We at MonoX sincerely thank our community members for their continued support during the development of MonoX 2.0!
This article serves as a rationale for the changes we have implemented for MonoX 2.0 and the upcoming relaunch.
We have been inspired by the creation of popular reserve currencies like OHM and TIME, however, in both instances, they lack proper utility except for (3,3). The problem with most (3,3) is that they do not offer any additional value creation through additional protocol functionality. You bond. You stake. That's it.
Problems with (3,3)
When a user can only bond and stake, it means that over time, protocols like Olympus and Wonderland consistently buy assets below market value (bonding) while simultaneously inflating their own supply (staking rewards).
Due to the way bonding works, users purchase OHM at a discounted price while the protocol uses OHM to purchase assets above their market value. As a result, over time the real price paid to acquire the treasury assets will be of greater value than the assets in the treasury. This results in a mercenary capital problem and forces users to pay a premium.
The outcome of bonding mechanics combined with (3,3) is unfavorable because it results in a premium for users.
We believe that a product that can use the Bonding Mechanics + Additional Feature will be able to offset the premium with the value capture of the additional feature(s) working in tandem with the bonds/protocol owned liquidity.
This is exactly what MonoX 2.0 will aim to achieve. MonoX 2.0 will launch with bonds to purchase discounted vUNIT (our reserve currency) and acquire protocol-owned liquidity held in our treasury. We also have additional utility for vUNIT as it will continue to serve its purpose as the force that powers our AMM.
We see the value of creating a reserve currency that is not only used for our single-sided liquidity pools, by creating a ‘virtual pair’ but also functioning as a free-floating algorithmic reserve currency that draws intrinsic value from the assets in our treasury. With the new model, our new vCASH (vUNIT) has additional utility aside from being used in our single-sided liquidity mechanics.
Protocol Owned Liquidity + Limitations of Liquidity Mining
The majority of DEXs are running on outdated mechanisms and incentive structures. Liquidity mining is used to incentivize users to deposit liquidity to the protocol. However, it fosters an environment where the protocol’s native token is subject to long-term selling pressure from farmers in exchange for short-term incentives.
This LM model has been proven to be unsustainable and the introduction of bonding programs to create a treasury with assets owned by the protocol itself (Protocol Owned Liquidity — POL), not the users (Liquidity Providers) has its advantages when applied to an AMM or DEX.
We will offer bonding for users to sell their LP tokens back to us (MonoX Protocol), in exchange for our reserve currency vUNIT at a discounted price. vUNIT is vested to users over 5 days with a rebase occurring every 8 hours.
The primary benefit for users considering the hack, is that the risk of depositing assets to our contract is carried to us, the protocol, and not incurred by the user.
The primary benefit for us, is that the LP tokens are then owned by us the protocol (POL), and we can use it as permanent liquidity on our platform and help us to function as a perpetual market maker for our own DEX.
We believe that moving forward with this model will be a vast improvement for all participants of our ecosystem.
What is vUNIT?
vUNIT is our upgrade from the old vCASH stabelcoin which we used to power the protocol during our first iteration of MonoX. It now serves additional utility to the platform not just being the primitive that creates a virtual pair, offering our users single-sided liquidity.
The three functions of currency are:
1. Unit of account (All the assets on our DEX express their value in terms of vUNIT)
2. Store of value (As a reserve currency backed by assets)
3. Medium of exchange (Every swap on our protocol routes through vUNIT. Token A -> vUNIT -> Token B)
From the above, vUNIT is a more robust currency that fits into the three core functions of currency by definition.
vUNIT is the glue that underpins the entire protocol. It is not a stablecoin, but instead a reserve currency. The role of vUNIT in the MonoX ecosystem provides utility in two ways:
Utility: Reserve Currency
- On one side we have the bonding mechanism that acquires assets and protocol-owned liquidity to our treasury. vUNIT then provides a free-floating value based on the treasury reserves and gives intrinsic value to the reserve currency. Ideally, vUNIT will always be worth more than 1 USDC and that is the floor price.
Utility: Using vUNIT for Virtual Pairs
- vUNIT, is still the key to offering single-sided liquidity for our users. It’s what powers the protocol and uses the same mechanics as before in our AMM. We use vUNIT to create a virtual pair when depositing tokens into a liquidity pool on our platform.
How is vUNIT Backed?
vUNIT is backed by our treasury accumulated from assets via our bonding program. It is not pegged 1:1, rather because our treasury backs the currency which the protocol can buy back should it ever fall below 0. However, vUNIT is also backed by the liquidity in our pools. The sell function mints vUNIT as the physical token. In essence, vUNIT is backed further by the liquidity itself in our pools, not just the assets in our treasury. vUNIT is this instance is only backed when there is a positive vUNIT balance in the pool. Trustless listing pools cannot go below 0 for vUNIT balance.
One can also trade vUNIT outside of MonoX. This is something we didn’t have before with our previous vCASH token.
How To Get vUNIT
Purchase from Market
- Users can swap any ERC token directly to vUNIT.
When users withdraw liquidity, they will receive vUNIT (as well as their liquidity) if there is a positive vUNIT balance in the pool.
- Users can participate in our bonding program to purchase discounted vUNIT.
We’ll airdrop vUNIT based on vCASH position before the hack.
On February 4th we will release our public testnet of MonoX 2.0.
When deploy to mainnet, our relaunch will be a soft launch with, a focus on user experience, and security.