Breaking-down Rock3T’s Economic Levers
How the design is an ETH-native BTC alternative
Now that Rock3T’s code is in public on the Degen.VC Github here, and the detailed mathematics has been added to the introductory article here, this article is designed to explain further how the 3 levers work together. Here goes!
Economic Lever 1: Lock Period
The Lock Period is the period of time the LP is locked once a user sends ETH to the Liquid Vault.
This reduces over time in accordance with the improvement in System Health, which is defined by the following formula:
System Health reflects the robustness of the token’s ecosystem. Since it is calculated using the combination of the amount of ETH & R3T in the Uniswap pool, the measure of health is directly related to the amount of each in the pool and therefore liquidity. Price obviously plays a role — as the token price changes relative to the price of ETH, so the relative amounts of ETH & R3T in the pool change. It’s a dynamically calculated measure that undoubtedly gives it uniqueness.
While liquidity on Uniswap remains robust, the health is high and the lock period is therefore low.
Only the embedded token buying pressure formula interacts with Lock Period, and it does so through the autonomously increasing ETH fee.
The fee increases as the number of Rock3T tokens in the Uniswap pool increases. Since this makes up the denominator of system health, the 2 are intertwined.
The initial starting lock period is set to 45-days and varies autonomously according to system health.
Economic Lever 2: Perpetually locked LP (LP Burn on UI)
When a user sends ETH to the Liquid Vault (claims LP), a percentage is sent to the zero address via a donation function. This donation is locked (burned) permanently and contributes to the underlying strength of the token ecosystem.
The initial starting percentage is set to 5% and varies autonomously according Rock3T’s price strength. It decreases as the price increases.
This lever has an impact on the liquidity on Uniswap, and therefore has some role to play in the determination of system health.
Economic Lever 3: Embedded Token buying pressure (LP Boost on the UI)
When a user sends ETH to Liquid Vault, the ETH Fee is swapped for R3T on Uniswap — R3T is autonomously bought with the ETH.
The ETH Fee will depend on the amount of R3T tokens in the Uniswap pool. The lower the number, the lower the ETH fee.
What is means:
When a user send ETH to claim R3T tokens on the Liquid Vault, they are basically performing a transaction that is similar to this on Uniswap:
1. User buys token, say with 1 ETH.
2. User pools tokens with an additional 1 ETH on Uniswap.
3. User receives Liquidity Pool (LP) tokens from the Uniswap pool.
With Liquid Vault, a user sends ETH and receives LP tokens that are locked for the time period that is described in formula 1. A user sends 2 ETH to Liquid Vault as they are essentially buying and pooling in one transaction.
The dynamic of the ETH fee (LP Boost on the UI) is critical to the success of the ecosystem. The ETH fee is set at zero to start (and remember, locked LP starts at 5%), and let’s assume there are a certain number of token in the Uniswap pool that increases over time, meaning the ETH Fee increases as well.
This formula is entwined with the Lock Period formula as follows:
- Lock period decreases as system health improves.
- ETH fee increases as R3T increases in the Uniswap pool.
- The benefit decreases as R3T pooled increases AND the lock period decreases as the measure of system health improves.
This creates the incredible dynamic benefit in Rock3T through the interplay of the three economic levers.
Learn More
Website: https://3t.finance
Telegram: https://t.me/Rock3Tfinance
Discord: https://discord.gg/pPCuyYa
Reddit: https://reddit.com/r/DegenVC
Twitter: https://twitter.com/rock3tfinance
Github: https://github.com/degen-vc/rock3t-core-contracts
