Thread by @GoolagCrypto

Quick 🧵on why @TokenReactor is a gigabrain protocol

TL:DR; TokeMak solves for misaligned incentives within LM through providing sustainable liquidity to DeFi by means of an aggregation of LP rewards and the deployment of those rewards by the protocols LDs

As always; this is NOT FINANCIAL ADVICE. This only reflects my own synthesis and understanding of previous work by @Archer_MD_ , @LiquidityWizard , and the team at @TokenReactor.

If I misrepresent anything please feel free to correct me

🅰️ Problem Statement

The demand for liquidity is easily observed throughout the crypto ecosystem. People want to swap between different tokens on varying L1s and L2s and experience/use a variety of protocols

Protocols want liquidity to bring value and usage to their product

🅱️Why current solutions don't work

Currently LM is the main means by which protocols bootstrap liquidity, but that comes with some major issues

I. This inflationary dependency hopes that the underlying asset appreciates enough to offset the inflation

🅱️cont

II. Hyperissuance typically leads to opportunistic dumping thus adding sell pressure to the token

III. When LM incentives dry up, that mercenary TVL leaves in search for better yield removing the source of liquidity you attempted to bootstrap in the first place

1⃣ Enter the reactor

How does TOKE solve this?

TOKE offers a "buy/borrow to bootstrap" model to budding protocols in need of liquidity so they don't have to deal with these token inflation issues

This is the future vision of TOKE, but not necessarily what's happening now

2⃣ The road less traveled

How does TOKE get to the point where it can power the entire DeFi ecosystem with sustainable liquidity?

To understand how we get there you have to understand two key concepts

I. Protocol Controlled Assets

II. The Singularity

2⃣ I. PCA

What is PCA?

PCA are all the assets TOKE, the protocol, owns. E.g. 10K ETH, 5K OHM, 5K SUSHI etc.

How does TOKE get PCA?

TOKE provides single sided liquidity pools, "reactors", for LPs to deposit into to mitigate impermanent loss and earn TOKE

2⃣ I. cont

TOKE stakers, "liquidity directors", then direct TOKE deploy the deposited liquidity to trading markets to earn fees. Those fees are taken by TOKE as PCA

Thus TOKE internalizes LP rewards in trading markets, and externalizes TOKE to LPs who provide liquidity

2⃣ II. The Singularity

Eventually there comes an inflection point where the pool of PCA grows so large that external assets and LP rewards are no longer needed, and TOKE can shut off emissions

It is at this point where TOKE can power the entire DeFi ecosystem with its PCA

3⃣ Whats in it for me?

Broadly there are two core stakeholders to consider, and what's incentivizing them to even interact with TOKE

I. LPs

II. TOKE Stakers (LDs)

3⃣ I. LPs

Why would I want to be an LP?

Depositing into reactor provides a multitude of benefits for LPs. For one, you're still earning yield on your deposits.

It's also convenient and secure, you don't have to worry about which pools to deploy your assets to as TOKE does that

3⃣ I. cont

You're also mitigating impermanent loss as TOKE subsidizes that for you by pulling from PCA and slashing TOKE rewards from stakers

Finally, you're also provided with an abstraction layer from the growing complexity of liquidity provisioning; see UNISWAP V3

3⃣ II. LDs

Why would I want to be an LD?

I get exposure to the underlying price of TOKE, valued as a price per unit of liquidity, and I get to direct the liquidity and earn rewards from the massive pool of TOKEs PCA

I can also direct PCA to support liquidity for my project

3⃣ II. cont

Who could be an LD?

DEXs, DAOs, protocols, VC/Funds, and etc. Anyone who needs accessible liquidity without the hurdles of traditional liquidity bootstrapping incentives wants to be an LD and participate in the TOKE system

4⃣ Bonus round

There are a few common questions one might ask that I'll try to answer briefly here

I. What if someone forked TOKE?

Well you'd earn no advantage from that. The crux of the issue is PCA, which you can't fork, so what exactly would be the point of forking

4⃣ cont.

II. How long would it take to reach the singularity?

Fair question, wouldn't it take forever to reach the singularity?

No not necessarily, its possible for TOKE to partner with other protocols with large amounts of PCA (Olympus, Maker, Rari) to speed up the process

4⃣ cont.

III. Will TOKE be limited to the ETH ecoystem?

No! TOKE need not be limited to a singular L1 and in fact its quite easy to imagine TOKEs value proposition being spread across multiple L1s, L2s, and etc.

A multichain TOKE could definitely be possible

4⃣ cont.

IV. What about TOKEs FDV and emissions?

Well that's the point of the singularity. At some point PCA grows large enough where TOKE no longer needs to provide LP rewards. It's very possible that a significant portion of the 100M TOKE is never emitted

5⃣ Conclusion

Not only does TOKE's have product-market fit, it essentially creates a new business model LAAS or liquidity as a service. It also has really cool mech vibes which everyone can enjoy

I'd encourage everyone to visit their website tokemak.xyz and learn!