How to Infinity

(by Henry Ludgrove)

A guide to understanding and participating in Reflect Foundations revolutionary single sided staking pools.

After much anticipation, the Reflect Foundation has now launched two Infinity Pools for RFI and ELE tokens, with a third for NRCH to follow upon completion of the Enreach presale. With these, a new approach to staking, yield generation and passive income has landed in the DeFi space providing a level of security and simplicity for investors looking to earn a sustainable return while avoiding the volatility rollercoaster that has come to characterize the world of crypto. The benefits of staking and providing liquidity come with risks; the Ogre of impermanent loss lurks near every liquidity pool, while staking those LP tokens for the best APY will often lead you to high risk projects that are only days or even hours old, unaudited and with no track record, the possibility of losing all your funds to a hack or rug pull are very real.

So what sets the Infinity Pools apart?

The first thing to note about the infinity pools is what goes into them; if you’re not yet familiar with the unique mechanics of the RFI and ELE tokens you should take some time to read this article (https://foundation-reflect.medium.com/building-a-foundation-of-volume-for-rfi-3e0f3b879fe4).

Now you know about frictionless yield we can snap on some Speedos and dive into the pools.

Something you should always be asking when making an investment is ‘where does the money come from’? This is not only something I’ve learned through my own experience but is also one of Warren Buffet’s investment principles; if you don’t understand how a thing makes money, don’t buy it.

Money in, more out. But where does it come from?

The ELE and RFI pools began with a seed fund of 2M and 1.5M ELE respectively. These seed funds attract frictionless yield through transactions and trading volume which is then used as the staking rewards. It’s worth noting that being a community led project, should these seed numbers end up not working, the community can determine to change them. Both pools pay rewards in ELE and these rewards in turn attract their own frictionless yield, a novel form of compounding earnings which can go on forever due to the principle being locked in the pool in perpetuity. On top of this, the tokens you stake in the pool continue to earn frictionless yield as well as the staking rewards. Let’s review that quickly:

• Tokens continue to earn frictionless yield when staked
• Tokens earn staking rewards from Infinity Pools
• Reward tokens generate frictionless yield

One token. One staking contract. Yield three ways.

But money can’t just print forever, it will become worthless right?

Ordinarily that is true, but the elastic inflation/ deflation mechanism of ELE means that more tokens can be added constantly (5M tokens are minted per year) which is one source of the frictionless yield. The other source comes from a 1% fee charged on every ELE transaction and this is also where the deflationary mechanism comes in. This 1% fee is split in half, one half goes to token holders while the other is burned, never to be used again. This decreases the token supply, increasing the value of circuiting currency. When trading volume reaches a certain amount, the burn rate will outstrip minting and voila! price increases.

AHA! I’ve found your Achilles heel; what if trading volume doesn’t increase?

Well yes, you cracked the case… except, no; Morepheus, the clever old dev behind RFI thought of that too. Price advertises opportunity for those who are looking for it, and a decrease in the value of ELE provides just that. Because RFI lacks an inflationary mechanism, ELE will be constantly trying to lose value against RFI and when this happens, it creates an arbitrage opportunity.

Let’s assume for ease that 1 RFI = 1ELE and they both have a value of 0.0001 ETH. Trading volume of ELE drops and with it so does price.

1 ELE now = 0.00005 ETH or 0.5 RFI in all trading pools except the ELE/ETH pool.

This is because ELE/ETH pool is blocked from receiving frictionless yield and so inflation does not occur directly in this pool.

This creates a price imbalance and the following opportunity:

• Buy 1 ELE for 0.5 RFI from ELE/RFI liquidity pool
• Sell 1 ELE for 0.0001 ETH in ELE/ETH LP
• Buy 1 RFI for 0.0001 from RFI/ETH LP

The above example actually denotes wild price swings and our happy arbitrageur has made a 100% increase on his trade when in reality much smaller differences are spotted and exploited constantly. This set up ensures that there will always be a motivation for RFI and ELE to be traded and this is by no means the only combination of price changes that will generate arb opportunities.

Amazing! But can you give me a food based analogy that really ties all this together?

Umm… ok. Imagine that every time someone cooks some popcorn (transaction), some of it jumps out the pan. This escaped popcorn splits in half with some landing in the trash (burned tokens) and some being redistributed to everyone who already has some popcorn (frictionless yield).

The Infinity Pool is like a huge bucket full of popcorn with no one to eat it. If you pour your popcorn in with this, you can have a share of all the new popcorn the bucket attracts.

The price of popcorn is constantly kept in check by people (arbitrageurs) who are looking for stores (liquidity pools) selling it cheaply, where they buy it to then sell in stores where it’s more expensive. Each time they do this they also drop some, part of which lands in the trash while the rest is redistributed.

I’ve heard enough, where are the pools?

Before you take the plunge into your own decentralised UBI and start swimming towards financial freedom, there’s a couple of rules you should know.

Firstly, both Infinity Pools have a time lock of 15 days. This means that when you deposit funds, you will not be able to withdraw them until the time lock period has expired. If you add more tokens before your 15 days are up, the timer will reset for all of your tokens, not just the new ones. The reasoning behind this is twofold; on the one hand, locking up tokens for a period of time removes them from the sellable pool creating a supply side crisis and helping to elevate price. On the other hand it assists in reducing volatility by diminishing the effects of panic selling perpetuated by FUD, a blight to which no projects are immune.

Rule number 2 is more of a guideline but you’d do a well to follow it. Each pool has a multiplier that increases the rewards you get over time. The maximum it goes up to is 5X and it will reach this after 90 days. This means that if you remove your funds from the pool after the 15 day time lock but before 90 days, you will receive a smaller amount than if you were to wait the full 90 day period. Once staked you will be able to see the difference between what you’ll receive if you cash out pre and post 90 days shown as ‘Estimated Current Rewards’ (pre 90 days) and ‘Estimated Rewards (Fully Vested)’ (post 90 days). Of course after 90 days both of these categories will display the same amount.

Presently an ownership function exists which allows the developer to remove the seed funds (and only the seed funds) from the pools should they not function as expected. Removed seed funds would be used to start rectified Infinity Pools. The code for the pools has passed audits by both Certik and Solidity.Finance and this function was not deemed to jeopardise peoples’ personal input. Once the pools are known to be functioning correctly the ownership function will expire and the pools will run on autopilot until the end of time.

So slap on some sun screen and fill your bags with everything you need. The longer you’re at this pool party, the better it gets.