medium article here.

The launch of v2 will be here in no time as contracts are expected to go to audit by the end of this month, and as we set our sights on new horizons with Tokemak v2, we anticipate welcoming new pilots with fresh perspectives, ideas, and energy into the community. With this in mind, we’ll be rolling out a series of awareness initiatives designed to fuel the anticipation for the launch of v2, starting with a Zealy “sprint” campaign.

Zealy “Sprint” and a TOKE Prize Pool for Top Performing Pilots

How the sprint works is as follows: utilizing the Zealy platform, Pilots will seek to complete ‘quests’ in exchange for XP. Quests will range from engaging with @TokenReactor on Twitter, completing quizzes, submitting twitter threads on the topic of Tokemak v2 and other content creation activities. New quests will be added often over the course of the campaign, so join the Tokemak Discord here (if you haven’t already) for updates and any questions you may have for the team.

So what’s the XP for? At the end of the campaign, the top 40 participants will receive a share of the 4,500 TOKE prize pool according to the reward distribution below:

*Note: The raffle winner must complete > 50% of the quests to qualify. Out of the qualified participants, one will be selected at random.

At the conclusion of the sprint, all winners will be notified via Discord and rewards will be distributed.

How 2 Participate?

First, sign up for the Tokemak Zealy here (note: this will go live Wednesday the 24th — we’ll post on social channels and Discord once it is, at time of posting it is ‘private’): https://zealy.io/c/tokemak/questboard
Set up your profile by connecting your Discord and Twitter accounts
Check out the quests on the Tokemak Zealy Questboard
Begin completing quests to receive XP
Monitor the #zealy channel in our Discord to be notified when new quests are available (this channel will be available starting Wednesday)

Wen?

The start date of the Tokemak x Zealy campaign will be this Wednesday: May 24, 2023

The campaign will run for approximately two months, leading up to the anticipated launch window of v2. We will provide at least one week’s notice for the specific end date of the Sprint via Discord and Twitter.

Reactor cookin’

Moar (Future Initiatives)

Tokemak Threadooor Wars

The Zealy campaign marks the start of our journey towards Tokemak v2, but there’s more to come. We’ll also be launching a Twitter thread competition (The Tokemak Threadooor Wars). This is a chance for pilots to be rewarded for creating high-quality, engaging threads that help spread awareness and educate others about Tokemak v2.

While threads will also be a quest item in the Zealy campaign, we’ve set aside an additional pool of 2000 TOKE to be split equally among the creators of the top 10 threads. While quality comes first, we will be providing minor considerations to engagement. Be sure to familiarize yourself with the v2 Medium article and upcoming Gitbook updates. Feel free to also join in on the conversation in Discord if you have more questions. The official Threadooor Wars will begin after the Zealy sprint commences, though all threads will be considered.

Discord Improvements

Ye olde Leaky Reactor has been undergoing renovations and will be shortly reopening for business with the new addition of Grex as part of a new inter-pilot community honor system. Pilot’s will now be able to purchase a metaphorical brew for their fellow comrades using a slash command. The most honorable Pilots of each month will take their place on the walls of the Leaky.

Grex, the Leaky proprietor — he’s a tough sort, but serves a mean drink

We will also be taking the best Discord stickers and emoji’s submitted throughout the Zealy campaign and adding them to the Tokemak server, so get creating (or prompting) for your chance to leave your mark on the Tokemak community.

Lastly, upon launch of v2, we’ll be bringing the Leaky Reactor to life in a special commemorative way for Tokemak OGs and new LMP-1 participants. 🤫 More on that soon, Pilots.

v2 Landing Page

Last week a password protected version of the new landing page was released exclusively for the Tokemak Community to gather feedback and suggestions. If you’d like to check out the new landing page before it goes live to the public — jump into the Discord to get the password.

The v2 landing page will go live later this week and all will be able to view, be sure to take a look around and soak in all the details.

Twitter Spaces and Education Efforts

We are actively engaged with a handful of partner protocols and DeFi educators to help us spread the word and understanding of v2’s new products. We’ve also lined up some Twitter spaces with collaborating projects, so be on the lookout for those announcements soon.

More to come!

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Click here for an interactive tour of this illustration

Tokemak x Zealy Campaign & Upcoming Awareness Initiatives was originally published in Tokemak on Medium, where people are continuing the conversation by highlighting and responding to this story.

Tokemak (v2): Introducing LMPs, Autopilot, and the DAO Liquidity Marketplace

Tokemak — Wed, 17 May 2023 19:37:24 GMT

I. Intro (No tl;dr here, so strap in)

DeFi has changed, and so has Tokemak. Iterating beyond the limitations that constrained v1, Tokemak v2 was developed as an improved system for both liquidity providers (LPs) and DAOs through a novel concept called Liquidity Management Pools (LMPs). The new system comprises two separate products: a dynamic pool allocator that optimizes returns for LPs across different pools and DEXs (Autopilot), and a liquidity order book that enables DAOs to rent liquidity according to a transparent market rate (DAO Liquidity Marketplace).

Tokemak v2 is comprised of both a dynamic LP optimizer and a transparent liquidity order book, facilitating a more symbiotic relationship between LPs and liquidity seekers.

II. Background

The current status quo for DAOs to acquire liquidity relies on gauge systems that incentivize third-party LPs to provide liquidity to specific pools through periodic voting rounds. Using this mechanism, DAOs place incentives in voting markets at a fixed or market rate to influence voters to direct emissions to liquidity pools. Despite its merits, this strategy is subject to certain shortcomings, including an unknown depth of liquidity, a lack of flexibility for adjustments outside of voting rounds, and delayed responses to changes in liquidity needs.

In contrast, LPs face challenges in maintaining exposure to pegged assets (e.g., ETH LST pools), while optimally capturing the variance in yields across pools. Besides the complexity associated with the rebalancing logic of LP positions, this optimization process is prohibitively expensive for most DeFi users due to the inherently high gas costs.

DAOs currently rely on voting rounds to incentivize liquidity providers, facing limitations in predictability, flexibility, and responsiveness. LPs struggle to balance exposure to LP pools and capture yield fluctuations due to complex rebalancing and high gas costs.

III. Tokemak v2: Introducing Autopilot and the Liquidity Marketplace

Tokemak v2 remains true to its original mission of providing DAO liquidity. This is achieved by addressing the aforementioned challenges through Liquidity Management Pools (LMPs) that support different assets across various DEXs. LMPs are the core building block of two products: the Autopilot and the Liquidity Marketplace. These products are specifically designed to provide DAOs with greater flexibility and deterministic control over liquidity, while optimizing and simplifying the complexity of liquidity provision for LPs.

Take a tour of how the protocol works by clicking here.

The first addressable market for Tokemak v2 is focused on liquidity for ETH liquid staking tokens (LSTs). This approach provides a solution for LPs that seek a dynamic and optimal exposure to ETH through ETH LST pools, and it empowers LST protocols with new tools for liquidity management.

Tokemak v2 empowers DAOs and LPs with Liquidity Management Pools. The initial focus is on ETH liquid staking tokens, providing dynamic exposure to ETH for LPs and new liquidity management tools for LST protocols.

III(a). Autopilot

Tokemak’s Autopilot is an LP-centric utility that automatically rebalances liquidity across different assets, pools, and DEXs within a given LMP. With its dynamic allocation of liquidity, the Autopilot optimizes and auto-compounds LP returns, while simultaneously abstracting complexity away from the user and reducing gas costs.

To achieve this, the pool allocator logic considers several factors, including yields (i.e., base yield, trading fees, and incentives), exchange rate, underlying LST backing, slippage, and required liquidity constraints that enable the ability to exit any given pool. Additionally, the pool allocator logic verifies the on-chain LST backing and it accounts for the respective premium or discount while conducting liquidity rebalances to optimize its performance.

Click here for an interactive version of the above illustration

Through this rebalancing mechanism, the liquidity supplied to Tokemak’s Autopilot reacts to external inputs and captures the variability in yields across different pools. It does so according to a step size and a lookback window. The speed of response to this step size is slower for external inputs and faster for internal inputs provided by the DAO facing product. As such, the Autopilot is a rational market participant, and its rebalancing algorithm defines Tokemak’s Liquidity Rate, reflecting the changes in external market dynamics.

To optimize the Autopilot’s routing, the pool allocator relies on a solver. The solver can be decentralized by competing off-chain solvers providing an optimal routing solution. An on-chain component then checks if the proposed solution constitutes an improvement and ensures that it does not violate imposed constraints.

The LMPs will utilize the ERC-4626 Standard, enabling seamless integration without requiring the development of custom adapters.

In addition to its value proposition for LPs, the Autopilot can be seen as an instrument that sustainably sources liquidity that is readily available to be allocated to the DAO Liquidity Marketplace. Regardless of fluctuations in liquidity demand from DAOs, all liquidity supplied to the Autopilot is actively deployed and thus designed to generate optimal returns for LPs and fees for the protocol.

Tokemak’s Autopilot simplifies LPs’ experience by automatically rebalancing liquidity across assets, pools, and DEXs and abstracting complexity away on a simplified dashboard. It optimizes returns by considering various factors and reacting to market dynamics, while the protocol generates fees and ensures sustainable liquidity sourcing — independent of direct DAO demand.

A simplified presentation of the initial backtesting was shared during the last community call and can be found here: https://youtu.be/-kPIC3hd-lc?t=533

III(b). DAO Liquidity Marketplace

The Liquidity Marketplace is a novel approach to liquidity management for DAOs that enables real-time liquidity rental from any given LMP according to a transparent liquidity rate. This rate is determined by market dynamics that define the output liquidity rate discovered by the Autopilot (rebalancing logic).

One of the characteristics intrinsic to this product is the ability of DAOs to acquire liquidity directly and in quasi real-time while skipping indirect incentive mechanisms. As a result, Tokemak’s Liquidity Marketplace constitutes a system through which buyers can bid for liquidity at the current liquidity rate. The rebalancing logic treats these bids as internal and prioritized inputs.

It is worth noting that rates are sensitive to the supply and demand associated with this product, meaning that the liquidity rate increases when demand is high, and decreases when supply is high. Although buyers might place bids at any rate, the rebalancing logic will only provide liquidity once the bid is above Tokemak’s liquidity rate which represents the market price for liquidity rental. That is to say, the Liquidity Marketplace has a floor rate that is equal to the liquidity rate.

While using this system, LST protocols are able to select a destination across different DEXs, select the desired depth, and deposit incentives to acquire liquidity at Tokemak’s rate in real-time. Such flexibility is particularly relevant for LST protocols to reinforce liquidity during events of on-chain liquidations and large validator exit queues. Furthermore, this ensures that buyers pay exclusively for liquidity that is allocated to them instead of overpaying through traditional indirect incentive mechanisms that result in an unknown depth of liquidity.

Liquidity Marketplace, Tokemak’s DAO facing product, revolutionizes liquidity management by enabling quasi real-time liquidity rental at a transparent rate. Protocols bid for liquidity directly, skipping indirect incentives, while gaining flexibility, minimizing guesswork and reliance on often inelastic liquidity.

IV. Tokenomics

Tokemak v2 represents a new chapter for TOKE tokenomics. The proposed model is still subject to changes pending future validation and data collected during the initial phase of the LMP launch. Conceptually, this token design enables users to stake TOKE as collateral for LMPs according to individual risk preferences. In return, stakers receive LMP-specific performance fees for potential slashing risks.

IV(a). Core Mechanics

In this model, TOKE can be staked as collateral to Tokemak LMPs to provide a backstop against losses of principal. Token holders staking TOKE in a given LMP receive LMP-specific performance fees denominated in the underlying asset in exchange for potential slashing risks.

Given that different LMPs have different risk profiles, each staker must decide their exposure according to individual risk preferences. TOKE stakers can therefore improve the perceived safety of LMPs for LPs, thus attracting more deposits. This preserves TOKE’s utility of liquidity direction. At equilibrium, the APRs for TOKE stakers reflect the perceived risk associated with each LMP.

IV(b). Slashing Events

The initial scope for Tokemak LMPs lies in liquidity for LSTs, and impermanent loss risks are modest when compared to volatile pairs. Post-Shanghai upgrade, the risk of severe and sustained depegs also becomes less likely due to the arbitrage of LSTs that trade at a discount versus their backing.

Once the LMP-specific losses reported from the respective oracle hit a predefined threshold and the payout condition is triggered, the backing asset is removed from the corresponding LMP backing and placed into a vesting contract. As the asset is moved into vesting, the staking yield associated with the respective LMP increases. This creates stabilizing market dynamics for the protocol during slashing events where the backing asset is moved into vesting, thus being removed from circulation. These mechanics ensure that the backing asset is not immediately liquidated, but rather vests over time.

Furthermore, the backing asset is subject to a cooldown period to prevent stakers from removing funds from the respective LMP once the threshold for losses is triggered.

The steps below summarize the aforementioned slashing dynamics:

Oracle reports back losses, the threshold is met, and payout condition is triggered;
Backing asset (TOKE) is removed from the LMP backing and placed into vesting;
The LMP backing APR increases therefore incentivizing token holders to stake;
TOKE vests according to the predefined curve and duration.

The currently proposed token mechanics, pending validation, allow TOKE holders to stake tokens as collateral for Liquidity Management Pools. In return, stakers receive fees from the specific LMP. This incentivizes stakers to back LMPs based on risk profiles and TVL. Slashing events are handled through a vesting contract. Tokemak v2’s new tokenomics increase TOKE’s utility and reward token holders for participating in the protocol.

IV(c). TOKE Meta-LMP

As Tokemak establishes multiple LMPs with different assets and pools, TOKE stakers gain access to a range of LMP-specific yield opportunities. As such, leveraging the Autopilot’s modular design, a TOKE LMP which optimizes returns for stakers seeking to rebalance their TOKE across different LMPs can be created.

Given that staking rewards are denominated in the underlying asset (e.g., TOKE holders staked to ETH LMPs earn ETH), the TOKE LMP rewards can be automatically converted to TOKE and compounded. As a result, TOKE stakers have a passive way to engage with Tokemak v2’s utility.

Note: The general model outlined has tradeoffs in terms of both complexity and slashing risks for TOKE stakers. Due to this, there is an alternative proposal under consideration that still provides TOKE utility for both token holders and Tokemak LPs. The core difference of the alternative model lies in the absence of slashing risks for TOKE stakers, enabling a smoother integration of the TOKE LMP.

V. Product Rollout and Expansion Strategy

Tokemak v2 will be subject to a sequenced release, Autopilot being the first product to launch, followed by the DAO Liquidity Marketplace. This release sequence is necessary to sustainably bootstrap TVL using the Autopilot. Once sufficient TVL is reached, it can be efficiently allocated to the DAO facing product according to the existing demand for liquidity.

While the initial roll-out will be focused on pegged asset pools for ETH LMPs, Tokemak v2 aims to expand its product offering to stablecoins, additional stable pools, and lastly volatile pairs. It is worth noting that establishing liquidity rates for ETH and stablecoins constitutes a priority for v2, mirroring the demand for a dynamic and optimal exposure to these major asset classes.

Tokemak’s Autopilot is an ever evolving product. In addition to expanding the addressable market, more destinations for liquidity also benefit LPs, as the Autopilot gains more options for optimization. This not only refers to adding asset classes and destinations on mainnet (Balancer, Curve and Maverick at launch) — but also swiftly expanding to multiple L2s (Arbitrum, Optimism and zkSync) and their native DEXs (e.g. Velodrome).

Tokemak v2 will have a sequenced release, starting with the Autopilot and followed by the DAO Liquidity Marketplace. The focus is initially on ETH liquidity on the mainnet DEXs Balancer, Curve, and Maverick, with plans to expand to additional destinations and asset classes. Deployment on multiple L2s (Arbitrum, Optimism and zkSync) and their native DEXs are part of the near-term roadmap.

VI. Conclusion

The overarching goal for Tokemak v2 is to introduce transparent liquidity rates to DeFi through Liquidity Management Pools (LMPs) that provide improved solutions for both LPs and DAOs. This is achieved through two core products: the Autopilot, which dynamically optimizes returns for LPs across a range of assets, and DEXs, and the Liquidity Marketplace, which enables DAOs to access liquidity in quasi real-time at a transparent rate.

Creating a new dichotomy between static and dynamic options for LPs, the Autopilot autonomously rebalances liquidity across different venues, therefore outperforming a single pool exposure over time. Focusing on the first addressable market for v2, which is liquidity for ETH liquid staking tokens (LSTs), LPs that want exposure to ETH can capture the fluctuation in yields from different pools in a passive manner. As a result, LPs earn optimized returns on ETH while abstracting away complexity and minimizing gas costs.

To achieve this purpose, the Autopilot relies on several inputs, such as the various types of yield, the underlying LST backing, slippage, and liquidity constraints that ensure the ability to exit any given pool. Furthermore, the pool allocator logic verifies the on-chain LST backing, and it accounts for the respective premium or discount while conducting liquidity rebalances to optimize its performance.

By virtue of its adaptable nature and modular architecture, the addition of new destinations for liquidity continuously improves the Autopilot’s value proposition. Rather than being viewed as competition, high yielding opportunities can serve as catalysts for the Autopilot’s evolution.

Despite the utilitarian emphasis from the LP’s perspective, the Autopilot serves another core purpose for Tokemak v2, which is to find the liquidity rate associated with a given LMP, and sustainably source liquidity that is readily available for DAOs. Consequently, the product is not dependent on TOKE emissions. This ensures that regardless of any fluctuation in direct DAO demand, all liquidity remains actively deployed, thus benefiting both LPs and Tokemak.

Complementary to this, the DAO Liquidity Marketplace empowers DAOs with the option to deposit incentives to rent liquidity in quasi real-time at a known rate. This deterministic control enables a novel form of liquidity management where DAOs are able to directly define the desired depth across all integrated DEXs. As such, the uncertainty that is associated with indirect incentive mechanisms for third-party LPs is eliminated. This flexibility enables liquidity adjustments that are decoupled from voting rounds, thus allowing LST protocols to reinforce liquidity during events of on-chain liquidations and large validator exit queues.

In summary, the goal for Tokemak v2 is to create liquidity rates for crucial markets in the DeFi ecosystem through LMPs. By doing so, DAOs are empowered with real-time and deterministic control over liquidity while LPs get open access to a dynamic pool allocator that optimizes returns across all supported venues. Leveraging the existing synergies between both products, the Autopilot constitutes the rational market participant that provides reactive liquidity to integrated DEXs, sourcing both the TVL and discovering the rates that power the Liquidity Marketplace.

Note: A public-facing roadmap can be found on the following Asana board: https://app.asana.com/read-only/Public-Tokemak-V2/1201719920336277/cf9fd05c497a632a8b08fd1f21dd38ba/timeline

Tokemak v2 aims to introduce transparent liquidity rates in DeFi, benefiting LPs and DAOs. The Autopilot optimizes LP returns and sources liquidity, while the DAO Liquidity Marketplace offers real-time access to liquidity at a known rate. This synergy powers Tokemak’s goal of discovering liquidity rates for crucial DeFi markets.

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Tokemak (v2): Introducing LMPs, Autopilot, and the DAO Liquidity Marketplace was originally published in Tokemak on Medium, where people are continuing the conversation by highlighting and responding to this story.

All Systems Go for accTOKE and Rewards Logic Update

Tokemak — Wed, 30 Nov 2022 02:01:08 GMT

accTOKE and New Reward Logic Launch Wednesday, Nov 30th

After a seemingly never-ending series of exhausting events in the world of crypto, the core Tokemechs have been heads down in build mode, and this Wednesday, two important updates to the protocol are heading into production:

An updated reward logic that will align LD voting APRs with productive liquidity deployments
accTOKE: a new staking mechanism to allow TOKE holders to earn rewards accrued by Tokemak POA deployments

Updated Reward Logic:

The TOKE reward logic for Token Reactor voting is receiving an important update. While the changes might not be obvious in the UI, the updates to the underlying reward logic are designed to continue making Tokemak a more robust and productive protocol.

Fundamentally, the changes improve incentive alignment between Liquidity Directors and the protocol. This is a significant change that provides better optimization to support greater depth for productive deployments, resulting in increased protocol efficiency.

Key Points of the Logic Updates

Voting Alignment: Balancing the demand of the Liquidity Directors (LDs) with what deployments would be most efficient for the system
Performance: Optimizing rewards based on the performance of the reactors
Depth: More liquidity attracted to higher performing reactors

Performance is assessed on a historical basis (initially set at the trailing 8 Cycles). The calculation for a given Reactor is:

(Trading Fees + Rewards - Realized IL) * Risk factor [based on historical volatility]

Emissions Updates:

The emissions updates will be implemented in coordination with the new reward logic above. Emissions will be decreased gradually over the next 7 Cycles and in concert with the increasing caps on accTOKE. This continues Tokemak’s drive towards sustainable emissions. As always, all emission adjustments will be announced in the Discord prior to going into effect.

As this is a fairly substantial change in the underlying logic of the reward system, we encourage you to have a look at the updated Gitbook docs here which includes relevant equations and a detailed overview.

Now, let’s look at accTOKE!

accTOKE tl;dr

The long-awaited accTOKE feature will go live this Wednesday, November 30th
TOKE holders will now have the option to continue utilizing TOKE to direct liquidity, or to participate in Tokemak’s weekly Cycle rewards through the accTOKE locking mechanism
All rewards earned by accTOKE lockers originate from Tokemak’s POA (Protocol Owned Assets) deployments
On a weekly basis, rewards accrued by the POA deployments are claimable in WETH by accTOKE lockers
The accTOKE mechanism allows TOKE to be locked for 2, 3, or 4 weekly Cycles, with an increasing reward multiplier based on the length of desired accTOKE lock
Initially, there will be a cap on how much TOKE can enter the accTOKE system, and the cap will increase over a number of Cycles (more below)
Current Liquidity Directors will have the ability to migrate their TOKE to the accTOKE feature if their TOKE is already staked to direct liquidity
This coming Cycle (241) will begin accTOKE locking, with rewards starting to be earned in Cycle 242

Accretion

The ‘acc’ in ‘accTOKE’ was inspired by the term accretion, which in astronomical context is defined as “the coming together and cohesion of matter under the influence of gravitation to form larger bodies.”

In keeping with Tokemak’s spacey, sci-fi, tokamak-centric identity, this seemed a fitting descriptor for what’s expected of the effects of the accTOKE mechanism. The gravitational convergence between the accTOKE mechanism and regular TOKE utilization of directing liquidity will serve to form a stronger base for optimizing TOKE’s overall utility.

Actors that want to utilize TOKE for directing liquidity will ultimately have a stronger influence on that liquidity direction, and for those that want to harness the power of Tokemak’s POA deployments will now have the opportunity to do that, creating a harmony between the two different action-oriented TOKE holders.

How accTOKE Works

TOKE holders can either select the locking option on the modal, or if they’re currently LD’ing, choose to migrate their staked TOKE. accTOKE locking must occur prior to a Cycle’s rollover to earn rewards from a given Cycle.

A modal will pop up allowing a user to choose the Cycle length which they’re intending to lock.

Note: when you scroll down the modal, you’ll notice some importing info, namely that unless a withdrawal request is submitted, at the end of the selected Cycle length, the TOKE will automatically renew the lock for the same amount of originally chosen Cycles.

After the desired lock time is chosen, you’ll do a one-time wallet approval then a second lock transaction.

If a user stakes and locks more TOKE, their newly locked TOKE will extend the duration of TOKE they previously locked within accTOKE for the new lock period.

Example: User locks 1000 TOKE in Cycle 1 for 3 Cycles. Normally, their TOKE would be withdrawable on Cycle 4. They then lock another 1000 TOKE in Cycle 3 and select a new lock period of 3 Cycles. The user’s 2000 TOKE will then become eligible for withdrawal (pending a request) in Cycle 6. The new lock applies to all TOKE currently locked in the system.

If you don’t request a withdrawal from accTOKE, it will be automatically renewed at the end of a given lock up for the previously chosen duration.

Locking TOKE in the accTOKE mechanism does not return a ‘receipt’ ERC20 token, such as the tAssets from providing liquidity in a Token Reactor, so don’t expect an accTOKE token in your wallet.

Rewards and accTOKE Cap Timeline

On a weekly basis, rewards which vary in amount and asset, are claimable in WETH by the accTOKE lockers. accTOKE lockers can claim rewards at the end of each Cycle, not solely at the end of their full lock time. Note: POA deployment rewards earned and claimable by accTOKE stakers are not related to Token Reactor deployments.

WETH Rewards Calculation:

accTOKE lockers’ rewards will be calculated with the following logic:

POA deployment WETH Rewards = (Cycle Rewards in WETH / Total of all users’ accTOKE power) * Individual user’s accTOKE power

Where

Individual user’s accTOKE Power = TOKE Amount * Multiplier and the Multiplier is the number of cycles the user has locked TOKE for.

It’s important to remember that not all POA rewards go to accTOKE lockers, some rewards will still accrue back to Tokemak’s POA.

The schedule for accTOKE rewards from POA deployments is tentatively as follows:

Cycle 241: 20% of POA rewards
Cycle 242: 25% of POA rewards
Cycle 243: 30% of POA rewards
Cycle 244: 35% of POA rewards
Cycle 245: 40% of POA rewards
Cycle 246: 45% of POA rewards
Cycle 247: 50% of POA rewards

After the above terminal rate reaches 50%, it is possible for the rate to be increased or decreased, depending on a number of factors, including governance. However, if the rate is to be modified, it will only be implemented after the current maximum lock Cycle completes.

The capped amount of TOKE that can be deposited into the accTOKE mechanism will follow a similar schedule increase:

Cycle 241: 1,000,000 TOKE
Cycle 242: 2,000,000 TOKE
Cycle 243: 3,000,000 TOKE
Cycle 244: 4,000,000 TOKE
Cycle 245: 5,000,000 TOKE
Cycle 246: 6,000,000 TOKE
Cycle 247: Uncapped

At the start of Cycle 247, the cap for accTOKE will be removed.

Rewards can be claimable, if desired, at the end of any Cycle, not necessarily at the end of an accTOKE lock up period. The claiming function also offers the ability to unwrap the WETH at the same time (triggering an automatic second unwrap tx).

APRs will vary depending on a number of factors, including amount locked total, accTOKE capacity, and the previous Cycle’s rewards in WETH.

The accTOKE audit, performed by Halborn, can be found in our docs here.

More to Come

This is an important step to continue Tokemak’s growth, and there’s a lot more on the horizon.

More questions? Stop by our Discord and be sure to check out our State of the Reactor community calls, which generally occur twice a month.

…or pop in for a beer in the Leaky.

┻┳

All Systems Go for accTOKE and Rewards Logic Update was originally published in Tokemak on Medium, where people are continuing the conversation by highlighting and responding to this story.

TOKE/ETH Curve v2 LP (Boost with Convex)

Tokemak — Thu, 04 Aug 2022 19:03:25 GMT

UI Update!

The TOKE/ETH Curve v2 pool is activated and we’ve added a convenient way for Tokemechs to access providing liquidity to Curve (as well as boost their APR utilizing Convex) through the Tokemak UI at https://app.tokemak.xyz/. For the uninitiated with providing liquidity on Curve, please read the steps below carefully:

“Learn more” brings you here! To this very article

It’s important to first note that rewards from providing liquidity through Curve and boosting with Convex will provide CRV and CVX rewards, not rewards in Tokemak’s native token TOKE.

The arrow button will redirect you to Curve’s v2 Factory TOKE/ETH pool. You’ll first get a prompt notifying that you’re leaving Tokemak’s dApp:

Deposit TOKE/ETH on Curve V2 before heading to Convex via the “Deposit Curve LP” button

Once you reach Curve’s TOKE/ETH deposit page, you’ll see a few options for providing liquidity: adding tokens in a balanced fashion (similar to providing liquidity on Sushi) or providing the maximum amount of tokens available in your wallet. Curve v2 allows for users to deposit tokens in varying ratios, unlike Uni v2/Sushi’s usual behavior of providing a 50/50 equivalent in tokens.

Select only deposit in order to receive your tokeethCrv LP tokens, used to deposit on Convex

In order to take advantage of boosting your rewards over at Convex, you’ll want to ensure you simply “Deposit,” and not choose the option of ‘staking in the gauge.’ This allows you to take your tokeethCRV LP tokens (which you receive from providing liquidity on Curve) and deposit them into Convex.

Once you have your tokeethCrv (Curve LP) tokens, head back to the Tokemak dApp, and click on “DEPOSIT CURVE LP.” This button will bring a prompt to direct you to the Convex Finance stake page:

Clicking on “DEPOSIT ON CONVEX” will direct you to Convex’s staking tokeethCrv (Curve LP tokens):

In the search bar, typing in TOKE will filter the pools to the tokeethCrv Convex pool. There you can stake your tokeethCrv tokens and begin earning CVX on top of Curve’s rewards.

Note: a total of 17% fees are deducted from CRV rewards earned by your liquidity boosted by Convex. The breakdown of those fees, and an estimation of the total APR you can expect, is available in the “vAPR” column seen by clicking here:

It’s important to note that the TOKE/ETH Sushi LP will remain incentivized, however, there may be minor adjustments to balance the APR across the two pools. Tokemak currently controls ~40% of this pool and is now in an adequate position to incentivize CRV emissions while restructuring TOKE emissions accordingly.

Catch Up with the Latest Tokemak News:

Don’t forget to join us in the Discord and if you haven’t stopped by in a while. We’ve had some recent community calls (“State of the Reactor”) which can be listened to here at Tokebase:

In the Discord, the #dev-feed channel now has some more in-depth details on what the team is working on, and each Cycle’s rollover summaries.

The team is hard at work building and more updates are coming soon, Pilots.

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TOKE/ETH Curve v2 LP (Boost with Convex) was originally published in Tokemak on Medium, where people are continuing the conversation by highlighting and responding to this story.

┻┳ The ACCretion

Tokemak — Wed, 25 May 2022 02:24:59 GMT

The next phase of Tokemak is all about growing our PCA (protocol controlled assets). The PCA concept encompasses both the value of the portfolio the protocol owns (the so-called PCV or protocol controlled value) as well as the actual portfolio make-up or diversification.

Intro

In order to achieve rapid growth of the PCA, Tokemak is launching accTOKE, the ACC token, and a refined reward logic. All three will work in concert to achieve rapid growth of the PCA, improve the utility and efficiency of our liquidity, reduce emissions, and serve as the gateway into expanded protocol governance.

This article aims to provide the reader with a complete overview of how the different components work together.

Current Reward Logic

A reminder of the logic behind the current reward system will be helpful in order to fully understand the changes. Please refer to this Medium article for details about the reward equations.

In short, the three reward buckets (Liquidity Directors and both the Liquidity Provider groups across Pair and Token Reactors) are allocated to the individual Reactors based on the relative size of their pool within their category for LPs and across all reactors for LDs.

The actual amount paid out to both the LDs and LPs within any given Reactor is then determined by the balance of LP and LD. The full amount is only paid out if the Reactor is perfectly balanced.

Examining the ABC Reactor in the above illustration:

LP: ABC represents 52.6% of pair assets provided by LPs (100M / (100M + 90M)), 25.6% of all LP provided assets across both Pair and Token Reactors (100M / (100M + 90M + 100M + 100M))
LD: TOKE staked to ABC represents 50% of TOKE staked to Pair Reactors (100M / (100M + 100M), and 25.6% of TOKE staked across Pair and Token Reactors (100M / (100M + 100M +100M + 90M))

Rewards to the ABC LPs are calculated as follows (assuming 1,000 TOKE rewards allocated to Pair Reactors):

Rewards to the LDs staked to ABC are calculated as follows (assuming 2,000 TOKE rewards allocated to LDs):

Revenue Modulated LD-Rewards

Currently the Liquidity Directors (LDs) rewards are determined by the balance of the reactors, meaning the relationship of the TVL of both assets provided by LPs and TOKE staked by LDs relative to each other and to the total TVL in the system (Pair Reactors, Token Reactors and TOKE staked across both Reactor types):

In order to further strengthen the alignment of LDs and Tokemak an additional factor is introduced into the above reward logic. This parameter will weigh the LD rewards taking into account the system revenue generated by the underlying asset deployed to the different venues. In essence the LDs will earn rewards commensurate to the revenue generated by their directed liquidity.

While this is aimed at increasing the system revenue generated from which all will benefit, it will also have positive second order effects such as creating a more balanced interrelation between more asset/venue agnostic Tokemak oriented LDs, and LDs that might benefit from liquidity direction in more other ways outside the core Tokemak economics (think DAOs, trading venues etc.)

Just as importantly, taking into account the ACC mechanics described below, it will additionally give LDs control over which assets will be accumulated in the PCA. The updated logic including the factor will look as follows:

Here, R is a Revenue Factor that we will be unveiling soon. This factor will balance the Reactor not only in terms of LPs vs LDs, but also in the underlying revenue that is earned by the deployed liquidity. Since the LDs are the ones making the choices on where the liquidity is deployed, the LD rewards equations are the ones that are being modified by this factor.

The initial factor should be chosen in a way that doesn’t lead to a momentous change in APR, such as completely cutting off rewards from a Reactor generating little yield during a cycle — this could be achieved by implementing a lower limit soon to be determined.

The Revenue Factor shall at a later point be introduced as one of the governance controlled parameters.

Points to remember:

System revenue generated by a Reactor will have impact on the local LD rewards, resulting in a bonus paid out to LDs directing liquidity in ways beneficial to the protocol
The updated equations balance the interests of different type of Liquidity Directors
LDs will indirectly control which assets are accumulated in the PCA
The revenue control parameter will become a governance controlled parameter

Surplus Modulated LP-Rewards

It is important to remember that ultimately Tokemak aims to deploy its PCA, using LP provided assets as leverage (defined by the PCA multiplier). This is an important shift in thinking that moves us beyond the need to use the PCA as an idle backstop for deployed LP assets.

Tokemak is currently paying out rewards to LPs regardless of the current PCA holdings (which we here refer to as protocol controlled ABC, or pcABC tokens) to LP asset ratio (the tABC). Fundamentally, this equates to a loan of assets that sometimes cannot be usefully deployed as liquidity and to earn system revenue, and instead they sit idle in the reactor.

To account for the deployability of assets in any given reactor (and to further counteract the “laddering up” of a reactor in concert with the revenue factor) the reward equation on the LP side will include a factor taking into account the current PCA of the respective asset — thus optimizing capital efficiency.

The current reward equations for both Pair and Token Reactors are determined as below:

Using the reserve multiplier we can determine the desired, most capital efficient amount of LP assets to be factored into the equation (in this example, to keep things simple, we’ll abide by a PCA to deployed asset ratio of 2:1):

In the above Reactor, the PCA of $25M pcABC (protocol controlled ABC) would allow for a deployment of an additional $50M (for a total deployment of $75M ABC) — therefore $50M tABC (LP provided ABC) out of the $100M tABC total would remain idle in the reactor. In order to account for the PCA, the reward equation would be altered in the following way:

Here, lp*(i) is a modified definition of lp(i) to account for surplus modulation. We will share the mechanics in an upcoming detailed article. The introduction of this factor will require stepping into it in a controlled manner, allowing for users to adapt to the change in order to not trigger unwanted behavior.

Please also note that this will take into account the fact that some pair assets can be safely deployed to specific venues (such as Curve) while only requiring minimal PCA backstop.

Points to remember:

Balance between PCA and LP assets of a Reactor will have impact on the local LP rewards
This will improve capital efficiency of emissions
This prevents “laddering up” of a Reactor (farming with LP, stake TOKE rewards on LD side and subsequently raising the LP rewards) — especially in combination with the revenue factor on the LD side

Use of Reward Surpluses

Both of the above factors can, at least initially, lead to less actual reward payments to both LPs and LDs than allocated. These surpluses of TOKE rewards will be used to both increase the Token Reactor PCA (via ACC described below) and provide more productive Pair Reactor assets via TOKE-reward reallocation to productive pair assets in order to incentivize further LP deposits.

LD Surplus: Bonus can be spread across accTOKE holders (accTOKE described below) and TOKE stakers
LP Surplus: Bonus for PCA acquisition (ACC)

ACC — The PCA Token

With the launch of ACC, Tokemak will be able to accept all supported assets not just as TVL (tAssets), but also directly into its PCA — and as such directly under the control of TOKE holders for all future time, without an associated tAsset liability. ACC will also be a main stepping stone to permissionless reactors, allowing protocols to provide their reactor with the necessary reserve.

With this new mechanic, users can deposit any supported asset directly into Tokemak’s PCA, and will receive ACC in exchange (somewhat analogous to depositing CRV into Convex and receiving cvxCRV). There will be a bonus available for those who deposit their tokens into the PCA for a token whose Reactor is currently running with an LP Surplus, as described in the above section.

accTOKE — Locking TOKE

One can think of accTOKE as a “vote-locked” token (vl model / non-transferable), allowing holders to lock up TOKE in exchange for a number of benefits — not only further aligning long term holders with the protocol, but also expanding the protocol governance, mechanics, and earning potential for those TOKE holders who opt into the accTOKE model.

Among other governance functions, accTOKE will play a crucial role in the process of standing up permissionless reactors (similar to the approval process of Curve gauges). Revenue splitting and other exciting features will also be coming for accTOKE stakers.

Example

It’s important to understand that each of the above mentioned mechanics do not function in a vacuum but reinforce each other and, in combination, have favorable overarching consequences. To illustrate this, we will below examine one of the multiple cause and effect chains between them using a simplified example.

In this simplified example we will focus on the relationship between the revenue / surplus modulated rewards and the PCA. In order to keep things simple we will disregard some aspects (e.g. difference between Pair and Token Reactors) which have little impact on the general concept — and we will use simplified numbers:

In the above diagram, the ABC reactor is generating 5% in revenue yield, while the XYZ reactor is generating 4%. The XYZ reactor generating less system revenue will result in:

LD rewards being weighted towards the ABC reactor (revenue modulation):

Increased incentive for protocol agnostic LDs to shift more votes over to the ABC reactor, helping balance the interest of LDs that benefit from liquidity in more indirect ways (DAOs, DEXs etc). This will also prevent farming behavior that is unhealthy for the protocol such as “laddering up” a reactor (Add LP, earn TOKE rewards, vote TOKE to reactor allowing to accommodate more LPs)
LDs moving to the ABC reactor leads to an imbalance between the TOKE and ABC side of the reactor, thereby leading to increased incentives for LPs to provide ABC and thus leading to an increase in the TVL to PCA ratio of ABC

Increase in ABC surplus (surplus modulation):

The increase in the TVL to PCA ratio will lead to an increase in the reward surplus of the reactor, thus more rewards will be allocated to the PCA acquisition of the ABC reactor. This process will increase the PCA, bringing the TVL to PCA ratio back down to the target value

Rollout

In order to ensure the individual components work as expected and to allow for initial fine tuning of parameters, we will roll out these updates in the following anticipated order:

Revenue modulated LD rewards
Surplus modulated LP rewards
ACC / accTOKE

These updated tokenomics and mechanics will advance Tokemak toward the Singularity, increasing our PCA, revenues, capital efficiency, and utility as the liquidity bandwidth of web3.

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┻┳ The ACCretion was originally published in Tokemak on Medium, where people are continuing the conversation by highlighting and responding to this story.

┻┳ A Few Upcoming Milestones for 2022

Tokemak — Fri, 06 May 2022 23:53:44 GMT

C.o.R.E.3 Vote Completion and Reactor Activation

C.o.R.E.3 ends Monday, May 9th at 7PM UTC (12PM PT). You can add, remove, and change your votes until then, but remember: staking TOKE for additional votes takes up to ~15 minutes to appear, so if you’re adding last minute, be sure to factor that into the equation. When C.o.R.E.3 ends, we’ll announce more information about firing up the new Reactors.

Analytics Dashboard + Tokemak.xyz Splash Page

We’ve nearly completed a comprehensive Dune Analytics dashboard detailing Tokemak’s treasury, PCA, and deployments that can be monitored in real time. This will be released imminently. We’re also in the process of developing and releasing an informational splash page prior to entering Tokemak’s dapp, which will provide an easy-to-digest high level overview of the protocol, and specifically why DAOs would want to utilize Tokemak’s infrastructure as a liquidity solution. We believe there simply isn’t enough information readily available on the website as it currently stands to help new users understand Tokemak’s use case and potential, and we hope this remedies that.

Little by Little, More Governance

While the system designed for choosing Token Reactors through C.o.R.E. is a great tool for active participation in Tokemak governance, our goal is to progress towards deeper governance at large. Tokemak is a complicated beast, and the development timeline has been the first priority in the early stages of Tokemak’s evolution. As the Tokemak treasury begins to grow, infrastructure for automation begins to fall into place, and the guardrails for liquidity deployment begin to ease, we can look to grow into the DAO Tokemak was meant to become. In the near term, we’re looking to build out a method of allowing TOKE stakers to snapshot-vote for common goals and strategies that should be pursued.

Introducing accTOKE

accTOKE is coming soon. accTOKE is essentially a “vote-locked” token (or vl model) for TOKE that enables holders to lock up their TOKE for a longer period of time in exchange for a number of important benefits. Why would anyone choose to do this? Here are a few incentives:

Increased liquidity control: accTOKE holders get stronger control over liquidity direction
Boosted voting power: accTOKE gives holders more votes for C.o.R.E.4
Additional governance: accTOKE will be required in order to vote on approval of new reactors post C.o.R.E. events
Increased yield: accTOKE holders receive a portion of the protocol revenue

For #4, the protocol revenue will be converted into TOKE prior to distribution, thereby supporting the TOKE markets.

The introduction of accTOKE will expand protocol governance and mechanics in many ways. This will all be described in dedicated articles coming very soon. For those familiar with the role that vlCVX plays in the Convex ecosystem, you can get a slight indication of what is to come…

PCA Growth through ACC (Formerly Codenamed “pAssets”)

We are excited to unveil the concept that is going to unlock massive value for Tokemak and TOKE holders everywhere: ACC. We used to refer to ACC under the codename “pAssets”.

When we launch ACC, Tokemak becomes capable of accepting all supporting assets not just as TVL (tAssets), but also directly into our PCA. These assets are forever owned by Tokemak (and therefore TOKE holders) without any tAsset liability. And the kicker: Tokemak will be able to support this WITHOUT increasing emissions/inflation.

Participants will want to hold ACC, as they will receive a portion of the protocol revenue. This revenue will be converted into TOKE prior to distribution, supporting the TOKE markets.

A user can convert any asset from the LP side of a Token Reactor or a Pair Reactor into ACC, based on the market price of the asset and the price of ACC. Additionally, the system will self-optimize for PCV and TVL across all assets as the “balancing equations” expand to encompass ACC as well. Anytime that we have more TVL in a Reactor than can be safely deployed, the rewards will instead move to a bonus for any asset holders who give us PCA in that Cycle. In this way, ACC will have minting bonuses for assets that are preferentially needed by the protocol.

ACC will massively increase the PCV of Tokemak. Tokemak will never pay any extra emissions on any TVL that it cannot efficiently and profitably deploy, instead using the rewards and equations to optimize our PCV to TVL ratio. The future becomes clear and we begin to invert our model, which we have been planning for quite some time: Tokemak at this point will exist to deploy the PCA as liquidity bandwidth for web3, while deploying leverage via TVL only where it can safely and effectively be used.

An Acceleration Toward the Singularity

So, why the hell did we call it “ACC”? ACC and accTOKE are designed to rapidly draw us to the Singularity, the moment in time when Tokemak owns enough PCA to provide the liquidity bandwidth for all of web3. “Accretion” is defined as the process of growth or increase, typically by the gradual accumulation of additional layers or matter. An accretion disk is a structure of diffuse material in orbital motion around a black hole, forever approaching the Singularity. As Tokemak accumulates more PCV, we approach the Singularity.

Does ACC = Accretion, ACC = Acceleration, or ACC = Accumulation? Yes.

C.o.R.E.4

The end goal, as previously stated, is to implement permissionless Token Reactor creation. There are a number of complexities involved in reaching that goal, particularly when it comes to safety’s sake, and the development team is hard at work focusing on liquidity deployment and other core Tokemak features. In the meantime, the C.o.R.E. series have been effective in slowly and appropriately introducing more Reactors to Tokemak’s roster. Thus, we’re targeting another C.o.R.E. in the next ~two months to keep bolstering Tokemak’s arsenal of Token Reactors. As for Pair Reactors, they’re something that we’ll continue to look to add on a case-by-case basis.

Enter the Exaverse

We’ve been working with crypto-native artists to build out the Tokeverse since early last year in an attempt to breathe life into Tokemak’s core identity. Our upcoming first release of Tokemech Pilot NFTs, codenamed the Exaverse, has evolved into the beginnings of an immersive world, with a complex interplay between gamification and story telling. The in-game universe is a sci-fi extrapolation of the culture we have established with Tokemak, centered around the Leaky Reactor, which takes place at the edge of a supermassive blackhole.

Exaverse, in its current state, is a primitive, on-chain, composable game whose tokenomics are interlinked with Tokemak’s in pursuit of the singularity. The experience will revolve around the construction of Mech NFT’s from modular parts, a process which will contribute to the advent of the singularity for Tokemak. It will include a meta-game which is overlaid onto a map which will give players the ability to determine the fate of the Exaverse itself, in a communally-owned IP fashion.

The IP created by this process will be owned by the NFT holders and player base, but more importantly it will evolve through community creativity and governance. The system of processing raw creative input from players into finished material is where the innovation has been identified, and it will produce a living world upon which additional products can be built and monetized on behalf of the DAO. The UI, smart contracts, visual assets for the NFTs, and gameplay loops are in the early stages of being developed and refined. We’re getting closer and can’t wait to share more with everyone.

//more2come

Note: this isn’t an exhaustive list for updates coming in 2022. As expected, there has been and will be continuous and on-going development, updates to the UI, and other surprises. There will also be a deeper dive article on accTOKE + ACC in the next week or so.

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┻┳ A Few Upcoming Milestones for 2022 was originally published in Tokemak on Medium, where people are continuing the conversation by highlighting and responding to this story.

C.o.R.E.3 Voting Begins This Monday, May 2nd

Tokemak — Thu, 28 Apr 2022 23:18:46 GMT

Attention Tokemech Pilots that may have had one too many in the Leaky Reactor: we know those Offworld Carajillo’s are tasty but it’s time to sober up and report for duty. C.o.R.E.3 is rapidly approaching and voting starts this Monday, May 2nd.

An Ice Cold C.o.R.E. Refresher for a Groggy Pilot

C.o.R.E., short of Collateralization of Reactors Event, is where TOKE stakers (as well as LP TOKE/ETH stakers) vote for the next round of Token Reactors. A friendly yet competitive governance event where communities are known to rally around their preferred protocols / token projects to try to kickstart a Token Reactor for active liquidity deployment. The event lasts one week (ending on May 9th), and only the top five Reactors to receive the most votes will progress to the Reactor activation phase.

Select the C.o.R.E. tab at the top of the UI to access the voting page.

If you’ve participated in a C.o.R.E. before, you’ll find a familiar interface (seen above) where your votes can be submitted, removed, and rearranged at any time. This is all done through an gasless wallet signature, so no worries if you’re an indecisive Pilot and want to change your votes and/or allegiances at any time throughout the week.

So long as you have your TOKE or TOKE/ETH SLP tokens staked in Tokemak, your votes will auto-populate and you’ll be ready to start allocating at the start of the event. You can add votes at anytime by staking more TOKE, but it’ll take about 15 minutes before your votes will appear on the C.o.R.E. page.

The top five Reactors are separated from those requiring more votes to activate.

At any given time, you can see what place a Reactor’s in and how far away they are (in terms of votes) from reaching the top five. If the Reactor you want is closing in on a top five position, it’s time to rally the troops. Historically, there have been some shockingly close calls near the end of the event, so if the Reactor you want is in fifth place, don’t get cocky until the fat lady sings, Pilot.

4/30 Edit:

C.o.R.E.3 will begin midday PDT this Monday, May 2nd — the moment isn’t precise as it depends on final testing before we push live, but we will continue to update everyone in the Discord.

It will end on May 9, 7PM UTC (12PM PDT).

The final weighting for voting remains the same from C.o.R.E.2.:

1 liquid staked TOKE = 6 votes

1 staked LP token = 69 votes

1 locked (vesting) TOKE = 1 vote

Unlike C.o.R.E.2., there is no carryover bonus for C.o.R.E.3; ’tis a blank slate.

Returning Contenders:

Those contenders that fell short from C.o.R.E.2 making their grand return are: 1INCH, AAVE, ALPHA, API3, AXS, BADGER, BAL, BANK, BIT, BNT, COMP, CRV, CVX, FTM, GRO, INDEX, LDO, LINK, LQTY, LUNA, MATIC, MKR, NEAR, PERP, RAI, REN, RUNE, SPELL, TEMPLE, TRIBE, UNI, YFI, YGG, ZRX

New Challengers:

There are exciting new challengers in the mix now, vying for a Reactor of their own: ANGLE, APE, BICO, BTRFLY, CNV, DODO, DYDX, ENS, GALA, GFI, IMX, JPEG, PAL, PREMIA, ROOK, SDT, SILO, STG

C.o.R.E. Spotlight

This past week we’ve been hosting some projects in the Tokemak Discord for some short AMAs to introduce themselves to the community. We’ll be having more tomorrow and even into next week, so be sure to stop by the Discord to see the schedule, which can be found here:

The exact time of when C.o.R.E.3 kicks off will be announced shortly before the games begin, so be sure to follow along:

And as always, stop by on Sunday in the Discord for a drink with us in the Leaky.

Ah, the Leaky. A wretched hive of degens.

C.o.R.E.3 Voting Begins This Monday, May 2nd was originally published in Tokemak on Medium, where people are continuing the conversation by highlighting and responding to this story.

TOKE Emissions Update April 2022

Tokemak — Thu, 07 Apr 2022 00:07:00 GMT

Phase 1 Effective April 13th, 2022

Update: Tokemak has reached a point where we are now able to proceed with the next stage of our emissions. These forward thinking modifications will set us on a trajectory of sustainable emissions with the ultimate goal of benefitting the Tokemak protocol and its community.

Completion of the first phase will reduce TOKE emissions by 23%. In concert with our CRV/CVX strategy our TOKE/ETH liquidity will become increasingly efficient and will ultimately become self-sustaining.

The analysis performed also included a review of which emission groups tend to use their rewards actively in the system. Therefore we believe the updated approach will not only reduce emissions and lengthen the runway, but also relieve potential sell pressure in the future.

Phase 1:

The table below outlines the changes to the weekly TOKE rewards that will take effect on April 13th (Cycle 208) — please note that this table shows the final state, not taking into account that the emissions to the Uni TOKE/ETH LPs will be decreased over time.

The UI will reflect the updated reward quantities in the coming days:

*Note Uni TOKE/ETH reduction will occur over several Cycles. Initial reduction of 50% in Cycle 208

LP Pair Reactors: More emissions allocated to the current most revenue generating LPs
LD TOKE Stakers: Additional rewards to absorb increased LD activity from previous Sushi/Uni LP stakers
Sushi LP Stakers: Adapting rewards to match need of SushiSwap liquidity
Uni LP Stakers: Rewards to this pool will be initially decreased by 50%, further reductions after with the ultimate goal of sunsetting emissions fully
Curve LP Stakers: Rewards that should incentivize appropriately sized liquidity pool, additional rewards via future gauge weight will further supplement rewards here and ultimately become self-sustaining. This pool will be turned on over the coming weeks

While this is a noticeable decrease in rewards for Uni and Sushi LP stakers, we’re exploring adding the ability for LP stakers to begin voting to direct liquidity (with diluted voting power).
This will not only allow for them to offset the aforementioned changes. LP stakers have long provided a great service to the protocol, some might have wanted to more actively participate in the liquidity direction — which will now be possible for them. LP stakers are taking a non-negligible risk as is, so also giving them a more active role in the system is fair — and at the same time might have the effect of demanding a bit more participation.

Phase 2:

Phase 2 will introduce a refined incentive structure which will, in addition to the well known “balance the reactors” mechanic, include a factor resulting in rewards commensurate to the system revenue generated by the underlying directed liquidity. This will not only boost the growth of the PCA, from which all will benefit — but also help balance the incentives and interests of the different groups of LDs.

Taking into account that larger players such as DAOs and exchanges are more focused on directly benefiting from liquidity direction rather than optimizing for yield, as well as aligning the incentives of more agnostic LDs with the interest of the protocol and all its participants will result in a more balanced and healthy system state. DAOs and exchanges build liquidity while PCA grows. The ultimate goal always is to enable the different users to leverage the system in ways that benefit them while keeping all interests focused on growing a healthy protocol.

This is an important evolution and interim step prior to TOKE emissions decreasing in the long term. That long-term flow is: incentivize all liquidity direction -> incentivize liquidity direction that increases PCA -> progressively decrease the need for TOKE incentivization of liquidity direction.

Phase 2 will be enabled as soon as we have determined the initial parameters.

Phase 3:

More information will be forthcoming regarding the introduction of “pAssets,” but to give you a brief introduction: these are permanent assets (cannot be redeemed) designed to massively grow the PCA instead of the TVL. Opting to mint pABC tokens will have a variety of perks, that depositing into Reactors and receiving tABC assets do not. We’ll release an article soon detailing those incentives.

Phase 3 timeline TBD.

An artistic representation of Reactor emissions modifications :)

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