David and Goliath — A ve(3,3) narrative from BNB
An old tale that illustrates the triumph of intelligence over strength is the story of David and Goliath. Young David challenged Goliath. David was much smaller than him, much weaker in comparison & untrained in traditional combat. The champion known as Goliath among his own people, he was a big, hulking, and skilled warrior. But, he was unaware of David’s covert weapon. His loss and downfall were the result of his complacency.
Why am I sharing this with you?
Because I am using the Biblical story as an analogy for a secret weapon in DeFi. Before that, I want to give you a secret in DEX tokenomics. What does every DEX want more of, no matter what the market conditions are?
Liquidity.
How do DEXes get liquidity? By providing incentives. They come in either of the two forms.
a) Swap fees
b) Token rewards
However, providing either of the two can eat into your coffers easily if you don’t handle them properly. Token rewards can easily become worthless if all you can do with them is just sell them on the same DEX that gives them to you to keep your LP. After a while, the token will tank so much that it hardly inflates the APR to make you want to provide liquidity.
Then came the David on Ethereum.
Curve Finance came as a result for a need for good stableswaps that can handle massive quantities at a time. You normally would suffer a steep price impact when swapping $1m on Uniswap V2. Curve seemed to have changed their AMM to accommodate that & also provide enough incentive for people to keep their money there to make these swaps possible. The way it works is quite simple in hindsight.
They gave governance tokens as incentives for providing liquidity. Not just any governance token. Governance tokens that actually matter to anyone providing to an LP. With the governance you earn, you can vote every epoch to decide which pool is the most incentivized. People who chase more rewards will move over to the other LP & the cycle continues.
But can’t you just vote then sell your tokens? Not exactly.
In order to vote, you must have locked your CRV (gov. token) for a period ranging from 1 year to 4 years. The longer you lock, the more your votes matter. This forces liquidity providers to play the long game and keep providing liquidity to keep earning incentives. This came to the attention of protocols who wanted to make use of Curve’s DEX.
Then the story of bribes, Convex & the Convex Wars occurred. I don’t want to go too much into detail on that, because it’s already been covered here.
Now that you’re familiar with the TL;DR of the evolution of DEXes prior to Cone, I can talk about BNB’s ecosystem.
Enter Cone — BNB’s Davidian DEX
Cone Exchange is a DEX based on Solidly, whose AMM combines both Uniswap & Curve’s AMM logic to allow for both volatile and stableswaps in one place. The beauty of Cone is that it is the only of its kind on BNB. BNB has been a chain that’s historically not well-known for creating DeFi legends such as Tokemak, Curve, Convex or Jarvis. The biggest & possibly the de-facto DEX of BNB’s DeFi ecosystem is Pancake Swap. PCS still uses Uniswap V2's AMM, which is perfectly fine for normal swaps, but it cuts in when you want to make big swaps. On top of that, it is somewhat capital inefficient. You can make more volume & fees in different ways.
That is Cone’s Davidian slingshot. A brand-new AMM that is first of its kind in the ecosystem. It is proven to be capital efficient, given its Polygon counterpart’s performance — Dystopia, which with only $12m TVL generates a very solid over $1.5m volume on average every day. The Cone team comes with an even bigger slingshot this time, though. It’s called lower stableswap fees.
A measly 0.01% fee for every stableswap.
The results speak for themselves, honestly.
Why is this important?
Because nobody on BNB offers these deals. The fees allow for better arbitrage opportunities, ensure that once Cone gets featured on DEX aggregators — it stays as a household name. There can be billions in liquidity in every other DEX on BNB, but as long as there’s a better deal on Cone, the volume will cut in. People using 1inch for example swapping USDT to BUSD or vice-versa might not realize that they’re on Cone right now, but they’re getting a good deal, and they’re happy. Unless DEXes like Pancake Swap change their logic to compete with Cone, or lower their fees, they may suffer a fall in volume.
But how do you ensure that liquidity sticks on Cone with such small fees?
Remember how Curve rewards its liquidity providers? The same applies to Cone, but with a few tweaks.
For one, the vote-escrowed tokens are now a vote-escrowed NFT. It can be sold on marketplaces, but not directly swapped on a DEX. In order to maximize your yields, you must keep voting for your pools, moving LPs to the one with the best emissions that week. Learn that hustle, and you’ll come out a cashflow baron (maybe).
If that is too much work for you, then maybe entering the Unknown is for you.
Enter the Unknown
Unknown is a yield-farming platform built specifically for Cone. You might not know this, but Cone is built by Tetu Finance, a project which is an underdog in DeFi so far, with a lot of potential to build great dApps. They’ve worked with Sphere Finance, an even bigger contender to DeFi stardom. The same team at Sphere has helped develop Unknown & Penrose.
The way Unknown works is simple. Do you have LPs but want to maximize your APR without needing to buy a big bag of CONE to vote with? Unknown’s got a veNFT that lets them maximize APR. Just deposit there. On top of that, all the CONE you earn, you can mint unCONE with. unCONE is the answer to those who don’t want to lock for 4 years, but want the same benefits as if they’ve locked. In exchange for giving your voting power to Unknown, you can mint a token that represents veCONE locked for 4 years, and earn yields & can trade it whenever you see fit. Sounds like a nice deal.
On top of CONE rewards, you earn UNKWN at the same rate as CONE. UNKWN is an additional token reward you can only earn on Unknown. It’s a governance token in its own right, which you can vote with on Unknown, and based off that, Unknown votes on Cone. It’s a meta-governance protocol waiting to get influenced by a third party. This may or may not spark the Unknown wars. Spooky, but also highly profitable for anyone with governance.
So we’ve just checked a few things:
- Potential volume suction
- Sticky liquidity
- Valuable governance
- Bribes
This is the David & Goliath story in DeFi. It’s not as romanticized as the original, but at least there’s money in it. And money is quite enticing for everyone.
