Aqua Token utility
First of all we need to understand our target market. In its current state, the Aquafi protocol is aimed entirely at liquidity providers. This is a small group of people in an already small crypto market. To attract the attention of this small group of people, we need to provide a standout protocol. Then we need to market it which will be very difficult as we are up against other LP staking competitors.
What im suggesting is we expand our target market. The protocol should be designed for both the liquidity providers and the broader crypto community who don’t want to provide liquidity.
I propose the following utility for the Aqua token:
Stake to earn (aimed towards the broader crypto community)
Stake for bonus (aimed towards the LP’s)
Stake to earn
Aqua protocol will pay a 10% APY to anyone who stakes Aqua tokens. This Aqua reward will be pushed to the claims dapp weekly and the user can claim whenever they like. Weekly claims will keep people active and excited as opposed to monthly claims.
A currency is worth what it’s worth because people believe it is worth that much. That belief comes from trusting the currency. Staking a token creates scarcity and hence creates value and demonstrates you trust in the value of this token to hold otherwise you would have sold it.
All the Aqua tokens will be given away for free from day 1 of launch. No one would trust Aquafi protocol with their LP tokens if they believe the Aqua tokens will be dumped. Aqua holders need something to do with their tokens rather than them sitting idle in their wallets. Staking to earn a passive income is a great incentive for these idle Aqua tokens to be put to use and at the same time reduces circulating supply and brings confidence to the protocol for LP’s to use.
Is this sustainable?
Yes. There will be more tokens locked up than minted. For example if 500million are staked, that will produce an annual inflation of 50million. This effectively reduces the circulating supply by 450million. The protocol will have a buy back and burn mechanism utilising the LP fees collected in the Aquafi pool which will help control inflation. The more LP tokens deposited, the more Fees collected and the more the inflation can be controlled. Therefore token inflation is not an issue if we have mass adoption. And the only way to get mass adoption is to offer an incentive to buy and stake = stake to earn.
Why is this a good idea?
It gives the Aqua token a use case. Aquafi protocol will become your source of earning a passive income. Simply lockup your asset ($Aqua) and earn a weekly income. This is an attractive proposal in my opinion and will help to keep inflation under control whilst bringing utility to Aqua and trust to the Aquafi protocol.
Stake for bonus
This is the 2nd utility for the Aqua token. When a user stakes Aqua tokens along with their LP token, they get a bonus in their LP fees along with the stake to earn as discussed above. Every 10,000 Aqua tokens staked, LP earns an extra 0.5% Liquidty mining fee bonus. This bonus reward is only paid out when the user withdraws their LP token. The bonus is capped at 10% (200,000 Aqua stake earns max bonus).
User deposits ETH/LINK LP token. The advertised liquidity mining fee bonus for this LP token is 20%.
Example A: User has 0 stake = when he withdraws his LP token, he gets his original share of the LP token + LP fees earned paid out in Aqua with an additional 20% bonus applied.
Example B: User has 100,000 Aqua stake = He is earning 192.31 Aqua weekly (stake to earn rewards). When he withdraws his LP token, he gets his original share of the LP token + LP fees earned paid out in Aqua with an additional 25% bonus applied (5% extra stake for bonus rewards)
Is this sustainable?
Yes. The value being asked to stake to qualify for the extra bonus is considerably higher than the LP fee bonus being given. This means more tokens are out of circulation than introduced. It also means LP’s are rewarded more than the stakers and incentivises liquidity providers. When the LP withdraws their tokens, they may choose to keep the tokens staked to continue with stake to earn rather than dumping them onto the market.
Why would an LP want to buy Aqua to stake?
They don’t have to. They can use the protocol by depositing their LP token without an Aqua stake. But they will only get the advertised rate between 10-50%. However if a liquidity provider wishes to qualify for stake to earn and stake for bonus, then they will choose to stake Aqua tokens alongside their LP token.
How does this bring value to the Aqua token?
For Aquafi protocol to be used by Liquidity providers, they need to believe in the value of Aqua for them to accept Aqua as a form of payment. By allowing staking, they can develop trust within the protocol. The more coins that are staked, the more trust they will have in the value of Aqua and are more likely to accept this token as a form of payment and hence use the protocol.
Do you support this idea? Time for a vote
Do you like this idea and would you want the Blockzero labs team to consider this proposal? Please cast your vote and also make a comment with any additional things you would like from the Aqua token for the team to consider. Please contribute all your ideas in the comments below and together lets make the Aquafi protocol the best and most competitive liquidity mining protocol ever!
Importance of community contribution
I will now be working on potential adoption/marketing strategies and will post my suggestions here within the next week. As Blockzero labs citizens, please visit this forum regularly and contribute to any post you can as Blockzero is stronger with its citizens fully involved. Yes the Team at Blokzero labs is very creative and are very good at what they do. But together with everyones ideas they can build something far greater. Many thanks for reading and look forward to everyones involvement in making Aquafi the best it can be.
A note to Flashstake fans
Blockzero labs is still developing great things for the flashstake protocol. Flashstake.me is coming. Upfront flahstake offering is coming. Lets as a community keep the Flashtake protocol momentum going.