coreDEX Black Paper

Introduction

Derivative markets make up the majority of trading activity in traditional finance. Since their introduction in the late 1970s and widespread adoption in the 1980s and 1990s, derivatives have grown from nascent upstart to an over $16 trillion market. Derivative markets enable index tracking, leveraged positions, and the securitization of many non-liquid types of assets through ETFs. This model is strongly reflected by cryptocurrency tokenization. Similar to derivatives markets, tokenization allows for the option to speculate on non-liquid assets such as future network fees or present-day fees paid out as a function of volume.

While tokenization has largely been standardized on the Ethereum network, we lack a comprehensive open standard for guaranteed liquidity markets for tokenized assets. Without a guarantee of liquidity, markets suffer from sudden loss of liquidity, and highly increased risk due to the volatility introduced with highly variable liquidity.

In this paper we seek to share new developments in regards to different types of liquidity, coreDEX launch preparations, and a new staking mechanism for a new generation of tokenized assets.

Spectrum of Liquidity

The most dominant type of liquidity found in the cryptocurrency space, is free moving. Meaning that the capital provided for market making services can quickly be removed and used elsewhere. The increase in flexibility correlates with the amount of capital it attracts. Especially in DeFi, one can observe large volumes of liquidity, regularly being moved across different protocols. This can stun or even destroy the natural price discovery of tokenized assets.

Open Vested Liquidity (OVL) is a new type of liquidity that provides enough freedom to attract sufficient amount of capital along with a mechanism to promote market certainty. It aims to solve the problems that many markets face in DeFi and across the cryptocurrency space.

OVL uses a block time schedule which enables liquidity to be initially locked, obtaining market certainty while unlocking it over a predetermined time frame. This vesting period creates a predictable pattern, successfully inhibiting the volatility of liquidity and making the market more resistant to shocks such as sudden liquidity removals. Combining OVL together with locked liquidity attracts a significant amount of fresh capital while simultaneously creating a healthy market environment for tokenized assets which decreases the overall risk.

CoreDEX Launch Migration

CoreDEX introduces innovative ways to develop new instruments, creating versatile tokenized products such as yield producing volatility, unique futures based on locked liquidity, collateralized lending, leveraged positions and much more, all of which users can trade in a highly liquid market.

CoreDEX will run on a new liquidity provider token. Liquidity providers from CoreVault will be able to signal migration to the new coreLP token. This new token will allow the platform to rebase its liquidity pools depending on market conditions, as well as granting its holders revenue sharing across coreDEX. More details will be released before coreDEX is launched. The team is looking for a consensus of roughly 70% of CoreVault LP tokens signaling for the coreDEX migration, to secure an efficient amount of liquidity to fuel coreDEX.

Initially, CORE can be locked in the coreDEX Migration Contract and earn its owners’ fees from coreDEX alpha and beta. This is for the duration of the testing phase, until coreDEX stabilizes and CORE can be used as intended. A buyback revenue split token which gets distributed across coreLPs.

We are building two sections for coreDEX

• coreDEX CORE will focus on sustainable yield generation through token trading and lending products as well as host governance.
• coreDEX DELTA will address the lack of options and futures in the market and will solve Impermanent Loss.

A unique system is being built for our options liquidity providers which aims to remove Impermanent Loss. This is possible due to our designs being built from the ground up, with a focus on riskless liquidity provision.

Limited Staking Window

A new staking mechanism is in development which opens a Limited Staking Window (LSW) for users to participate in. For a limited time, users can stake their capital towards a new type of tradable derivative. A time based bonus of up to 30% on users staked capital is attached to the LSW. To incentivize the community further, an on-chain referral system is integrated in this system. Referral’s receive an additional bonus of 10% on their initial staked capital while the referrer receives a 5% bonus in credit and 5% in ETH.

Liquidity Rebasing Token (LRT)

LP tokens play a major role in the decentralized space. Traditionally, they track the contribution to a pool and are used to distribute transaction fees across its holders. Changing the rules of liquidity provision by locking the underlying assets indefinitely, redirects the LP tokens main purpose towards being a permanent building block of a system. While the underlying assets are controlled through the locking mechanism, the minting process and ultimately the total amount of LP tokens are not capped.

A new generation of tokens is in development which has an LP rebasing mechanism. It aims to limit the amount of LP tokens generated, making them more exclusive. Following an algorithmic rebasing raise, the LP mint price increases while the liquidity pool size stays the same. As a result, the price of minting new LP tokens becomes increasingly expensive to the point where they are unobtainable, creating a truly scarce LP token.

LRT aims to limit the minting process of LP tokens by time, completely on chain.