THENA — A Protocol for Protocols

Strategies for Mutual Value Creation

THENA is a next generation liquidity layer on BNB Chain (“BSC”) that was created as a protocol for protocols. The main stakeholders of THENA —veTHE holders, LPs, users, and protocols — are all aligned by the ve(3,3) dynamics that determine $THE emissions. $THE emissions, along with the bribes deposited by protocols and the fees generated by each pools, are the main pillars of THENA’s economy — designed to incentivize the best behavior out of each stakeholder.

The objective of this article is to examine the ways protocols can leverage the different strategies for their benefit. Prior to launch, our partners will be airdropped a share of veTHE in order to engage them for the long-term success of THENA. Each one of them has been identified and onboarded with mutual value creation in mind.

Centralized vs. Decentralized Emissions

In the current DeFi industry, DEXs emissions can be centralized (e.g. PancakeSwap), decentralized (e.g. THENA) or a mix of them (e.g. Beethoven-X).

Centralized emissions are allocated by the core team of a DEX according to their own strategy and third party protocols can seek agreement to secure some emissions on their pools. This model is efficient to provide direct incentives for Liquidity Providers (“LPs”) and benefit from the exposure of a protocol that has already scaled its operations. However, this model suffers from multiple inefficiencies:

• Emissions are not permissionless since the final allocation only depends on the good will of the DEX’s core team.
• The price of incentives is not driven by free market forces and tends to be artificially high. The core team can set the incentives in order to maximize the revenue generated by the DEX.
• This model is lacking flexibility. Emissions are usually scheduled for a given number of weeks and does not allow protocol to adapt in the circumstance of an unforeseen event.

On THENA, emissions distribution is based on a free market and third party protocols have the flexibility to secure incentives for their liquidity through two different options:

1. Bribing: Protocols can deposit extra rewards on their gauge in THENA’s bribing interface in order to incentivize veTHE holder to vote for their pool.
2. Gauges weight votes: Protocols can acquire veTHE tokens and vote to allocate $THE emissions on their pool.

These two options are:

• Permissionless: The bribing interface and the voting interface are permissionless. There are no barriers to entry
• Flexible: Protocols can adjust their bribes/vote on a weekly basis depending on their operating needs
• Capital efficient: The market price of bribes is driven by free market forces and THENA’s top-up incentive program even allows an increase in any amount of bribes deposited for the first 4-months following the launch. On the other hand, voting on gauges requires an initial investment that can produce net positive emissions once the initial outlay has been amortized.

The main difference between the bribing and the gauges weight vote option are:

• Bribes are an indirect incentives for veTHE holders to vote on the Gauge
• Bribes are the result of an expense, while gauges weight votes are the result of an investment, through $THE buy & lock.

Value Creating Strategies

1. Protocol owned liquidity (POL) deposits: Protocols with veTHE can deploy their own liquidity on THENA in order to farm $THE, lock the proceeds as veTHE and increase their share of the veTHE total supply.
2. Market buy and lock: Protocols can market buy $THE and lock it to increase their share in the veTHE total supply, and in return receive a greater amount of emissions over the coming months and years.
   For example: Given a hypothetical equilibrium $THE price at $0.1, any market buy & lock amount at week #1 would be amortized and start producing net positive $THE emissions at week #22.
3. Bribe deposits: In order to benefit from a positive return on investment, third parties can deposit custom amounts of rewards (“Bribes”) for any pool. Those rewards are claimed by veTHE holders that vote and allocate $THE emissions to these pools. In this way, protocols can influence and increase emissions for their native tokens. This has typically been the cheapest way to incentivize liquidity, and protocols would in this scenario benefit from a net positive return on investment. Rationale: The proceeds of theNFT sale will be utilized to increase the bribes deposited by protocols during the first 3 to 4 months. As a result, the amount of revenue that can be captured by veTHE holders will be boosted by two effects: First, the direct effect of theNFT proceeds being injected in THENA’s bribing marketplace, and second, the indirect effect of protocols being incentivized to increase their bribes to benefit from this subsidy. veTHE locking rate will increase, resulting in a strong buy & lock pressure on $THE resulting in higher APRs per $ of TVL on the liquidity pools. A deeper liquidity is incentivized and better trading conditions are enabled on the DEX.
4. Protocol revenue deposited as bribes: Protocols can utilize a portion of the revenue generated thanks to THENA’s pools to bribe and/or market buy and lock THE. Some protocols’ revenue depends directly on the global demand and liquidity of their tokens. As a result, and under certain conditions, staking some tokens in THENA’s pool are equivalent to generate revenue for the protocol issuer. For example: Liquid Stacking protocols are generating revenue from each $BNB being staked through their platform. User deposits $BNB → The protocol stakes the $BNB and issues a receipt token that represents the staked position. It earns the staking rewards and can be traded on a secondary market. In exchange for the service, a fee is applied on the staking gains. In that particular case, the number of liquid staked tokens in THENA’s pool can serve as a proxy to estimate the number of BNB being staked thanks to THENA and the associated revenue. A portion of this revenue can then be used to bribe veTHE holders and/or market buy and lock $THE in order to increase the emissions received by the pool.
5. Revenue generation: Protocols also have the flexibility to sell their voting power on any given period of time in order to generate revenue with it. It also provides a discounted exit option through an OTC deal or NFT marketplace.

POL & Active Bribing Strategy

This cross-strategy can be applied to maximize the benefits for each of THENA’s stakeholders. It combines the provision of protocol owned liquidity (“POL”) with bribes deposits (“Bribes”). These two actions have been identified as the most value creative for THENA and its stakeholders.

Here is how it works:

The Matrix of Value Creation

(0,0): Protocols that do not bribe or deposit POL do not foster the creation of value in THENA. They are losing influence over $THE emissions due to the partial anti-dilution protection set at 30%.

(0,2): Protocols that deposit their own liquidity are able to farm & lock $THE in order to increase their governance power over time. This also increases liquidity for pools which improves the trading conditions for THENA’s users, drives more volume and generates more fees to incentivize veTHE holders to vote for the pool.

(2,0): Protocols that bribe benefit from the top-up incentive program from THENA that consists of increasing the bribes deposited — thanks to the 4-month seeding program. Protocols benefit from a net positive return on their expenses and deeper liquidity for their pools. Additionally, THENA’s participants are incentivized to lock their tokens in order to generate a higher yield out of their weekly-votes.

(3,3): Protocols depositing bribes and protocol owned liquidity is what benefits THENA’s stakeholders the most. This translates to deeper liquidity and higher $THE emissions for the pools.

What does it mean for stakeholders?

• Traders: The deeper the liquidity, the better the user experience.
• LPs: The bribes deposited incentivize higher $THE emissions for the pool, as well as a higher locking rate that leads to a buying pressure on $THE and higher APR.
• Protocols: First, their bribe expense allows capital efficient $THE emissions that be farmed and captured thanks to their protocol owned liquidity deposited. Second, the POL deposited enables better trading conditions for users which drives more volume and generates more fees that can, again, be captured by the protocol. Therefore, this strategy can be leveraged to increase protocols governance power over THENA.
• veTHE holders: The bribes deposited are directly captured. The optimal trading conditions lead to more liquidity being routed through THENA, and therefore more fees being captured for the following epochs.
• theNFT stakers: More fees generated means higher revenue for stakers.

A Winning Formula

THENA is by design a decentralized protocol that seeks to promote the best sustainable DeFi practices. Protocols can tailor their own strategies in order to maximize the value extracted out of the DEX, and incentivize long-term sticky liquidity for their native tokens.

The bribing program, the initial veTHE distribution protocols, and the modest anti-dilution protection guarantee a dynamic and decentralized governance over the protocol. When combined together, POL and Bribes can be leveraged as a strong tool by protocols to increase their power over THENA’s emissions over the long run. Moreover, this strategy promotes a virtuous cycle of value creation for each THENA’s stakeholders — LPs, traders, protocols, theNFT stakers, and veTHE holders.

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