AquaFi Protocol | Protocol Features #XIOfeedback

Please provide your thoughts on two specific questions:

  1. How should the premium calculation be performed?
  2. BONUS: Should liquidity earning tokens (LP tokens) created by Blockzero Labs earn an additional premium?

1. Premium Calculation

How should the premium calculation be performed?

Potential Options

  1. Static Rate - All accepted/whitelisted pairs will earn a base rate of 10%. “Lower risk” LP tokens can be voted on by the community and these could be offered higher premium rates - for example if the community believes we want more WETH/USDT liquidity tokens, we can set the premium for this anywhere between 10% and 25%
  2. Shared Basket - Set aside a constant number of AQUA tokens per day/month and distribute these based on the % of fees generated by the staked LP tokens - for example, there are 100,000 AQUA tokens available for the day. There are two stakers, one of which has earned 70% of the total fees and the other who has earned the remainder 30%. The first staker will receive 70,000 tokens into their running total and the second will receive 30,000. This will continue every day until the stakers decide to withdraw at which point the running total of AQUA tokens would be paid.
  3. Dynamic Rate - Have something similar to the FPY within the Flash protocol where the rewards/premium is calculated based on the usage of the protocol. As the protocol is used more, the premiums lower, and as the protocol is used less, the premiums increase - for example when the AquaFi protocol is not being used, the premium is set to 25% and when it is being used extensively, the premium is set to 10%. This might be quite challenging since we need to think of what type of metrics we can use on-chain to suggest when the protocol is being utilized. Some ideas here are maybe keeping track of all the AQUA paid over the last X days and when the average is lower than this, the premium increases? (probably a bad example but hopefully it illustrates the point)
  4. Hybrid - Require the staker to stake some amount of AQUA in order to unlock higher tiers of premium/APY - for example, the staker could stake their LP tokens for a given amount of time and receive the base rate of 10% upon withdrawal. However, if the staker wanted to “unlock” higher levels of premium (say up to 25% for example) they would have to lock some amount of AQUA tokens. We could have some sort of sliding scale and be percentage-based to encourage the holding of AQUA tokens - the larger holders earning bigger % returns would be incentivized to continue purchasing AQUA tokens - example:
  • 0.01% = 25%…
  • 0.001% = 20%…
  • 0.0001%+ = 15%…
  • 0.00001% = 10%
  • else 5%
  1. something else

2. Incentivise Blockzerolabs Projects (BONUS Question)

Should liquidity earning tokens (LP tokens) created by Blockzero Labs earn an additional premium? (e.g., LP tokens from the Flash protocol earn an additional x%). How much additional premium would you suggest?

Removed the question regarding unstake early since the protocol will allow users to withdraw at any time and the premium will be calculated upon withdrawal.

  1. Premium Calculation
    Personally I like the Dynamic Rate as it is done with the Flash protocol at the moment. To me it is a fair way of calculating the premium. However if this technically is a tough route then I would go for the Static Rate. It is very simple to understand for the liquidity providers with little IT background like me.
    BONUS Question
    Yes it would be good for expanding the BlockZero community if LP tokens created by Blockzero Labs will earn additional premium. I suggest to make it 25% extra. So if you would normally earn 10%, then it would be 12,5%.
  2. Unstake Early.
    Yes I believe it should always be possible to unstake early. To me the possibility to unstake is a big pro. It will increase the number of people who want to try to stake. If it will not be possible to unstake early it will stop people from trying it. The best would be to allow the unstaking without a fee. Another option could be a small fee. Don’t make the fee to big.
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i’m in for dynamic rate and “yes, no additional fee”.

the first one is to avoid an infinite token minting of aqua.

the second one is because 90% of other staking protocols/tokens just gives you the token you have earned until the moment you unstake. if we give no tokens if you unstake early, noone is going to stake for long time… it would be non sense given the fluctuation of crypto market…

ah! and no additional premium for blockzero tokens (otherwise it would be like triple premium on top of a premium… and we are arguing that central banks are minting new money hahaha :smiley: )

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1. Premium Calculation

I choose the fourth option (Hybrid). If there is a premium for staking AQUA, and a higher premium for the more AQUA you stake, it will incentivize people to not cash out the AQUA as quickly since they’ll probably want to stake the rewarded AQUA for an even higher reward in the future, thus leading LPs to invest more in the protocol, use it more, while locking away more tokens in the process. There could even be an opt-in automatic process to automatically stake rewarded AQUA.

2. Unstake Early

I choose the second option , (Yes with additional fee). I think the less tokens in circulation the better so more incentive to keep them locked is ideal. Personally, I think we shouldn’t go easy on the early unstacking fee because it would pay out more in the end for everyone, to incentivize having more the tokens locked or in consequence burning a lot of tokens.
Plus, when people start staking for X amount of time, they probably aren’t thinking about early unstaking after X-Y amount of time, so it shouldn’t be too much of a turn off if the consequences of early unstaking are high.

  1. I like the hybrid model. I struggle to see what the value of the aqua token will be unless it can be utilized somehow. With this model it creates actual value in holding the aqua token so there will be some market pressure to sustain it as people take their aqua rewards. I was thinking about this earlier actually and to me it is almost necessary to sustain the aqua price for there to be this type of incentive on holding the token

  2. I believe it would be good to have someone really familiar with token economics theory pitch in on this. To me creating the MOST attractive opportunity for stakers is ideal. So I would say no fee at all. This would bring the most users in right away. HOWEVER. If the economic model for how this system works would be harmed by people coming in and out quickly. Maybe due to gas fees or something else that is hard to predict than it could be necessary for there to be a penalty fee to pay. I dont think this is ideal but I think it would be needed to weigh against what is ideal for stakers vs what is needed for this mini economic model to work inside of Ethereum as it is.

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1. Premium Calculation

I like the static rate. It is very simple and easy proposition. Stake your LP get 10% extra. I also like the idea of higher premium rates for selected pairs.
I don’t like option 2 and 3, because the fess the LP providers learns are already dynamic. Combining that with dynamic reward, might make it confusing. It won’t be very clear how much aqua made them vs how much uniswap made them.
I really like option 4 though. One of the main drawbacks of aqua so far has been that there is no reason to hold AQUA token. This would solve the problem.

2. Unstake Early

I thought people could just stake until they withdraw. I wasn’t aware they had to put in a fixed amount of time. Is there any video talking about this change (It was not this way for the beginning was it? If so could someone point me to a link I would love to watch it and hear the reasons for this change. Thank you. )
I vote for option number 1 no additional fee.

I have made some modifications to the initial questions - the question regarding unstake early has been removed since the protocol will allow users to withdraw at any time. The premium will be calcualted upon withdrawal.

Sorry about the inconvienence!

Tagging the above posters to trigger notifications @Mindora @meanderingmagi @mrsmith @chiquito82 @scsmit

My first post, regarding premium calculation, stands fitting then.


For me I would go in for the hybrid system as I am a great advocate for the sustainability of the $AQUA token itself. We can’t run the protocol if there aren’t systems in place to make sure the token involved in it’s operation isn’t self sustaining. Looking at all the suggested solutions I personally think it’s the Hybrid model that does it best. The fact that people would be incentivized for holding or staking $Aqua tokens in order to reduce the supply circulating and hence increase demand/supply ratio would make sure it is more profitable to keep holding the token than just selling upon receiving, reducing selling pressure drastically.

With the bonus question about extra reward for blockzero lab LP tokens I think it is a very good idea that should be implemented. As a lab, the core community or projects under your care are supposed to benefit more in a way than others you’re lending a helping or partnership hand to. I think an extra 2-5% reward increase in regards to this will be a good one to start with.


Your argument on no additional premium for blockzero tokens really makes sense but I think giving very minute extra reward percentage like say 1-2% extra won’t be too bad to breakdown the protocol rather it would make it more enticing to engage with the blockzero ecosystem as you are rewarded more in all angles. This would draw more people to blockzero labs and further help the AQUA protocol too so kind of a feedback reaction which is positive

i really don’t know… we are receiving many many incentives already to be a blockzero citizen… in my opinion it’s starting to be too much…

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  1. Option 4, Hybrid will get my vote. Staking more FLASH linked to tiers of increased returns is a very good way of rewarding investors that are taking a bit more risk and also committing more to the project.
    Do you have SKIN IN THE GAME? - that is the question that needs to be answered and rewarded appropriately.

  2. This might be against the flow but I would vote NO. The rewards are good enough in the fees the liquidity providers earn. I would not dilute the FLASH rewards/earning to other projects - keep it 100% in $FLASH and allow it to grow at maximum potential.

Thank you

DrLuke :stethoscope:



I believe we should work with the hybrid method it encourage usage and for no.2 if enough tokens are there from the lp to sustain the program for a good while no problem we could implement an additional premium otherwise we could use it for something else.

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This is a very interesting question.

The premium calculator will be key to guarantee the success (or failure) of Aqua. I would try an option that has mechanisms of preventing overinflation.

For instance, the one that you can stake Aqua to earn more premium (Hybrid) seems a good way to put aqua out of circulation. If you unstake early then you would lose a % of the Aqua, similar to what happens with Flash. So hybrid seems the best option in my opinion.

Could we also implement some mechanism to burn Aqua to help with inflation? For instance it could be written that every transaction burns X% (a small percentage) of the tokens. This will also encourage to hold tokens. Or maybe they could also be used to unlock other options or exchange for other tokens in one of the pools, and these Aqua being burned. Just throwing some ideas around.

About incentivizing BZ projects, I think everything that brings eyes, and volume to the protocols and dapps from BZ and away from the main DEX it’s a win. I would incentivize it, albeit at a modest rate.

Yeah I can relate to this but just a little more extra reward that just stimulate people to enjoy being an active blockzero user and doesn’t inflate or harm the protocol too much imo is fine

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Prefer this option. However, I would like to see a more flexible way of locking, similar to the bonus rates of CEL. That is just to have x% of value in LP in Aqua on your wallet would lead to higher APY. No locking. In that it is different to what CDC offers in their DeFi wallet: true locking for up to 4 years to get a multiple to the APY.

Also like the static bonus, however I see trouble in evaluating low vs medium risk LPs.

Something hybrid in between 1 and 2 Static Basket. Start with a fix rate and depending on total usage and development of all LPs, grant an additional Aqua pay out per quarter afterwards? This would probably need some measure to counter inflation. Maybe payout locked and unlocking requires burning?

I’m a huge fan of #4 HYBRID model:

  • It gives an extra purpose on “why would I use AQUA?” other than to burn it to earn LP tokens.
  • It requires all users to continue to accumulate over time and still hold their AQUA earned due to the entire protocol having inflation of more and more minted AQUA. So by requiring a % of the total supply to be held in order to achieve higher payouts, it helps to prevent a “I reached my flat amount target and can sell all AQUA I ever get after that hard limit was reached”.


  • Yes we should have a few pairs that earn even more to generate more excitement and interest. I would suggest it is only a few specific pairs that are XIO specific: XIO/ETH (Uniswap), XIO/FLASH (Flash Protocol), AQUA/ETH (Aqua protocol), and maybe even FLASH/ETH (Flash Protocol). If we allow this, we would probably want to allow this to be voted on by XIO governance in the future so as new future protocols come out developed by Blockzero we can add them to this “bonus list”. Maybe look at how SushiSwap handles this, draw inspiration from there. Their governance is more sophisticated, allowing voting on exactly what the bonus multipliers are and for which token pairs.
  • I would assume if there is an extra bonus it would be somewhere between 5% to 25%. Example: if the AQUA highest tier is 125% and the bonus for XIO/ETH is +20% then the highest rewards possible for XIO/ETH in AQUA is 125%+20%=145%

I like the idea of boosting the rewards by staking.
This will incentive to hold the tokens.

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If we opted to go for this method, what metric would you use that determines the dynamic rate? In the flash protocol this is achieved by using the FPY which is:

eg: ((1-(9,081,072.65/18,129,619.46))/2 = 24.95%

No, you are correct, the protocol allows people to stake until they withdraw - I changed this earlier in the day :slight_smile:

The Aqua protocol would not require an amount of time that users must stake for. Users are free to stake for any given amount of time which means they can withdraw on the next block if they wanted to.

What would a modest rate be in your opinion?

If I read everything here, I think the consensus is that either the Hybrid model or the Dynamic rate are preferred. If I had to choose I would choose for the Hybird model BUT I do think that it is more difficult to explain to newcomers. We really want new people to enter the AquaFi protocol, and this also means that it should be clear what is going on here and how you can work with the protocol.

The base workings of the protocol already need some explaining, so when you also need to explain the Hybrid model, it might become a bit unclear and it might deter people. Therefor we need a clear and simple way to explain the way people can earn rewards of the protocol, i.e. the Dynamic rate.