The following is a description of how farming rewards will be distributed on the VyFinance DEx. This is not an exhaustive list of the farms that we plan to launch with, but rather an outline of the approach we are taking towards farming, and description of the initial emissions.
Our approach to farming in Cardano DeFi (CDeFi) and the reasoning that has lead to this implementation:
Cardano Native Tokens (CNTs) and Stable-coin pairs:
Currently there are very few CNTs’ that are linked in any way to USD or USD linked pairs. As a result, serving liquidity to Cardano almost always requires the user to hold Cardano risk for at least 50% of any liquidity provision. This works against CDeFi as it increases the risk for holding LPs on the Cardano blockchain. We propose to offer 19% of the total farm on the VyFinance platform to CNT Stable-coin pairs. In doing so, we hope to create a lower risk option for users that are more hesitant to engage due to Impermanent Risk.
All DExs have an initially inflating supply. What is most important is the management of this supply to ensure it does not outpace the market capitalisation of the project. Given the current circulating supply of $VYFI (which is 13,101,000), our Market Cap is roughly 3.35 million ADA as of today’s date (given the price of $VYFI on 2/6/23). The lowest market cap of any operational DEx is approximately 10 million $ADA. Assuming our market cap will reach at least that of the lowest valued DEx within one year of launch, we can calculate a farming rate that allows for growth in the price of our native token $VYFI.
We have decided to reduce our total emissions by 50%. The total emissions rate for the year will be 17,212,500 $VYFI. This will give a total supply of 30,313,500 $VYFI tokens after one year of farming. This total supply would result in our token value to be 50% higher than it is today (2/6/23), assuming we have a market cap of at least the lowest value Cardano DEx after one year.
How the BAR aims to support a sustainable ecosystem:
The BAR is our redistribution mechanism for the VYFI ecosystem. We will use one third of all the fees generated on our DEx to rebuy $VYFI from the market. This process creates buy pressure for our token, whilst our DEx is being used. This gives support to the tokens price through this buyback mechanism.
For more details regarding the BAR, click here: https://bit.ly/3XJqk2W
Distributions of emissions on the VyFinance platform:
We have ranked tokens using a combined score of daily traded volume, market cap and current liquidity. Using this list we are distributing the farm as follows:
- 66% of all farm is allocated to the top 25 tokens
- 6% will be allocated to pairs that fall below the top 25 CNTs
- 19% will be allocated to stable coin pairs
- 9% will be available for community vote
The specific farms that we will be launching with will be announced in the coming weeks. We’re really excited to share our DEx with the Cardano Community.