Gamifying DeFi: Liquidity
The Seascape ecosystem aims to be a home for game developers and users alike as it continues to develop. In order to do this, it is necessary to establish a firm foundation among savvy crypto enthusiasts. As of Q4 2020, we are entering Phase 1 of our 3 Phase plan to bring DeFi and profitability to gamers across the planet through our platform. In this series of essays, we want to explain the key aspects of Phase 1, elucidating both how they work and how they have been gamified on the Seascape Network. Today’s topic is Liquidity.
What is Liquidity?
In a nutshell, liquidity is a decentralized finance (DeFi) term which refers to the availability of tokens on a specific platform. As you can imagine, this is absolutely crucial for the creation, growth, and expansion of the market. Users within the market can supply liquidity to DeFi applications like Uniswap, and in this context are known as Liquidity Providers or LPs.
What is Liquidity Mining?
A popular and effective way to incentivize users to supply liquidity is to reward them for doing so. This is the process of liquidity mining, a proof-of-work technique that enables the protocol to execute trades, thereby rewarding the LP with newly minted tokens. Let’s break this down using a concrete example. Users can go to Uniswap to exchange a crypto currency for a token, in our case, Ether for Crowns. When liquidity is deposited into the pool, so-called liquidity tokens are minted to the LP’s address, in proportion to how much liquidity they contributed to the pool. These tokens effectively represent the amount of liquidity the LP has contributed to the pool. There are inherent benefits that the user gets immediately for their contribution, such as receiving trading fees collected from all users when they withdraw their assets back from the protocol — in our case, Crowns. This process is inherently game-like in nature, but on the Seascape Network, we take this process from the abstract and mundane and unleash its potential as an actual, playable minigame.
The Future of Liquidity Mining
2020 proved itself to be the year that put Liquidity mining on the map. Projects exploded across the Crypto-sphere, making what was once a fringe concept something more akin to a household name. The ways in which it is approached are also growing in creativity. Take for instance, the GET protocol, which engaged in a community incentive program rewarding users at random intervals with their GET token. The purpose of random intervals was to inspire excitement — to make the process more fun for participants. This could be seen as a UX improvement over the other, more direct programs, such as the one enacted by the finance company Meter. Their liquidity mining project more resembles the status quo, with a simple, step-by-step guide, telling users what to do and what to expect. In both these cases, the end goal is excellent and clear, but the audience is necessarily narrowed to aficionados who are already in the know.
Seascape aims to change this by improving upon the current design largely at play within the Crypto-sphere. We are currently gamifying the process of liquidity mining, onboarding a wider audience than currently reachable. As current attempts already demonstrate, liquidity and all its accompanying processes are inherently fun and game-like in nature. Seascape Network will work to unleash its true gaming potential, along with other facets of decentralized finance to guarantee that making profit and having fun are are united for players as they can be. Stay tuned!