Appreciative Tokenomics
Government tokens are an integral part of any truly decentralized DAO platform. Representing each and every person’s own stake and voting power, gov tokens to a certain degree represent the value of the platform itself. A large portion of the market’s platforms all advertise that their gov tokens have no intrinsic value and in many ways this an honest assertion so that users understand the risks. However, LIQUID believes gov tokens can certainly have an appreciable value point through a competitive and ever evolving platform.
The cash grab, massive token printing status quo of late must be resolved in order for DeFi to grow. Last minute announcements of large token farming opportunities only serve whales with the opportunity to take advantage of first market mover gains. By the time a token may have a legitimate chance at innovation, the price tag will instill a negative connotation to traders the world over. This compound effect of negative price action leading to further losses also gives incentive for whales to continue bleeding the system dry. Whales have an important part to play in token offerings but steps can be taken to curtail negative side effects during launch.
The first step is to establish a token cap. This overall restriction of supply will establish continuous appreciation overall and maximize scarcity. The second step LIQUID will take will be the weekly cap of tokens that can be purchased through the GTO contract. To Induce further scarcity early on, a weekly cap will lend opportunity to exchanges the market over to collect on swap fees on the ICE-ETH pair. In reality, exchanges could accept ANY ERC-20 tokens as exchangeable for ICE tokens. Only through the GTO contract itself is ETH required for deposit.
Market wide speculation each week will also have a cyclical effect on the new tokens being offered the subsequent week. As price appreciates further, the contract purchasable ICE tokens will be more and more sought, increasing potential arbitrage gains for traders throughout the GTO.
The real stand out of LIQUID’s launch is the refundability option. Through the use of a UI and the token contract itself, any deposited ETH can be withdrawn by returning the ICE tokens back to the contract. Keep in mind, this is mainly used as a security and comfortability factor. If the token itself is appreciating with speculation on other exchanges during the GTO, and tokens returned to the contract will immediately become re-purchasable with ETH deposits. The point is for the contract to maintain the 1:1 ETH to ICE peg within itself. Whatever amount of speculation that occurs outside of the contract is purely up to the market and will be an excellent indicator of market sentiment around the platform.
When the purchasing period ends, the contract will immediately perform the conversion from ICE tokens to LIQ-ETH LP tokens. Half of all the deposited ETH will be burned to mint an equal amount of LIQ tokens. As stated in our intro article, the moment this pool launches, arbitrage traders should immediately start purchasing any market available LP tokens and LIQ tokens as the LIQ tokens within will (until arbitrage occurs) still be priced around their original 1 ETH peg. This initial incentive for massive trading volume should help kick start the pool’s fees, immediately making returns for the LIQ-ETH LP holders and act as a steady foundation for the platform moving forward.
The important thing for gov token holders to remember is there is an extremely high incentive for you to actively participate in governance itself. By allowing the DAO to remotely change any and all pool fees, the governance can continuously remain a financially viable option in the swaps market. The initial drop in pool fees generated will decrease due to voting changes, but the ensuing flood of liquidity and volume from other platforms will outweigh the loss. The more successful and competitive the gov voting and pool fees get, the more value the gov votes and therefore the gov tokens themselves appreciate in value. LIQ holders will have incentive to keep their pool LP’s competitive and traders/LPers will have incentive to use the LIQUID platform.
