Introducing Orchard: The Omnichain Governance Aggregator Driving Revenue For The Root Ecosystem

TL;DR

• Orchard is Root’s Omnichain Governance Aggregator, which capitalizes on revenue opportunities offered by next-generation DEXs
• Using bribes and accumulated governance power, it creates a self-perpetuating revenue flywheel effect for the Root ecosystem
• Portions of the funds it generates are flowed into Bloomworks, Root’s DeFi Lab, which incubates Stem protocols
• These Stem protocols are then integrated into a comprehensive operating system for DeFi, called Sprout, creating a “Robinhood for Defi” experience

In the run-up to this week’s Root dApp launch an Token Generation Event (TGE) on Tuesday 26th July at 2pm EST, we’re excited to introduce you to Sprout Academy! Sprout Academy will be a new series of articles exploring every aspect of the Root ecosystem. To kick things off, we’re offering a deep dive into Orchard — the Omnichain Governance Aggregator at the heart of the Root protocol. It all starts by sowing a few seeds…

Sowing The Seeds: An Introduction To ve(3,3)DEXs, The Soil From Which Orchard’s Revenue’s Grow

To understand how the Orchard Omnichain Governance Aggregator generates a perpetual source of revenue for Root stakeholders, we first need to understand the ve(3,3) DEX model. This is because it is the incentive structures offered by these next-generation DEXs that Orchard takes advantage of to generate its self-perpetuating revenue stream.

DEX is an abbreviated term for Decentralized Exchanges, which are protocols that allow for the exchange of DeFi assets without a centralized middle-man. They work by providing Liquidity Pools (LPs), which are smart contracts in which pairs of tokens are locked up in large quantities governed by an Automated Market Maker (AMM). This allows users to buy and sell from these pools without the need for an order book.

Many of the emerging generation of DEXs are pioneering an incentive structure known as the ve(3,3) model. In the ve(3,3) model, holders of governance tokens who lock their tokens into vested veTokens can vote on which liquidity pools should receive emissions of their native token. They also incorporate the possibility for third-parties to “bribe” governance token holders to direct emissions towards their favored pools. Despite their scandalous sounding name, bribes are in fact a legitimate part of the ve(3,3)DEX model that serve an important function in maximizing the decentralization of decision-making.

Harvesting The Revenue: How Orchard Generates A Self-Perpetuating Income Stream From ve(3,3) Incentive Structures

Orchard can be seen like an automated combine harvester that is constantly tilling the fields of the ve(3,3)DEX landscape to harvest revenue for the Root ecosystem. It begins this process through a process of bonding, whereby it offers people the opportunity to receive discounted ROOT in exchange for ETH and, soon, other reputable assets. Users will be able to simply log on to the Root dApp, choose which asset they wish to sell to the Root DAO and then receive their discounted ROOT tokens. The pricing is calculated using a Dutch auction system that ensures the price always remains below the market rate. The tokens vest over 5 days in a linear vesting schedule.

The ETH and other assets generated by this bonding process however, do not sit idle as in many DeFi treasuries. Instead they are fed into Orchard, which uses them to accumulate governance power on ve(3,3) DEXs as well as bribe layers such as Balancer and Aura. It does this primarily through bribing, whereby it pays governance token holders on these protocols to use their vote to direct emissions to ROOT liquidity pools. Because Root adopts a strategy of Protocol Owned Liquidity (POL), it will own the vast majority of the liquidity for these pools. Therefore, it will accumulate revenue in the form of the ve(3,3) token emissions that it has self-directed to these pools via bribes.

Under favorable conditions, Root will lock some of the governance tokens it receives to build a base of voting power to complement its bribing strategy. This unlocks a further revenue stream for the Root treasury as it can receive bribes itself from stakeholders who wish to use its accumulated governance power.

So, the revenue generation process is well under way by this point. But it doesn’t end here. The next step is to take this initial revenue and transform it into a self-perpetuating flywheel that accumulates constantly growing income for the Root ecosystem. This is how it does it:

Growing The Orchard: Transforming One-Off Revenues Into A Self-Perpetuating Revenue Flywheel

Whilst one-off revenues can help a treasury get off the ground, the dream for any DeFi project is to have a mechanism for automatically growing out its reserves in a self-perpetuating manner that does not rely on favorable market conditions. This is where the Orchard Omnichain Governance Aggregator comes into its own.

That is because a portion of the revenues generated by Orchard are reinvested back into making further bribes on liquidity gauges for ROOT pools across the various ve(3,3)DEXs that it is targeting. This creates a flywheel effect whereby Orchard’s bribes and accumulated governance power generate revenue, which can be used to place more bribes, which create more revenue, and so on in a never-ending cycle.

But this is not even the most exciting part of how Orchard works. Only part of the revenue from Orchard is re-invested into further bribes. The real magic comes in the form of how the rest of the revenue it generates is deployed.

It all starts with investments in new Stem protocols…

Turning The Orchard Into A Forest: Cultivating The Stems That Will Grow Into A Comprehensive DeFi Operating System

Whilst part of Orchard’s revenues are directed towards further bribes, another part is plowed into its revolutionary Root & Stem investment model. To execute this, Orchard works in conjunction with Root’s in-house DeFi lab, Bloomworks. We’ll be doing a deep dive into Bloomworks in part 2 of Sprout Academy. But for the purposes of this article, it can be summarized as an investment vehicle that uses capital generated by Orchard to develop innovative DeFi protocols that build towards a comprehensive operating system for DeFi. It works like this:

Orchard is constantly drip-feeding funds into the Bloomworks warchest, which is used to invest in Stem projects. Stems are protocols created by Bloomworks , and the focus areas are determined by 2 criteria. The first is that the Stem must remedy a major market inefficiency, such as inaccessibility to DeFi. In doing so, the creation and release of the particular Stem helps Root to establish itself as an all-in-one consolidated DeFi Hub.The second criteria is that the Stem must offer a uniquely high-EV opportunity for native and existing DeFi users. This ensures that they will ultimately drive revenue back into the Root ecosystem, delivering the kind of outsized income that no single project could deliver on its own.

But the process does not end here. As Stems mature, they are eventually standardized, streamlined and upgraded in readiness for integration into Root’s DeFi Hub, called Sprout. We’ll discuss more about Sprout in part 3 of the Sprout Academy series. However, in essence, it is designed to offer a “Robinhood of DeFi” experience, unifying each Stem protocol into a comprehensive Defi operating System. Sprout will offer the kind of one-stop shop for DeFi that the Root & Stem investment model is uniquely placed to deliver. This will create a network effect, which drives increased revenue generation opportunities for each individual dApp. These increased revenues can then be distributed back into Root token holders, which now has the income stream of not just one single DeFi project but an operating system for the entire DeFi space.

You can now see how Root is so well positioned to generate levels of revenue that no other project can compete with. This is because it’s not really one project. It’s a vehicle for growing an all-encompassing suite of high EV protocols, each of which is pumping its own revenue stream back into the Root ecosystem.

In a moment, we’ll talk about how you can become one of the people obenefiting from Root’s unique revenue generation model. But firstly, let’s look at some of the partnerships that Root has already secured to start putting Orchard to work on.

Laying Down Roots Across Every Omnichain Source Of Liquidity

The beauty of the Orchard Omnichain Governance Aggregator is that it is a mutually beneficial system that creates a win-win for both Root and the next-generation DEXs that it partners with. Root brings these protocols a reliable long-term, non-mercenary source of liquidity that is aligned with their own goals and incentive structures. Meanwhile, the protocols provide Root with fertile ground to put Orchard to work in generating revenues using its Omnichain Governance Aggregator flywheel. Because of this, Root has been able to rapidly build out an exciting ecosystem of partners across multiple chains. Here’s a peek at some of our first partners and how the partnerships provide mutual benefit:

Ramses: Ramses is a ve(3,3) DEX that provides a native liquidity layer & decentralized exchange on Arbitrum. Root’s partnership with RAMSES will initially involve an exchange of tokens between each protocol. Root will use its allocation of veRAM tokens to operate its Orchard’s Omnichain Governance Aggregetor flywheel on RAMSES. Meanwhile, Root will bring increased liquidity to RAMSES, applying long-term, non-mercenary strategies that support the health of the RAMSES ecosystem.

Chronos: Chronos is set to become a power player ve(3,3) DEX on Arbitrum, and Root’s collaboration with them brings mutual benefits for both protocols. Root brings sticky liquidity to reduce sell pressure on CHR tokens while accruing governance authority for the mutual benefit of both protocols. Root deploys bribes, and Chronos provides CHR tokens, expanding Orchard’s flywheel. There will again also be a token swap with Root receiving veCHR from Chronos. This reflects both protocols’ long-term intent to build a liquidity powerhouse on Arbitrum.

THENA: THENA is a top ve(3,3) DEX, bringing new protocols to BNB Chain. By opening a free market for THE emissions, THENA allows protocols to bootstrap and scale liquidity. The partnership accelerates THENA’s growth and enables Orchard to kickstart its omnichain vision. Together, Root and THENA make a natural pair. Root, an omni-chain ecosystem by design, will also join THENA’s WARP accelerator to bootstrap ROOT liquidity on Binance’s Smart Chain, resulting in extensive liquidity growth and revenue generation for both parties. Again, there will be a token swap, with Root acquiring a substantial position in veTHE. This exchange will solidify Root’s position in THENA’s ecosystem and reciprocally allows THENA to benefit from our joint success.’

Equilibre: Equilibre is an AMM and liquidity marketplace built on the Kava chain. As part of the partnership, Equilibre will exchange an allocation of its governance token — veVARA — for an allocation of ROOT tokens. This exchange will help solidify a long-term partnership built on mutually-aligned incentives. It will also allow Orchard to continue with its omnichain expansion, giving exposure to an additional chain where it can apply its revenue-generating flywheel.

Together these partnerships mean that Orchard has exposure to Arbitrum, BNB chain, and Kava straight from launch. However, Root is currently in advanced discussion with most leading ve(3,3)DEXs and is on track to rapidly deliver its vision of a truly omnichain strategy, harvesting revenues across all omnichain sources of liquidity.

Distributing The Fruit: How You Can Become A Stakeholder In The Root Ecosystem & Benefit From The Revenue Streams Being Seeded By Orchard

As you can see, the Orchard is a cornerstone of Root’s strategy for creating a comprehensive Operating System for DeFi with multiple revenue streams the like of which it would be very hard for any single protocol to compete with. So, you are probably wondering how you can get in on the ground floor and become a stakeholder in this ecosystem. Fortunately, it is extremely easy!

Whilst Orchard and Bloomworks do all the complex work behind the scenes, starting on Tuesday 26th July at 2pm EST, you will be able to simply purchase ROOT tokens, stake them, and then watch your yields start rolling in. It will be a simple 3 stage process:

1. Buy ROOT tokens: You will be able to do this at a discount through purchasing a Root Bond on the Root dApp. Alternatively, you can purchase it on the open market where it will mostly be seeded on a Balancer 80/20 ROOT/ETH pool on Ethereum, along with a secondary Uniswap v3 pool. ROOT tokens serve as the entry point into the Root ecosystem, and can be staked in order to start getting your share of Root’s revenue as passive income.
2. Stake Root to Receive veROOT: Then you will simply need to head over to the Root dApp to stake your ROOT tokens and receive veROOT tokens in return. veROOT confers governance rights. But crucially, it is also the main vehicle for you to start earning passive income generated by Orchard, Bloomworks and Sprout. The process for becoming a veROOT holder is simple. You simply buy ROOT tokens then stake them on the Root dApp. To stake, you must also add an amount of ETH alongside the ROOT, either manually or through the apps zapper function. Staking is always 16 weeks, never less and never more. As a veROOT holder, you will receive passive yield in the form of esROOT tokens, which are redeemable on a 1:1 basis for ROOT liquid ROOT tokens.
3. Watch The Income Start Rolling In: Root protocol does everything for you from there! You can watch your passive income start accumulating in the form of esROOT, the escrowed version of Root, which is redeemable 1:1 for ROOT tokens. The value of the esRoot is backed by the ever-growing treasury that Orchard, Bloomworks & Sprout are generating, ensuring it can keep growing as the ecosystem grows. The following graph gives an estimate of the APR for veROOT holders:

If you act fast, you will also be able to take part in the veHyperStake event, which takes place for the first 3 days after launch. This allows you to double your Year 1 APR. This means that any user who vests their ROOT into veROOT in the first 3 days after launch will receive doubled APR for the whole year. This opportunity will end on Friday 29th July 2023 at 2pm EST.

You will simply need to follow the above process and Root Protocol will do the rest, putting Orchard, Bloomworks, and Sprout to work to execute complex revenue generating strategies beyond the scope of any individual person or even any single protocol.

More To Come

We hope you’ve enjoyed discovering more about Orchard and how it kick-starts the revenue generating process for the Root ecosystem. We’ll be following this up soon with further deep-dives into Bloomworks and Sprout, as well as spotlighting some of the first Stems growing in the Root forest.

In the meantime, you can discover more by browsing our docs and joining the Root Discord community.