Our Product Mechanics & Tokenomics
Lithium is a decentralised valuation protocol combining the power of both Human and Machine Learning into one dynamic and potent pricing model for illiquid assets across the Web3 and DeFi space.
Powered by our Collective Intelligence, we aim to deliver accurate asset valuations by capturing market sentiment where data is lacking. Thus, not only do we focus on providing genuine and transparent valuations, we provide them when they cannot be found anywhere else. That is Our Mission at Lithium.
Our mechanism and crypto-economy in our own Token — $LITH
At the heart of the Lithium Protocol is $LITH, Lithium’s native token from which stem all interactions and rewards that are to happen within the ecosystem. Collective Intelligence is built upon Lithium’s user interaction mechanics leveraging crypto-economy with $LITH & Reputation Point (RP), which helps to incentivize quality and precise pricing estimates while maintaining the protocol’s integrity. The complete tokenomics can be seen from the graph below: Price seekers contribute $LITH to the reward pool to give incentive for Price Experts to provide their opinions. Price Experts appraise the NFTs in a pricing quest in order to win the reward pool. The more $MATIC or $LITH staked, the more a Price Expert will earn when they win.
TL;DR — watch it: https://www.youtube.com/watch?v=6dkAlUSGvHk
Reputation Point (RP)
Although $LITH is staked when making a price estimate, its main purpose is to determine the rewards distribution across the winners of a Pricing Quest. Just by having a lot of $LITH, a wealthy Price Expert does not get to enjoy extra influence on the final valuation. The key influencing factor on a contribution’s weight in the final output is the quantity of RP staked along with the submission as it signifies both the expert’s track record and confidence in his estimates.
Essential to the proper functioning of Lithium’s protocol, RP is a measure of an Expert’s reputation and past performance, and by extension integrity, as malicious actors will see their RP slashed and accurate appraisals will have the Expert’s reputation grow accordingly. It is absolutely crucial for Experts to maintain a high reputation, as RP controls the maximum amount of $LITH one can stake, and offers access to opportunities restricted to high RP Experts only. Furthermore, to ensure maximum engagement from the Experts, RP possesses two unique attributes:
1. Self-burning: meaning reputation will go down for inactive Experts who do not stay up to date with the market.
2. two-way relationship with $LITH: while the amount of RP an Expert possesses will determine the maximum $LITH he may stake to an estimate, the amount of staked $LITH will also affect the quantity of RP the Expert will be able to attach to that same valuation.
In this fashion, we encourage deliberate and thoughtful contributions that will continuously improve the protocol integrity.
Price Experts are the brain power behind Lithium’s Collective Intelligence. Experts respond to the Seekers’ Pricing Quests, providing their price estimates while staking refundable $LITH, as well as RP if they have any, to indicate the degree of confidence in their appraisal. Upon completion, the Experts receive rewards relative to the accuracy of said estimate.
Asking the Experts to provide price estimates in ranges is a key principle to avoid arbitrary estimates, and enables our [aggregation process to summarise community opinions into a Consensus]. As explained by Prof. Daniel Kahneman and Prof. Richard Thaler, both Nobel Prize Laureates known for using Psychology and Behavioural Science in Economic Studies, people assign different value to buying and selling, especially for assets that are held for use or not regularly traded. Hence, having the Experts provide estimates for both ends of the range, we push them to thoroughly consider their projections and provide valuations as if they were looking to either acquire or sell the asset, making any malicious behaviour impractical and damaging for the perpetrator.
To help users estimate price ranges, we define the 2 submitted price as below:
Price to Buy: The best price that the buyer could successfully convince the owner to sell today
Price to Sell: The best price that owner could get from successfully selling the NFT today
As of now, the Pricing Quest — $LITH staking interaction constitutes the main feature for Lithium’s ecosystem — where users will not lose any of their staked tokens. There are plans to add further options enabling a higher risk/reward scheme such as the soon-to-come Price Battle Mode.
Price Seekers are individuals, or groups, who come looking for the valuation of a certain asset. A Seeker entering into Lithium will contribute $LITH to a Pricing Quest’s reward pool. A Pricing Quest is the Seeker’s request for appraisal of a selected asset, to which a bounty in $LITH is attached in order to incentivize the Price Experts. After the Pricing Quest, the Seeker will be able to visualise the valuation data in the way of charts, and access tools for [detailed micro analysis for deep insights].
Future plans include the implementation of “private” Pricing Quest, granting the possibility to target only a very select few experts.
Why we chose Polygon?
The beauty of Collective Intelligence is that it is impartial. It is decentralised. It is the voice of the community. And we want that voice to be as loud as possible. We want to give everyone the chance to be part of Lithium protocol’s development and its ever-growing Human Power. Polygon gives us all of that, and more.
A well-proven and efficient technology, Polygon is a platform boasting low gas fees, addressing the pain points of larger blockchain (though remaining cross-chain and EVM compatible) and thus opening the doors to a large and active community. One that is always on the edge of the news, seeking new technologies and knowledge in the Web3.0 world. That is how we envision Collective Intelligence, a bustling community of passionate Seekers/Experts that will lead Lithium to a bright future, even perhaps pushing it to grow to become a DAO using $LITH token as governance.
Lithium Finance is the first decentralized NFT valuation protocol powered by collective intelligence and machine learning. Redefining NFT valuation approach through incentivizing honest assessment from community to reveal market sentiments.