Aqua token utility proposal

     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:

  1. Stake to earn (aimed towards the broader crypto community)

  2. 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.

Why staking?
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).

An example:
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!

  • Yes
  • No

0 voters

    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.

7 Likes

This is a brilliant proposal of 2 sustainable, exciting use cases for $AQUA. I don’t understand all of it but I’ll get my head round it. I love seeing my token balance growing in the Claims Dapp and I cannae wait to start Aquafi -ing my LP tokens :slight_smile: and start earning some sweet bonus $AQUA :whale: XID-0b69f

1 Like

I think giving the option to stake $AQUA to boost LP fee payout further than standard advertised is a great way to promote holding $AQUA.

To incentivise people to buy $AQUA to stake it, it would have to be worthwhile for the staker. If a staker buys $2000 worth of AQUA @$0.1/AQUA to get max boost of 10% in fees then most would want to break even on that $2000 cost ASAP.
Holding a large % of a high volume LP would make the payback alot quicker. Holding a low % would make it take alot longer. I see this being attractive to people holding large % of an LP.

The only thing is would this 200,000 AQUA stake limit mean a person would get the 10% boost for 1 LP token they hold or all different LP contract tokens they hold?

If you need 200,000 AQUA staked to get you a 10% boost on all LPs then people may take advantage of this and could actually increase inflation in my opinion. If 200,000 AQUA is required per LP you AquaFi then inflation would be alot lower.

On top of what you suggested I think it may be beneficial if ETH/AQUA LP holders are able to AQUAFI that LP token contract for 2x standard LP % boost to incentivise people to add to the ETH/AQUA LP pool. I think this could greatly boost liquidity for AQUA if fee boost is much higher for that pool than others. AQUA liquidity would be essential for the protocol to function.
This like staking should lock up more AQUA also but benefit liquidity at the same time.

The only thing is would this 200,000 AQUA stake limit mean a person would get the 10% boost for 1 LP token they hold or all different LP contract tokens they hold?

This is a great point you have raised. Thanks for raising this as I did overlook this particular area. I believe it would be more attractive to the LP to include the max 10% bonus on all LP tokens from a single 200,000 Aqua stake. Why?

  • I understand your concern regarding inflation. However the bonus payout will only be as good as the fees this LP generates. And the more fee it generates, the better and profitable for the Aquafi protocol. Thereofore I believe it is in the best interest of the protocol to encourage and incentivise multiple deposits of LP tokens.

  • If 200,000 Aqua stake is required per LP token to get the max 10% reward for each LP token, this can become very costly for an LP and may not be value for money and could put them off the protocol entirely or they may just depoit 1 LP token. A single stake requirement is better value for money and is more likely to encourage LP’s to stake the max 200,000 if they intend to deposit multiple LP tokens.

On top of what you suggested I think it may be beneficial if ETH/AQUA LP holders are able to AQUAFI that LP token contract for 2x standard LP % boost to incentivise people to add to the ETH/AQUA LP pool.

Again a great point. However the protocol itself has flexibility on how much bonus to offer to a LP token. The trailer video suggests this bonus ranges anywhere bewteen 10-50%. Therefore we do not need to modify the ‘stake for bonus’ rewards.

I really appreciate you reading this proposal and providing your input. Thank you

1 Like

That is a fair point, as in reality it is only temporary inflation. Those fees the LP generates may end up being used by the protocol to buy AQUA and burn it. This would boost the price of AQUA and generate more fees for the ETH/AQUA
LP pool. People are going to earn so much in fees through adding to the ETH/AQUA liquidity pool :sunglasses:.

If AQUAFI is designed so everything is centred around the ETH/AQUA liquidity pool then I think the ETH/AQUA LP would become one of the highest fee generating pools in crypto. Make it by design so the ETH/AQUA pool has a positive feedback loop. It sounds like it will. If it can achieve that then there will likely be an inrush of people to buy AQUA to provide liquidity and earn fees.

This is true. It will be interesting to know how it will be determined which LP gets what bonus. A governance vote? Using calculations to determine the highest fee generating LP and give that LP the greatest boost to make the protocol generate more fees? Hopefully not to long before we know the answer to this.

I like that this stake to earn gives another use case for AQUA but can we make this staking of AQUA stay attractive as you described with less inflation? I think combining your staking idea with the impermanent loss cover Zach mentioned in the video could work. Instead of staking AQUA for 10% APY someone could stake AQUA for X% coverage of impermanent loss on their LP token whilst maintaining the AQUAFI fee boost. If they have no impermanent loss then no AQUA needs to be minted for the cover payout, just for the fee boost. Could lock up alot of AQUA. At the same time think back to your initial point of stake to earn, I think I went a bit off track. Stake to earn with 10APY% would lock up AQUA temporarily, give another use case for AQUA and the more stakers indicates more trust on the token like you mentioned. You make good points on this.

That’s ok, was a great read. A really well thought out proposal :clap:

1 Like