Dystopia is a new decentralized exchange coming to Polygon, based on Uniswap v2 and Curve Stable Swaps. With improved incentive mechanisms for liquidity providers and stakers, Dystopia will be the most efficient protocol for swapping between stable coins and closely correlated assets.
Welcome to Dystopia!
As mentioned before, Dystopia is a decentralized exchange (dex), which is a type of protocol that allows for automated trading between two (or more) types of assets. As a dex, Dystopia will facilitate swaps between stable coins and closely correlated assets, such as swaps between USDC-USDT or wMATIC-stMATIC for example. Focusing on closely correlated assets with a 0.05% trading fee allows for Dystopia users to cheaply execute very large or small trades without experiencing high slippage.
Slippage is the difference between the expected price of an order and the price when the order actually executes. High slippage occurs when there are low levels of liquidity in liquidity pools.
Similar to curve, Dystopia will allow for low slippage trades but with an improved governance structure.There are two main stakeholders involved in a decentralized exchange: the liquidity providers, and the native governance token holders. Liquidity providers need to be incentivized in order for the protocol to have the deep liquidity that allows for low slippage trades, and governance token holders need to be incentivized in order for the token to be valuable.
Tokens
Dystopia will release a native governance token, DYST, which can be staked on the protocol. Those who stake DYST for veDYST (vote-escrowed DYST), will receive trading fees on the protocol. On the other hand, liquidity providers will receive emissions incentives in the form of DYST, in return for their deposited liquidity. The veDYST holders will be able to vote for specific whitelisted vaults which will receive DYST emissions, proportional to the votes received / total votes. However, one important caveat is that veDYST holders only receive trading fees from the vaults that they vote for.
This creates a positive feedback loop in which vaults with higher trading fees attract more votes from veDYST holders. This leads to more TVL from liquidity providers who want the highest reward for their liquidity possible, allowing for better rates.
The token release will be a fair launch, AKA no white-lists, pre-sales, or VC backing. Users can all equally participate from day 1 to earn DYST.
Emissions & ve(3,3)
Another striking feature of Dystopia’s economic systems is the dynamic structure of DYST emissions. Foremost, the weekly DYST emissions to liquidity providers are dependent upon the amount of DYST tokens that are locked for veDYST.
If 100% of circulating DYST are locked for veDYST, then the weekly emissions would be 0 DYST. If 50% of DYST are locked, then 50% of potential weekly emissions will go to liquidity providers. If 0% of DYST are locked, then 100% of the potential weekly emissions will be go to liquidity providers
This creates an incentive mechanism coined ve(3,3), which makes DYST holders disincentivized to maximize the amount of DYST staked, since then the protocol will lose liquidity since liquidity providers will have no incentives to keep their deposits in the protocol. However, DYST holders want to maximize their fee revenue, so the protocol will come to a naturally arrived equilibrium of locked DYST and DYST emissions.
Another mechanism implemented is a reduced-dilution of veDYST holders DYST balances. Normally, those who have staked a native governance token see their balances become diluted as emissions lower their overall percentage of token holdings. This can cause the native token holders to want to sell early, before their holdings become worth far less, putting a heavy sell pressure on the token. Dystopia avoids this heavy sell pressure by giving 10% of all DYST emissions to veDYST holders, while liquidity providers receive 90% as sufficient rewards for depositing liquidity.
The Dystopian Era Awaits You
Given this redesign of incentive mechanisms paired with the highly successful Uniswap v2 / Curve style AMM, Dystopia will provide the best experience for low slippage trades.
With the improved mechanisms and deep research, Dystopia is a protocol deployed for the mutual benefit of all the parties involved on the platform!
