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Plenty V2 Introduction
An introduction to Plenty's vote escrow (ve) model.
Existing Automated Market Makers (AMMs) are primarily designed for individual Liquidity Providers (LP's), and incentivize liquidity in exchange for an emission of free tokens. While today, AMMs are often used by other protocols, either through token incentives, bootstrapping liquidity, or protocol owned liquidity.
The goal of the new Plenty is to better align emission of tokens to beneficial actions and solve the problem with current AMM designs where liquidity provision is temporarily subsidized while fee generation -the more sustainable incentives-generating mechanism- is not.
The Plenty DEX requires modifications to make it easy for other protocols to leverage them:
- Must be able to easily add token incentives to liquidity.
- Must be able to easily bribe token emissions onto liquidity.
- Must be able to accrue fees from incentivized liquidity.
- Must be able to permissionlessly deploy liquidity.
With the above in place, any protocol, DAO, or project on Tezos can easily incentivize its own liquidity, be it for its token, its stable coin, or even other derivatives, and while doing so, fully accrue trading fees.
Users can mint a
PLYin a vote escrow (ve) lock for a specified duration.
veNFTsare used for voting. By voting a
veNFTholder can claim the trading fees and bribes attached to the liquidity pool for the epoch (one week). In the next epoch (one week)
PLYemissions are distributed based on the vote weight of each gauge.
One important innovation here is that
veNFTholders receive trading fees ONLY from the gauges they have voted for. This is a modification to the ve model of Curve in which
veCRVholders receive fees from the entire protocol itself.
In the case of
veNFTvoting, users will vote for pools which generate the most trading fees. That should have the positive effect of attracting more liquidity in that liquidity pool, potentially leading to an increase in volume and trading fees.
Another innovation is that
veNFTholders also receive a share of
PLYemissions based on the circulating supply. Anytime the circulating supply increases through inflation, a proportional increase will be attributed to
veNFTholders. This makes the value proposition of locking very attractive as your lock does not get diluted by new
veNFTcan be traded, a different user from the one who created the vote lock in the first place can hold them to benefit. If this user is a protocol, it could use
PLYemissions to its own liquidity pools and earn its trading fees.
Alice, Bob, and Carol use different strategies.
- Alice: By providing liquidity and staking LP tokens Alice earns
PLYrewards. Alice doesn't vote, so she won't earn any trading fees and bribes. The gauge weight of
Liquidity Pool 1is lowered at the start of the next epoch, unlike
Liquidity Pool 2and
Liquidity Pool 3.Their gauge weights are increased at the start of the next epoch thanks to the voting activity of Bob and Carol.
- Bob: By voting Bob earns trading fees and bribes related to
Liquidity Pool 2. Voting for the gauge attached to
Liquidity Pool 2increases the gauge weight at the start of the next epoch.
- Carol: By providing liquidity, staking LP tokens, AND voting for a gauge, Carol earns
PLYrewards, trading fees, and bribes. Voting for the gauge attached to Liquidity Pool 3 increases the
PLYgauge weight at the start of the next epoch.