ZAP is a novel DeFi protocol that generates passive yield for existing holders every time a new buy order executes. The yield is instantaneous and ~10,101% higher than the standard RFI protocol.
In addition, there is no transfer tax which allows traders and investors to enter with size as well as seamless integration with other DeFi protocols.
Background
In late 2020, the Reflect.finance (RFI) protocol introduced the concept of frictionless yield via a novel “reflect” mechanism that instantly distributes token to all holders on each transfer. This breakthrough allowed holders to collect yield passively without the complexity and security risks of staking contracts.
The market demand for these innovative features were not only reflected in RFI’s market cap growth but also the hundreds (or possibly thousands) of forks that launched afterwards, including Safemoon which reached billions in market capitalization.
The Problem With Passive Yield Protocols
While RFI and its numerous forks have validated market demand for passive yield producing assets, we would argue they carry inherent design flaws that prevent these projects from reaching their full potential in terms of DeFi adoption and integration.
The yield from RFI originates from a 1% tax on every transfer (buy, sell, or p2p transfer) and gets automatically distributed to all holders in proportion to their token holdings.
While this works by keeping the supply fixed, the main issues with yield being generated from token tax are:
- Tokens with transfer taxes discourage trading activity and especially alienate users who trade with size (no one likes paying extra fees, on top of existing gas fees)
- Tokens with transfer taxes are more difficult to integrate into staking contracts. Due to the deflationary nature of the transfer. This is why we rarely see yield farms involving reflect-type tokens
- The effective yields holders receive are negligible unless there is massive trading volume (see the RFI vs. ZAP comparison table below)
In the traditional RFI token model, the yield strictly depends on trading volume. However, trading volume is inherently disincentivized by token tax and limited integrations.
This means whenever the initial launch hype dies down, the effective yield for holders is negligible and often nullified by negative price action.
Multiple forks have attempted to solve this problem by increasing the token tax to generate higher yields. However, this discourages trading even more and again leads to trivial yields.
The Solution: Creating A Passive Yield Protocol With Zero Transfer Taxes
The ZAP Protocol attempts to solve these challenges by creating a token with passive yield mechanics that do not stem from transfer taxes.
Instead, the passive yields come from supply expansion from new buy orders (which represent organic demand for the token).
As a ZAP holder, you passively earn more tokens for every new buy order placed on Uniswap or Sushiswap. Your rewards are instantly “zapped” into your wallet after each new buy that routes through the Uniswap or Sushiswap pools. There is never any tax when buying or transferring between wallets. There is a 5 minute transfer cooldown to prevent flashloan abuse (cannot transfer tokens within 5 minutes of buying).
With ZAP, the amount of reward tokens you receive is determined by the size of each new buy order. The total supply will expand by 20% of each buy order, and will be instantly zapped to all holders in proportion to their holdings.
The Uniswap or Sushiswap pool does NOT experience supply expansion meaning holders get more rewards and there is no price drop per expansion event.
The exact formula used to calculate the global expansion amount is:
Global expansion amount = Buy amount * 20%
For example, let’s say the total supply is 10M and you hold 0.1% or 10,000 ZAP tokens.
The next buyer purchases 5,000 ZAP tokens.
This would lead to a global supply expansion of 20% of 5,000 ZAP or 1,000 ZAP, and you would receive an additional 5 ZAP (0.1% of 5,000).
Additional Token Mechanics To Ensure a Fair Distribution and Prevent Abuse
There are a few mechanics in place to encourage a fair launch and prevent abuse:
- Anti-bot blacklist that prevents selling from liquidity snipers who purchases before live trading is officially announced
- Max 2% transfer and token holding limit — to ensure a fairer distribution, wallets with 2% or more of the supply cannot buy more ZAP
- 5 minute transfer cooldown that resets after each buy. This means users cannot buy a large amount of tokens and instantly sell your yield (ZAP is flash loan resistant). However, you are able to continuously buy without transferring
Yield Comparison: ZAP vs. RFI Forks
To put into perspective the benefits of ZAP versus traditional “passive yield” protocols, let’s compare it with RFI using some basic assumptions:
- Total supply: 10,000,000 tokens
- Your holdings: 0.1% of supply or 10,000 tokens
- Token price: $1
- Daily trading volume: 10,000,000 tokens (50% are buys)
- Annual Yield ZAP: 3650%
- Annual Yield RFI: 36%
Even though ZAP only pays yield on buy orders, your net passive yield will still be 101x greater than that produced by the original RFI.
And when compared to an RFI fork with 5% transfer tax, your yield is still 20x greater, plus you don’t incur an additional 5% tax when selling your tokens.
The Game Theory Behind ZAP — Hodling Wins
The game theory behind ZAP was inspired by Olympus DAO, an algo-stablecoin project designed to reward cooperation as the optimal outcome for the entire community.
So far the community has benefited tremendously from playing cooperatively (buying and bonding) rather than competitively (selling).
The simplest model ZAP also has two players with three possible actions:
- Buy
- Hold
- Sell
Players buy when they anticipate more incoming buyers and a price increase. Players are most likely to sell when they anticipate incoming sellers or prices moving downwards.
Players are most likely to hold when they don’t have a strong directional bias but don’t anticipate significant downside.
- Buying has the effect of pushing the price up
- Selling has the effect of pushing the price down
- Holding has no net effect on price but holders benefit from increased tokens as well as price appreciation
As you can see, dominant strategies are cooperative. When both players buy and or hold, the results are all positive. Neutral strategies are when one player holds or buys and the other sells. Only competition (sell/sell) is the negative sum outcome.
Of course, this model is over simplified and ultimately depends on a variety of factors. This is simply meant to show the positive-sum environment produced by cooperation rather than competition.
$ZAP Token Launch
ZAP will list on July 23, 2021 on Uniswap V2. Because there is no token tax, there may be sandwhich bots on the trading pair, so set your slippage accordingly. To start, the max transaction limit will be set to 2% of the supply.
Total supply: 10,000,000
- Team: 5% (2% upfront, 3% vested over 4 weeks)
- Marketing: 5%
- Staking Rewards: 25%
- Liquidity: 65% (75% of the starting liquidity will be locked for 1 month via Team.finance)
$ZAP Roadmap
Although ZAP has been throughly tested, it is an experimental DeFi project and should not be considered an investment or financial vehicle.
As DeFi participants, we’ve seen too many projects overpromise and under-deliver. That’s why we are promising secure code, fair launch, and locked liquidity at launch.
At this time, we do not have a formal roadmap as we want to prioritize getting tokens into the hands of the community first in a 100% fair and secure manner, then allow the community to dictate the direction of the project.
