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Liquidity Bootstrap & Provisioning Campaign

Liquidity Bootstrap & Provisioning Campaign

(Any views expressed in the below are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.)

The information provided in this website does not constitute investment advice, financial advice, or trading advice.

In the coming days Zenon Network (NoM) is launching a trustless bridge between its network and Ethereum. The bridge and associated ERC-20 token contracts will allow NoM assets, such as ZNN and QSR, to move onto Ethereum. Once on Ethereum, wZNN and wQSR can be swapped for other ERC-20 tokens. However, in order to do so the community needs to form the necessary liquidity pools.

The "Liquidity Bootstrap and Provisioning Campaign" sets out to build a robust and stable NoM ecosystem by attracting participants to join and contribute to the liquidity pools on Ethereum.

Liquidity Bootstrap & Provisioning Campaign

Upon launch, liquidity pool (LP) participants will receive a share of baseline Orbital rewards worth 561.6 ZNN and 1,250 QSR per day. However, during the bootstrap campaign, participants will receive extra rewards and additional security measures.

Bootstrap & Provisioning Campaign Benefits:

  • Duration: 30 - 90 days from launch
  • Liquidity Cap: 100,000 ZNN
  • Bootstrap Rewards: TBD (250,000 ZNN and 600,000 QSR are available. Exact amount found here)
  • Additional Security Measures: No swapping of wZNN to ETH (Users can only purchase wZNN / wQSR and bridge to NoM)

Liquidity Rewards Example

Let's review a few LP concepts before reviewing the rewards example.

  • Liquidity Cap: An artificial limit on the amount of liquidity allowed during the Bootstrap & Provisioning Campaign. It is currently set at 100,000 ZNN.
  • Orbital Rewards: These are protocol emissions to support network liquidity that do not change. They are set at 561.6 ZNN and 1,250 QSR per day.
  • Bootstrap Rewards: These are additional protocol emissions that will be available to LP providers during the Bootstrap & Provisioning Campaign. The total is approximately 250,000 ZNN and 600,000 QSR, however participants should expect only a fraction to be available.
  • Liquidity Multiplier: LPs can choose to stake their LP tokens for between 1 and 12 months in order to receive a Liquidity Multiplier of 1X to 12X. For example: 1 month -> 1X multiplier, 2 months -> 2X multiplier, ... 12 months -> 12X multiplier. The multiplier increases the staker's share of protocol emissions.

Let's assume the liquidity pool (LP) has 100,000 wZNN for a year and Alice contributes 10% (10,000 wZNN). If all participants lock their LP token for one month, Alice will earn 56.1 ZNN/day (10% * 561.6).

However, if Alice locks her liquidity for 12 months, while everyone else chooses 1 month, Alice's adjusted liquidity would be calculated as (10k ZNN * 12x multiplier) = 120k ZNN. Everyone else's adjusted liquidity locked for one month would be (90k ZNN * 1x multiplier) = 90k ZNN. Alice adjusted share of the pool is 57% (120k / 210k). She will earn 321 ZNN/day (57% * 561.6).

The image below explains how the Orbital Rewards are calculated under this scenario. Column "G" shows baseline Orbital rewards. Column "H" estimates the Bootstrap rewards if they were 500 ZNN per day. Impermanent loss is excluded from these scenarios below but should be taken into account.

And the following scenario calculates Alice's rewards if various participants stake their LP tokens for longer than 1 month.

Risk Mitigation

To reduce risk and provide better incentives for early participants, NoM is implementing an initial limit of 100,000 wZNN in the liquidity pool. We expect this limit to last for at least one month. During the risk mitigation period participants can add liquidity and swap ERC-20 assets to wZNN. However, participants will NOT be able to sell wZNN for another ERC-20 asset.

This limitation will help maintain a stable liquidity environment and protect participants from front-running. Once this limitation is lifted we expect bots to arb the price of wZNN to ZNN on Stex.com.

Zenon Network Risk Mitigation Engine