VyFinance will be offering a feature where users can stake their VYFI to the BAR, and earn a share of fees that are generated across the VyFinance ecosystem. This is a big step forward for the whole chain, as it is the first redistributive mechanism launched on Cardano!
How is this implemented into our DEx?
Every swap that takes place on a DEx is charged a fee. Our liquidity pools will have a fee of 0.3%, of which 0.2% will be given back to the liquidity providers, and 0.1% will be ‘Served’ to our BAR. When we say ‘Served’, we are referring to serving fees, as $VYFI, to the BAR. In effect, this creates a process where fees are collected to purchase $VYFI back from the market, and then distribute that $VYFI proportionally to all users staked to the Bar contract.
How does it work?
Embedded Liquidity Pools (ELPs)
The Bar is built into every single liquidity pool that is on our dApp. It sits inside any trading pairs liquidity pool as an Embedded Liquidity Pool (ELP). These ELPs’ collect the 0.1% that has been generated from every swap, and perform a transaction which sends these fees towards the Bar upon executing the ‘Serve’ operation.
The fees collected in the ELPs’ are in both currencies. Upon creation of any trading pair that isn’t linked to ADA, the creator determines which token will be the Principal Token (PT) of the liquidity pool. Upon execution of the ‘Serve’ operation, the ELP will convert all fee’s into the PT, and send these fee’s forward to the closest ADA linked pair.
An example of ELP’s in Action
User creates the liquidity pool for Token A/Token B, and sets Token A to be the PT of the liquidity pool. After a period of time, the ELP collects 30 Token A, and 50 Token B as fees. Once the ‘Serve’ Operation is executed, the ELP swaps all Token B to Token A — as Token A has been selected as the PT in the pair.
Once swapped, all the accrued Token A is sent to the ELP for the ADA/Token A pair. The same process then repeats, but with ADA as the PT. At the time of the ‘Serve’ operation, the collected fees are converted to ADA, and the collected ADA is sent to the ELP for the ADA/VYFI pair.
$VYFI Linked ELPs
All $VYFI linked ELP’s behave differently to our other liquidity pools. As $VYFI can be ‘Served’ directly to our Bar, it is always the PT for the pool. Once the ‘Serve’ operation is executed on a $VYFI pair, all the accrued fees are converted to $VYFI, and the ELP sends these tokens directly to the BAR to be distributed amongst stakers.
How to Engage
Users stake their $VYFI at our bar in exchange for xVYFI. xVYFI tracks your proportional ownership of all the $VYFI held in the bar. Every time you withdraw $VYFI from the BAR, the xVYFI sent for the transaction is burnt, and you receive your deposit plus all $VYFI earnt.
How is xVYFI priced?
Value xVYFI = $VYFI in BAR/Sum of xVYFI Minted
xVYFI is priced in $VYFI
How does xVYFI gain value?
- $VYFI must be sent into the BAR to mint xVYFI.
- xVYFI must be sent to the BAR and burnt to receive $VYFI back from the BAR
- Each time the BAR receives $VYFI from any source other than a user deposit, NO xVYFI is minted.
When a fee is accrued, it is added to the total $VYFI that is held in the BAR. Over time, with each addition of $VYFI, the ratio of $VYFI:xVYFI in the BAR increases. This means that xVYFI will be worth more $VYFI each time a ‘Serve’ operation is executed.
What does the user see?
All a user has to do is come to the BAR on app.vyfi.io once it has launched, stake their VYFI into the BAR and from there, you will receive your xVYFI in return! We also plan on launching an xVYFI/ADA liquidity pool so you can trade directly from ADA to xVYFI without staking to the BAR. This makes it even easier for users to engage! There will be a dashboard on our BAR page that allows you to track the ratio between $VYFI and xVYFI, and other important statistics.
We’d like to thank the community for being patient while we develop these new and innovative products for Cardano. We’re super excited to see users check it out! We expect testnet sometime in February, with a mainnet launch sometime in March.