Since Liquifi protocol was launched in Ethereum (October 2020) and Binance Smart Chain (March 2021) the Liquifi DAO token (LQF) was also introduced. The main idea behind LQF was to create a true fair launch project with decentralized governance handed to a community of token holders from the very beginning. In the first version of Liquifi, LQF tokens were minted every week and distributed proportionally among liquidity providers without any private allocations or token sales.
Though the described fair launch principles are still actual and evangelized by the Liquifi team, the time showed several issues that needed to be fixed. The two most important problems identified were: hardcoded weekly LQF emission and limited farming features. We took up the challenge and now happily announce New LQF v2 tokenomics.
LQFv2 will be minted every block
First of all, we change the LQF minting schedule from the initial weekly claims to every block minting. It means that the current accrued LQF amounts will be always available and liquidity providers and yield pool stakers will be able to claim their LQF rewards as often as they consider it convenient.
New farming and yield pools
With Liquifi V2 we add new earning possibilities for liquidity providers and token holders. The new Liquifi V2 farming is more flexible. It will be possible to farm not only from pairs with BNB / ETH but from any liquidity pool approved by the Liquifi DAO.
In addition to the LQF farming, we introduce yield pools that allow staking of LQF tokens to earn more LQF or other tokens. There will be two types of yield pools:
- LQF yield pool — will allow staking LQF, yielding more LQF.
- Other token yield pools — will allow staking LQF, yielding other tokens.
Flexible emission and burn rate control
Another major improvement of LQFv2 tokenomics is flexible token emission with several directions. Instead of one hardcoded way to mint LQF tokens we introduce a possibility to distribute the minted tokens every block to several destinations (see fig. 1). The three emission directions introduced at the beginning are:
- To farms — LQF tokens distributed among all the LP token stakers proportionally to the number of LP tokens multiplied by a farming factor that is specific for each LP token.
- To yield pools — LQF tokens distributed among all the LQF token stakers proportionally to the number of LQF staked.
- To burn — part of the emission will be immediately burnt.
We also introduce the Protocol development and marketing fund that will initially receive an additional amount of minted tokens equal to 10% of all claimed LQF tokens.
Additionally, Liquifi will burn 50% of LQF tokens received from any services on the platform — either directly or via buyback.
Mint / burn rates
The base minting rate (20 LQF per block) is fixed and determines the maximum possible LQF emission speed. The other aspects will be controllable by the Liquifi DAO:
- Immediate burn rate (Z).
- Additional mint rate to the Protocol development and marketing fund.
- Additional token emission directions and their rates.
- Burn rate from services.
Possibility to control the burn rates gives LQFv2 a strong deflationary mechanism that will allow the Liquifi DAO to find an optimal mint / burn balance and maintain a stable token exchange price.
LQF price monetary control
An important feature of new LQF tokenomics is an algorithm that controls token distribution between farms and yield pools. Using a (DAO defined) target LQF price, the algorithm maintains balance between the two most important token emission directions:
- Let 20 LQF is minted every block, X LQF is sent to farms, Y LQF is sent to yield pools, Z LQF is burnt, then we calculate
- X = β (20 — Z)
- Y = (1 — β) (20 — Z)
- β is a balance factor that depends on the current LQF price and the target LQF price:
- β = 0.5 if the current LQF price = target LQF price;
- 0 < β < 0.5 if the current LQF price < target LQF price;
- 0.5 < β < 1 if the current LQF price > target LQF price.
Using this approach, we incentivize LQF staking (and therefore LQF buying) when the price is going low and farming when the price is going high. As a result, the LQF price becomes more controllable.
Liquifi V2 farming and staking architecture
In the core of the Liquifi V2 farming and staking architecture (fig. 2) is a new LQF token, which is an ERC20 / BEP20 compatible smart contract. The Minter smart contract is responsible for LQF mint / burn control according to the logic described above. The Farming smart contract allows making liquidity pool token deposits and claiming LQF tokens. The Staking smart contract has two responsibilities: first, it allows staking LQF tokens and claiming more LQF tokens; second, it implements governance token delegation logic, derived from the Compound DAO architecture, and allows voting for proposals in the Governance smart contract. Thus, LQF staking not only gives an earning possibility, but is also required to participate in Liquifi governance.
Transition from LQFv1 to LQFv2
The Liquifi protocol V1 was designed in a way that disallowed changing of DAO tokens minting schedule. Due to this, we need to provide a transition mechanism for LQFv1 token holders to convert their assets to new LQFv2 tokens.
All LQFv1 token holders will be able to convert their tokens. But, as we cannot stop minting LQFv1 tokens, the exchange rate will be lower for late claimers. We will perform the transition in 3 rounds. During rounds 1 (private round) and 2 (public round 1) the exchange rate from LQFv1 to LQFv2 will be 1:1. For round 3 (public round 2) the exchange rate will be 0.8 LQFv2 for 1 LQFv1. See more details at https://v2.liquifi.org/.
As LQFv1 tokens circulate on the open market, it will be also possible to buy them on Liquifi or PancakeSwap exchanges and then convert to LQFv2.
All the converted LQFv1 will be burnt. After round 3 finishes, LQFv1 tokens will be discontinued as Liquifi DAO tokens and will be replaced by Liquifi V2 DAO tokens.
It is not necessary for liquidity providers to remove their liquidity from Liquifi pools as Liquifi V1 protocol will continue to operate. But it will be required to unstake LP tokens from the old LQFv1 farming contract and restake them to the new LQFv2 farming contract. This operation is safe and will not cause any liquidity losses.
Get in touch with us:
WWW: https://liquifi.org/
E-mail: hello@liquifi.org
Twitter: https://twitter.com/liquifiorg
Telegram: https://t.me/LiquifiGroup
