State of the Reactor - April 14, 2023

  • The DAO-facing side of Tokemak v2 addresses gaps that exist in current liquidity solutions. With the upcoming product, the team will implement a complementary system to the unpredictable gauge and bribing systems that exist in DeFi. The v2 system is able to address the limitations with a real-time liquidity solution that allows DAOs to receive on-demand liquidity at a known rate.
  • DAOs and protocols are able to see a real-time liquidity rental rate within the platform using a “liquidity orderbook.” DAOs can offer incentives and receive a certain quantity of liquidity for a known duration.
  • The initial target of v2 is Ethereum liquid staking tokens (LSTs, i.e. stETH, rETH, etc.) However, the logic of both upcoming v2 products is adaptable to markets beyond LSTs.
  • In order for the DAO-facing side of Tokemak GP to succeed, the protocol must source liquidity from users. With this in mind, the team has designed a second mechanism that focuses on attracting this TVL.
  • The two complementary products of Tokemak v2 are useful for both DAOs that need liquidity and users who desire additional productivity for assets they hold.
  • LSTs are an ideal starting point for v2, due to the lower volatility and a natural built-in yield. Rewards for Tokemak LPs will beat the native staking yield in order to attract deposits.
graph of competitive yield for various liquid staking token pools
Graph of competitive yield for various LST pools
  • There are many different LST pools available in DeFi, all with variable and competing rewards rates. Staying on top of the pools with the highest yield opportunities is a time-consuming process that requires expensive transaction fees.
  • Tokemak Autopilot, which is designed to attract liquidity, is the solution for the user-facing side of v2. Autopilot is an auto-rebalancing product that seeks the highest yield opportunities for LST pairs. The mechanism factors in pool fees, native rewards, and rebalancing slippage (both positive and negative). It works across multiple AMMs, optimizing yield-seeking behavior with a holistic view across DeFi platforms.
  • Autopilot also features the ability to autocompound rewards.
  • A special thank you to the analytics team! The work involved in the product is very advanced, and takes into account many variables beyond simple APYs.
  • This product attracts TVL without emissions, which can then be utilized in the DAO-facing side of the protocol.
  • On the next community call, the analytics team will present a detailed explanation of the inner workings of this new product.
  • Tokemak v1 required buy-in from both LPs and DAOs on either side of a Reactor. With v2, the two are decoupled, and the protocol will offer value to both types of participants independently while combining the mechanics into the end product.
  • The team has created a public timeline so the community can follow development milestones.
  • Audits are unpredictable, but the current estimate for completion on the user-facing side (Autopilot) is late May to early June, and July to August for the DAO side of the product. Security is a top priority, and timelines are subject to change.
  • A testnet is anticipated to launch sooner, and the team will reach out to the community for feedback.
  • The design of v2 makes it much more portable across chains than v1, and additional markets beyond Layer-1 Ethereum are planned for the future.
  • An awareness marketing campaign is planned prior to launch (ramp-up begins in May) on Twitter and other social media.
  • Thank you to the community for your support and patience while the team researches and develops this novel product!
“We think the product-market fit is undeniable for both sides.” - SHARP
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