Hi all, glad to have you here!
#dev DeFi team has announced our upcoming project KMM Swap and introduced its innovative mechanism for a few days. Now it’s time for us to look at another vital factor of a project, KMM tokenomics.
For anyone who hasn’t had an idea of what KMM Swap is, KMM Swap is a brand new AMM that leverages on Chainlink decentralized price oracle and a new capital distribution model to provide not only low slippage to traders but also high capital efficiency and low slippage to liquidity providers.
✣ Read the below article to understand how KMM is making the difference: https://devdefi.medium.com/kmm-swap-whats-the-difference-832afcdb37ca
KMM token distribution model is designed to:
1. Reward early liquidity providers for taking higher risks.
2. Reflect the fundamental value of the exchange.
Therefore, KMM will increase its mining difficulty over time and distribute tokens based on the transaction fee incurred. Thus, the KMM token distribution model follows an indefinite series:
And the sum is equal to
Within the summation, each term represents the number of KMM tokens that are distributed for each BNB worth of transaction fee the protocol incurs. For example, the first BNB of the transaction fee will distribute 1,000 KMM tokens; the second BNB of the transaction fee will distribute 1,000 * 0.9999991 KMM tokens, and so on.
Using a revenue-based distribution model, the tokenomics of KMM token by it self has a deflation mechanism.
KMM tokens are distributed by liquidity pools so LPs generating more transaction fees receive proportionally more KMM tokens. For each BNB mined, KMM tokens are distributed as follows:
Initially, as KMM is a new token and Chainlink can’t fetch its price from other DEXs or CEXs, we will use the traditional AMM constant product curve, x*y = k, to price our tokens.
To ensure long-term sustainability of the liquidity, tokenomics and governance of KMM, we introduce the concept of time-locking similar to that of Curve for both LP tokens and KMM tokens. Time-locking periods range from 1 week to 4 years.
To receive KMM tokens, liquidity providers must stake their LP tokens at the corresponding farms. After staking, liquidity providers can choose locking periods. 1-year locking corresponds to 1 veLP; 1-week locking corresponds to 1/52 veLP; 4-year locking corresponds to 4 veLP and so on.
For example, if a liquidity provider locks 1 BNB-BUSD LP token for 6 months, he will receive 0.5 veBNB-BUSD. KMM tokens are distributed to liquidity providers proportionally to veLP:
In addition, liquidity providers of LP can govern their own LP by tweaking their own LP’s parameters. At the beginning, 2 parameters can be tweaked by liquidity providers: ₁ maxSlippage and ₂ transaction fee. The default values are maxSlippage = 5 (in percentage) and transaction fee = 0.3 (in percentage).
- Lower maxSlippage increases the concentration of the asset around the current market price and thus increases market depth, an option suitable to stablecoin swaps.
- Higher maxSlippage increases profitability to liquidity providers given the same trading volume.
KMM token holders govern KMM protocol by voting. KMM tokens have the same time-locking feature as LP tokens do. Each veKMM represents 1 vote. Holders can delegate their votes to others.
KMM holders can vote to turn on the treasury switch which will collect 0.05% of the trading fee from liquidity providers (or 16.67% of their revenue) of the LP fee to contribute to the treasury. This switch is by default turned off. The use of the treasury fund is decided by KMM holders.
KMM Swap is estimated to be launched in late 2021 under the umbrella of #dev DeFi. The team have been working hard for the final production. Follow our social medias and join the community for the lasted updates.
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