Evolution Finance Token Ecosystem & Locked Liquidity
DeFi drastically improved the blockchain industry with the invention of yield farming and incentivized staking. Yet, while DeFi’s introductions are great methods to reward token holders, they require tokens to be constantly minted or distributed into circulation. With more tokens minted, the overall supply of tokens constantly increases.
A constantly increasing supply of tokens comes with a large downside: a hyper-inflationary design that forces a long-term fall in price.
Evolution Finance addresses this negative effect through various deflationary methods, or simply deflationary farms. Evolution Finance ensures liquidity providers and stakers are rewarded without inflating the supply of the native EVN tokens.
EVN, by design, is a revolutionary leap forward in token economics.
Deflationary farming is a new and highly underutilized model that is starting to gain traction, but is still in its infancy. cVault Finance (CORE) is credited for pioneering deflationary farming, something that will rapidly gain more adoption.
This model has its roots in the BOMB token, which launched the first deflationary token, with a portion of each transaction being burned. Follow-on projects adjusted this model to split the transaction fee between stakers and a burn. CORE morphed the model by rewarding LPs rather than stakers.
The key mechanism behind deflationary farming is a locked liquidity model, which ensures the entire deflationary farming economy can function. This model covers everything from fees and rewards, to even utilizing ETH that falls below the price floor for a positive value effect.
Liquidity Floor Model
The Rootkit Finance team pioneered the revolutionary Liquidity Floor model, which allows access to any ETH below the liquidity floor. This ETH can then be recycled back into the ecosystem to increase the value of the network’s native token.
Any locked liquidity added into the liquidity pool remains permanently locked, creating a liquidity floor, with trading fees and token burns on transactions raising the floor with every single transaction (priced in eth). The network can withdraw the surplus liquidity to increase network value.
The way this liquidity floor model allows access to the ETH below the liquidity floor is by wrapping the token (ETH in this example) into a synthetic asset that mimics the value of the underlying ETH. Using Rootkit Finance as an example, LPs convert their ETH to kETH, with this kETH backed 1:1 with ETH and therefore valued at 1 ETH. kETH can also easily be redeemed for ETH at any point.
As the pool generates trading fees, liquidity remains locked permanently. While the liquidity floor may have begun with just 1,000 kETH, adding additional liquidity, trading fees and burns may grow it to 1,100 kETH. Now there’s a surplus of kETH under the liquidity floor which can be withdrawn and unwrapped. Essentially, trading revenue of the pool is regularly withdrawn and then used for network growth, including but not limited to token buy backs and platform development.
Evolution Finance will use tETH — a wrapped version of ETH to allow access to ETH below the price floor.
As mentioned earlier, the deflationary farming model allows liquidity providers and stakers to be rewarded without inflating the token supply. Evolution Finance improves on this model by charging a 1.7% fee on transactions and distributing it by the following:
1. 1% to locked LP stakers,
2. 0.2% to EVN stakers,
3. 0.4% burn on transfers,
4. 0.1% for future development.
A key problem with existing liquidity generation token launches is that spikes in volume drive more users to become liquidity providers. This increase in liquidity permanently reduces the value and earning potential of LPs.
Until now, locked LP tokens have had virtually no supply cap. Evolution Finance differs here by only allowing the first $5M worth of LP tokens to be eligible for the 1% transaction fee. After that, LP tokens will not be convertible to the fee-earning EVNY.
A $5M liquidity pool is significant as it is deep enough to ensure strong buy/sell trades, yet capped tight enough to consistently reward LPs well. Liquidity generation pools like Core end up with so much locked liquidity that it can take LPs years to break even, if ever.
This capped model ensures EVNY remains valuable throughout the life of the project, as the rewards cannot be diluted by additional liquidity being added. Meanwhile the EVN token carries its own utility function, as ENVY is an incentive system, not the main product.
Fees and Rewards
The EVN token has a 1.7% fee on transfers implemented into the code. Every time an EVN token holder sells or transfers tokens, this fee will be deducted and distributed throughout the community.
How the fees are distributed and utilized:
Fee Distributed to LP Stakers: 1%
Fees Burned: 0.4%
Fee Distribution to EVN Stakers: 0.2%
Fee Distribution to Development Fund: 0.1%
Net total fees: 1.7%
If EVN tokens are traded on centralized exchanges it can have a negative effect, as fees can only be applied to onchain transactions. To resolve this dilemma, any centralized exchange listing the EVN token will have their wallets whitelisted and a 5% transfer fee will be applied to their CEX addresses.
Fee Distribution to LP Stakers — EVNY: 1%
Once LP tokens are deposited into the smart contract, they become permanently locked within the EVN pools, which means you will no longer be able to withdraw them. LP depositors will receive Evolution Finance Yield Token (EVNY) to represent their share of locked liquidity. The 1% fee that is utilized to distribute rewards to LP token stakers is to compensate them for locking their tokens and providing a permanently liquid market.
This reward is also unlike any other liquidity provider, yield farming or staking system in DeFi because it is:
- entirely non-inflationary
- has a hard cap in participation
To facilitate this process, LP tokens from the ETH/EVN pool can be deposited into a smart contract easily accessible on the Evolution Finance website. LP tokens will be permanently locked in the contract and a new ERC20 token “Evolution Finance Yield Token” (EVNY) will be minted at 1:1 and issued to depositors. The new EVNY token can then be deposited to earn APY based on the share of fees mentioned earlier.
Jake deposits $25,000 into the ETH/EVN pool and Sarah deposits $75,000. They are the only liquidity providers. The token’s transaction volume is $1M per day.
- 1.7% is applied as a fee to the transaction volume (1.7% of $1M = $17,000)
- 1% of the transaction volume is paid to LPs (1% of $1M = $10,000)
Jake and Sarah share the daily $10,000 fee proportionally. Since Jake has 25% of the total liquidity, he will receive $2,500 (0.25 x $10,000) daily. Sarah has 75% of the total liquidity, she will receive $7,500 (0.75 x $10,000) daily.
When LP tokens are deposited into the locked liquidity contract and the new EVNY is issued, it CANNOT be withdrawn or redeemed for the underlying assets. LP tokens that are converted to EVNY are part of the permanent liquidity and are utilized in staking pools to generate fees on transactional volume. EVNY tokens may be sold on other platforms such as uniswap, balancer or even centralized exchanges but cannot be unwrapped or exchanged for the underlying asset.
Locked LP tokens that are eligible to receive rewards from the 1% fee (EVNY) will be limited to the first $5,000,000 provided to locked liquidity.
The limit at $5,000,000 is a major step forward. Evidenced by other locked liquidity protocols, the APY becomes significantly lower over time as more liquidity is added to the pools and the rewards get thinner and thinner as they are divided among a greater amount of LP tokens. Holders of the first $5,000,000 worth of locked LP tokens (EVNY) can rest assured that their APY returns will not be diminished by additional liquidity being provided. This limit may be increased in the future if voted on by governance as being in the best interests of the ecosystem.
Fee Distribution to Token Burn: 0.4%
An ongoing burn fee will be included in all transfers or sales of the EVN token, and is designed to combat sell pressure. Generally as sales are made, the token price tends to depreciate, however Evolution Finance will balance out the sell pressure by using this token burn. An ongoing burning of tokens will naturally reduce the overall supply and create a highly positive ecosystem and token value by increasing the price floor.
Fee Distribution to EVN Stakers: 0.2%
A portion of the fees on all token transfers is allocated to EVN staking through a partner platform. When finalized, rewards will go to users depositing collateral on the upcoming lending platform.
The network uses 0.2% of all fees to reward EVN stakers based on their positive social impact on the Evolution Finance community. More information regarding staking will be released soon.
Token Supply & Distribution
A total of 300,000 EVN tokens will be minted at the token generation event (TGE) with no future minting function enabled. The 300,000 tokens minted during the TGE will be the first and only batch of EVN tokens that will ever be minted. These tokens will be added to uniswap proportionately, with $300k (ETH) of locked liquidity:
At Launch there will be one pool.
Pool 1: ETH/EVN = $300k ETH + 300,000 EVN
Post launch a second pool will be created for tETH/EVN (wrapped eth to manage eth below the price floor). Liquidity will be split from the ETH/EVN pool and managed between the two new pools to ensure maximum value.
*Fully diluted market cap at launch will be $300k with 100% of tokens in circulation.
Revolutionizing the Token Ecosystem in DeFi
Rewarding liquidity providers and stakers by constantly minting new tokens has negative long-term consequences in both theory and practice. This constant inflation of the supply creates a game of “money chicken,” in which participants hope with each new day that the inflation does not lower token value. History has shown time and again that it does.
EVN’s deflationary liquidity model manages to reward LP’s and stakers without increasing token supply. In fact, it manages to pay sizeable rewards whilst also reducing the overall token supply.
Evolution Finance is built with the belief that the token economics of the project are the most evolved to date. The token design has been developed to support the seed community as the foundation to one of DeFi’s most advanced lending and borrowing platforms. With capped liquidity, a deflationary design, supported by the wrapping functions of renVM/Binance Token Canal and backed by some of the industry’s biggest institutions and developers, the project is saddled for disruption.
Evolution Finance is a self-funded project with no tokens given to the partners or foundation. The entire 100% of supply is added to the locked liquidity.
Due to this structure, the funding partners will be offered the first opportunity to market buy at launch once the Uni contract goes live, and all partners will have the same individual contribution cap as everyone else. This is the fairest launch possible while still allowing partners to participate without getting free tokens.
At launch, the individual cap per transaction will be implemented for a set period of time to help prevent and limit any bots from buying up the supply and then dumping. Multiple anti bot measures will also be activated including but not limited to the blacklisting of bot wallets, leaving their tokens locked for ever and unable to be sold.
The specific capped amount will be announced at the time of launch.
The development partners of Evolution Finance are DAO Maker, Ferrum Network, and Blockchain Strategy Team. The security partners are Arcadia Group and CipherBlade and one of the initially planned liquidity partners is HBK-GoChain, a $100M+ AUM fund.
Telegram Chat: https://t.me/evolutionfinance