Behodler AMA2: 15th October 2020

Q1: When you land on Behodler.io and after you connect your metamask wallet you see the headline ‘Behodler Liquidity Protocol’. What does this mean?

Behodler is a protocol for token exchange which uses a growing pool of liquidity to facilitate deep exchange. What sets Behodler apart is that it is designed to leak liquidity into the pool permanently, acting as an ever growing token sink. The portion of tokens permanently locked in Behodler constantly grows, protecting it from vampire liquidity migration attacks.

Q2: Why is Behodler needed?

Behodler espouses two core values that formed the heart of the early cryptocurrency movement and which need reinvigorating in this era of Defi:

The first is a concern expressed by Vitalik Buterin on the nature of perpetually inflationary tokens like Eth which require ever increasing demand to keep up with supply. By positioning itself as the Great Sink of Ethereum, Behodler performs a service for the ecosystem by acting as a gravity well of supply side constraint. The HODL is not just a value but a key feature of the smart contract.

The second value is similar but approaches the problem from a different perspective. Behodler taps into the power of burning. If inflation redistributes value from savers to debtors, from the edges to the financially and politically well connected, burning is its opposite. Burning is a force for empowering the edges.

Currently Behodler burns WeiDai and Scarcity, the liquidity token on every trade as a proof of concept to demonstrate the power of burn-on-trade incentives. However, the protocol can be opened to burn any burnable token.

Q3: How does Behodler maintain the price of each token?

At the heart of Behodler is an omnischedule token bonding curve. This is a bonding curve which accepts multiple input tokens in return for minting only one output token, Scarcity. Scarcity is priced independently on each input curve. If you pause to think about it, this means the ratio of Scarcity prices across input tokens implies their market price. Scarcity is simultaneously a medium of exchange and a liquidity token.

Q4: Talk us through a swap on Behodler. What happens and how is this different to Uniswap that most people now understand.

In Uniswap, tokens are stored in exchange pairs. This means that if you want to swap a token found on one pair with that found in another pair, you might have to hop through intermediate pairs to make the swap.

In Behodler, all liquidity is stored in one contract. A token-to-token swap is as follows:

Input token generates Scarcity. Scarcity is used to redeem output token.

That’s it. And it’s all composed into one transaction so that you can swap input for output without ever knowing about Scarcity.

Q5: Who will get Behodler trading fees and why?

Behodler changes a fee on Scarcity redemption. In time, the community will control the distribution of fees. However, to kick things off, the fee in Behodler is broken down as follows:

0.3% of the scarcity value is sent to a perpetual liquidity mining contract where hodlers of Eye and Scarcity can stake for a perpetual share of the revenue.

0.1% is sent to a liquidity mining pool for once off liquidity mining events. 0.1% is sent to the DAO treasury to incentivise community participation and 0.5% is burnt.

Q6: Now I would like to ask you to explain three concepts described on the various Behodler materials:

Q6a: Why is the price of Scarcity token likely to increase

On every trade, a portion of Scarcity is burnt. This simulates the effect of losing your private keys, which is to say a certain small portion of liquidity is leaked into the system. As time proceeds, the proportion of liquidity relative to the circulating Scarcity grows so that each unit of Scarcity naturally redeems more stored liquidity.

Q6b: What do you mean by “permanent sink”?

On every token swap a small portion of the output token is leaked into the contract. If you wish to reclaim that small portion, you’d have to put in more of another token but that would create additional leakage. Each attempt to reclaim leaked tokens caused by Scarcity burning would have the net effect of gradually increasing the pool of liquidity.

Q6c: What is meant by index or “basket-token tracker”

In traditional finance an index tracker is a number that represents the aggregate value of an underlying basket of assets. Since Scarcity can be redeemed for any of the tokens traded on Behodler and since its supply is proportional to the holdings of those tokens, Scarcity acts as an index tracker for the aggregate value of all the tokens traded on Behodler. Thanks to arbitrage opportunities between Behodler and other exchanges, the index is automatically rebalanced by profit seeking traders without holders of Scarcity incurring any cost.

Q7: Back to fees. How will farming happen? Perhaps you could briefly introduce Liquid Cat?

Liquid Cat is a staking dapp that takes liquidity mining into a new exciting realm by offering customized liquidity mining packages on demand. While most liquidity mining offerings simply transfer the governance token to the broader user base, Liquid Cat allows us to tailor the nature of the mining event to the specific situation to best reward the user base. We can have anything from simple staking to liquidity migration such as the one we saw with Sushiswap or even complex community governed mining events that act as dynamic crowdsourcing for the age of Defi.

Q7: What is EYE token’s purpose?

EYE is the governance token for Behodler and will form the central element in directing the actions of the upcoming MorgothDAO. To reward EYE holders for participating in keeping Behodler decentralized, EYE will also be eligible to stake for perpetual fee revenue generated from Behodler trading.

Q8: Now to the bit we have all been waiting for. The Liquidity Mining Event. What is it and how is it going to happen?

In the first application of Liquid Cat on Behodler, 3 new token launches will occur through the mining of Eye. At the end of the mining event, the staked tokens will be migrated to Behodler and the miners will be able to redeem the Scarcity generated during the migration event.

As an ongoing incentive, we’ll also have a perpetual mining event where holders of Scarcity and Eye will be able to stake their tokens to receive a share in fee revenue generated by Behodler.

By paying Scarcity holders to stake, we’ll be creating incentives to bring liquidity to Behodler which of course will generate even more fee revenue in a virtuous cycle.

Q9: You have discussed the idea of a token offering conducted through Behodler. How would this exciting prospect work in practice?

Liquid Cat offers an innovative funding model for new projects by allowing them to create mining events using their project tokens to attract new users. At the end of the event, an instant and deep market is created on Behodler for the token and the miners of course are able to redeem their Scaricty generated during migration. We believe that because of Liquid Cat’s flexibility to allow DAO governance to be injected into mining events, it will position liquidity mining as a central funding primitive in the ecosystem.

Instead of hoping for users to chance by their projects or to adopt their liquidity pool tokens, project creators will be able to offer to the entire foot traffic of Behodler the familiar universal liquidity token, Scarcity, which already has value and widespread use. Imagine hosting a funding event where you were able to hand out not only your new token but a well established and deeply liquid token such as Dai, Eth or WBTC. Well Behodler project launches allow just that by giving the project owners the ability to offer Scarcity in addition to their project token at no cost to themselves.

Q10: What happens to tokens, where and how is important to investors. Can you describe the approach taken to locking EYE’s LP and other tokens?

When Eye was created, the dev team locked all of their EYE tokens as Uniswap LP tokens in unicrypt. In addition to their own tokens, 4 million EYE tokens were reserved to kick off the first liquidity mining event. As of October 9th, they were all locked in a timelocked contract due for unlocking on November 30th, by when we suspect all of our mining code would have been tested.

Q11: To conclude, can you summarise three main benefits Behodler introduces under the banners: investors, traders and the Ethereum ecosystem at large?

Investors receive an index tracking token that is programmed through burning to only increase in value with respect to the underlying liquidity pool which itself continues to grow increasingly diverse. In addition to simply gaining from holding Scarcity, investors are able to earn a perpetual share of trading revenue.

Traders will have access to a pool of liquidity that is on a one way trip upwards because of the token sink properties I mentioned earlier. Whereas market conditions play havoc with price slippage from day to day, Behodler will offer a continual increase in depth, making arbitrage opportunities all the more profitable as time goes on.

The ecosystem firstly will benefit from a sink which will decrease the circulation of very important ecosystem tokens such as Eth and WBTC. Since trades of WeiDai are burnt on Behodler, the niche for cautious savers who wish to consistently beat inflation is also being enriched.

Finally: the liquidity mining project launches, moderated by MolochDAO, will ensure that brilliant developers need not find themselves in a catch 22 of not having enough capital to attract capital. And similarly by enriching every product launch with a dose of Scarcity, token adoption isn’t an immediate pre-requisite to capital formation. By removing these bottlenecks, we suspect that Behodler will drive a new wave of developer-led innovation.

Q12: Finally, and I know convention usually puts this question first. What brought you to Behodler. How long have you been developing it? Tell us a bit of the backstory!

The idea actually sparked back in 2018 when token bonding curves were gaining popularity. Token bonding curves are basically just token generating contracts that create their own market prices instantly. I realized that if you combined more than one token bonding curve into a single contract, you’d be able to swap and price the various tokens against each other without ever needing to look outside that contract. So I began to refine the concept of an omnischedule token bonding curve and on my journey I discovered that it has some powerful liquidity growth properties. Most of the early days were spent discovering and refining maths and my house was littered with graphs and scribbles of calculus before I was ready to transform the concepts into safe and tested smart contracts.

At about the same time I was developing a new type of savings instrument on the blockchain, WeiDai, which uses token burning incentives to drive its value formation. The idea was to show that credit market backed tokens such as Compound’s cDai aren’t the only way to drive faster than inflation growth and that burning has a much higher potential upside if incentivized correctly. The result was a big success and WeiDai has grown faster since the launch of Multi Collateral Dai than all the other credit market backed tokens.

The dynamism of WeiDai led me to examine if I could enrich Behodler with burning incentives and a few crumpled diagrams and equations later, I realized that by burning Scarcity, Behodler would move beyond a liquidity protocol to become a permanent sink for tokens and acts as a vital service in the broader Ethereum ecosystem.

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