The Liquidity Wars: Arrival of the Tokemechs
The Curve Wars were only the first chapter in the battle for liquidity in DeFi. Tokemak is positioned to bring the fight to a massive new scale.
The Curve Wars, the first chapter in Web3's contest for liquidity dominance, began with a small list of contestants and centered around Curve. Protocols continue to fight to accumulate CRV in order to gain voting power over the network and increase stablecoin yield.
A Brief Recap of the Curve Wars
- Convex moved quickly to become the dominant holder of CRV and therefore a leading influence in the infamous CRV gauge, a tool for directing liquidity.
- Yearn, already involved in CRV, aligned with Convex and then surprised everyone with a buyback campaign and tokenomics changes to mimic the veCRV model.
- Mochi Finance attempted a wild front-run that earned the wrath of the crypto leviathan Tetranode where he nuked their pool and token into oblivion.
- OlympusDAO launched their CVX bonds tossing their hat into the ring.
- [Redacted] made a huge launch and snapped up tons of CRV and CVX, as well as gOHM.
- Frax and Wonderland added to the fray and also began accumulating CVX.
- In another major move to bolster their dominance, Convex began accumulating Frax's FXS fractional-algorithmic stablecoin.
As more and more players entered the game the Votium bribes continued to flow.
- Everyone wants to control the CRV gauge and direct liquidity to themselves and away from competitors
- Follow Tetranode.
- No seriously, follow Tetranode. He is a major player and involved with almost all of the protocols I’ve mentioned so far. Ignore him at your own peril.
- [Redacted] is nothing to sleep on - major moves happening there and there is much more happening than most know… give 0xSami a follow.
- OlympusDAO has been rocked by forks, but there is still so much being built and their ties in DeFi 2.0 are deep. Additionally, the impact of gOHM is still yet to be fully realized…
- Convex’s interest in FRAX isn’t unwarranted. 👀
Again, this recap is incredibly brief and there is so much I haven’t covered. I highly suggest reading Arthur White’s “Why Curve Wars Matter” and Knower’s “The Curve Wars Rage On” for a more complete picture.
So far this contest centers around Curve DAO – which is focused on stable swaps.
So what if the battlefield were extended beyond stables?
As the CRV wars raged on, shadowy figures lurked in the distance…the Tokemechs.
One of the Tokemak team’s first major appearances was in a SushiSwap Onsen AMA.
In August of 2021, Liquidity Wizard and Internet Paul appeared on the forum preaching sustainable liquidity and Tokemak’s intent to become a black hole for liquidity. For many attendants it was just another high APR liquidity pair but for me it was the day I became a Pilot and started stockpiling my $TOKE-powered liquidity lasers.
I wish I could brag to have the foresight to have fully understood and predicted Tokemak’s plan and impact but that would be dishonest. At the time, I understood at a high level that Tokemak was pitching sustainable liquidity and that they had caught the eye of notable protocols and individuals in the web3 space. It wasn’t until the CRV wars began heating up and leaks/developments from the Tokemak team began connecting the pieces for me that I began to understand the impact.
Enough build-up and history. Let’s get into it.
I’ll save time and word count but if you want to read my recent more in-depth dive on Tokemak’s role in managing and facilitating liquidity check out my “Tokemak Oil: Greed-onomics, Efficiency, and Ease of Use” article.
In short, Tokemak’s benefits are that it allows farmers to farm a single-sided position, Pilots ($TOKE stakers) to earn rewards for balancing the reactors (pools) and directing liquidity, and protocols to unload the burden of managing and incentivizing their own pools for rented, short-term liquidity.
Tokemak takes on the burden of managing liquidity and risk of impermanent loss in exchange for platform fees and becoming the black hole of liquidity.
The words “Tokemak” and “liquidity” are quickly becoming synonymous in the world of DeFi 2.0.
We have now covered what the CRV Wars are and what Tokemak is. You should now be drawing your own conclusions on the importance of Tokemak.
CRV specializes in stables and has become highly contested for the liquidity it can direct to protocols. Convex is an entire protocol designed just to gobble up a market majority of CRV, and as a result protocols have begin acquiring massive amounts of their native token CVX alongside CRV.
The motivation driving this frenzied activity is that whoever ultimately controls CRV controls a major source of liquidity. It is essentially a foundational money lego in DeFi… until Tokemak came along.
The image above comes from a series of Liquidity Wizard’s latest leaks captured in this edition of Leaky Sunday. This most recent batch of leaks included hints of a potential buyback, airdrop, and oh yeah…the mention of Curve! There is a lot to take in when viewing the chart above, but notice that in this diagram CRV is not bottom lego… it’s Tokemak.
A quick reminder, Curve’s focus and intent was stableswaps – not necessarily liquidity. It happens to be a great source of liquidity because there is a lot of volume on stables and, well… they are stable.
Tokemak, on the other hand, was designed to facilitate liquidity from the beginning.
And guess who was interested in setting up a Tokemak Reactor for liquidity…
Yep. Curve and every other player that is anticipating Liquidity Wars. Clearly the liquidity black hole has caught the eye of DeFi 1.0 and 2.0 protocols alike – especially considering the bribes showing up on Votemak.
Here’s some more alpha for you. Remember [REDACTED] and their major moves in the CRV wars?
Seems like this heavy hitting protocol wants to add $TOKE to their portfolio alongside $CRV, $CVX, and $gOHM. Also be on the look out for a FRAX proposal on snapshot regarding their Tokemak reactors…
Tokemak expands the game beyond just CRV and CVX. If a Reactor exists for a token, then liquidity can be directed to it via $TOKE – and the team has not been shy in announcing their intent to go cross-chain.
Through this model Tokemak becomes the foundational layer in DeFi – essentially positioned to be a sea of liquidity in which everyone will want a port to operate from.
This is the next chapter in the liquidity wars. The activity will expand beyond CRV and we will see new players emerge.
This is sure to be an exciting time in DeFi, so buckle up Pilots. The Tokemechs have arrived!
Coming Soon from the Tokeverse
- Debt-duality liquidity
- Permissionless reactors/C.O.R.E. 3 announcement
- More Votemak bribes 😊