How ARC Finance "Trade to Earn" Mechanism Reshapes DeFi Tokenomics
Hey, ArcArmies! Hope you’re all doing well?
Today, we’ll be talking about Arc Finance’s Trade to Earn Mechanism and how it easily reshapes the DeFi Tokenomics.
First off, we’ll learn about what Arc Finance is.
What is Arc Finance?
ARC Finance is an AUM-based liquidity market capitalization management technology that enables users to accomplish effective high-yield liquidity management through the use of a combination of premium mining tactics. The objective of ARC Finance is to provide proactive liquidity management services for a variety of public chains and tokens.
Arc Finance, a Binance Smart Chain (BSC)-based LaaS for Basic Economic Facilities, addresses the issue by combining Automatic Unlocking Mining (AUM) and Liquidity Premium Pool (LPP). It intends for all platform users to be able to trade in order to earn money. It is an efficient algorithm that automatically modifies the pace at which r-Tokens are unlocked.
The automatic unlocking mining algorithm permits users to utilize a particular variety of token as a collateral and create corresponding r-Tokens which will remain locked on the onset and will be unlocked when users begin to mine or trade in the liquidity pool as the AUM algorithm asserts the transaction activity of a user as the criterion to unlock and release the locked r-Tokens.
Miners could use a specific type of token as collateral with the AUM algorithm, and corresponding r-Tokens would be created. R-Tokens would be locked at first and unlocked when users began mining or trading in the Liquidity Pool. Arc Finance would use an algorithm to automatically adjust the unlocking speed. The algorithm’s main idea is that the more a user trades in the LP, the more r-tokens are unlocked, providing users with a higher annual percentage yield (APY).
In addition, during the trading cycle, extra rewards are given to users in the form of platform tokens to encourage them to maintain a positive trading habit. There exist four technologies that are employed as indispensable technical support for the automatic unlocking mining algorithm to enhance its application.
Retrospect of Defi
The cryptocurrency industry saw a DeFi boom in the summer of 2020, earning it the moniker "DeFi Summer." For the first time, individuals realized that blockchain technology could be used to power large-scale applications.
People expected DeFi summer to return in 2021, but it did not. Despite the lack of DeFi Summer, DeFi 2.0 arrived on the scene and improved LaaS even more. The ownership of Liquidity Pool (LP) was transferred from consumers to developers in DeFi 2.0, a move intended to address fundamental issues that stymie project development, such as excessive pumping-and-dumping in liquidity mining, whales profiting from the project, and so on.
DeFi 2.0 does, to some extent, address the aforementioned issues. Unfortunately, again another issue arose. Apparently, it’s difficult for investors to overlook the hazards posed by the fact that developers hold a big number of tokens.
Last summer, liquidity mining was a big part of DeFi’s success, as it allowed ventures to get off to a fast start. It not only helped to attract a huge number of users by giving them tokens, but it also helped to achieve the high level of liquidity that DeFi requires. Nonetheless, it would easily cause the Matthew effect, which means that a tiny group of people would control a big quantity of capital, and that this capital would give these whales’ unfair advantages in reaping substantial gains early in ventures. By the time more people join these ventures, the money made by the whales will have to be paid back.
DeFi 2.0’s developers have been working on a solution for the problem for a long time, but the one they’ve come up with now appears to be more of a regression than an improvement. Both users and developers are looking for a better way out of their predicament.
Trading To Earn as Arc Finance’s Innovation
By combining Automatic Unlocking Mining (AUM) and Liquidity Premium Pool, Arc Finance, a Binance Smart Chain (BSC) based LaaS for Basic Economic Facilities, solves the problem (LPP). Its goal is to allow all platform users to earn money via trading.
Miners may employ a specific type of token as collateral with the AUM algorithm, and equivalent r-Tokens would be issued. R-Tokens would be locked at first, then unlocked once users began mining or trading in the Liquidity Pool. Based on an algorithm, Arc Finance would automatically alter the unlocking speed. The algorithm’s main principle is that the more a user trades in the LP, the more r-tokens are unlocked, resulting in a bigger annual percentage yield for the user (APY).
Arc Finance’s Liquidity Premium Pool (LPP) covers mining with portofolio contracts and burning to mine. When it comes to mining, users have a lot of options and can make a lot of money. The following are the rules:
1. Users can pick between two types of tokens offered on Arc Finance’s platform, namely token A and token B.
2. Arc Finance uses smart contracts to automatically generate A-B collateral.
3. Users will obtain the A-B staking ratio calculated automatically.
4. When collateral is kept, users earn a larger APY than specified in the combined contracts.
Real-time Swap Pool Protocol
1. Users obtain the LP by depositing the same amount of project token and USDT into the liquidity pool.
2. Arc Finance executes smart contracts to burn the project token.
3. In proportion to the tokens burned, users receive a new ARC/USDT LP.
4. Users then have the option of selecting one of the following three options:
1. Unlocking the LP
2. Mining of LPs
3. Profits from swap fees are shared.
Swap Fee Rebates
A part of the swap fees produced by all swaps on the Arc Finance platform will be put towards environmental initiatives.
Arc Finance charges a 3% fee for each swap transaction, which is split as follows:
– 20% is used to repurchase and burn the platform tokens.
– 16.67% is used as dividends to reward users holding the platform token.
– 13.33% is used as referral rewards to veteran users.
– 50% is put into the LP pool freely to guarantee a benign ecocycling.
Arc Finance uses the AUM algorithm to establish a liquidity premium approach, allowing projects with low liquidity to generate more profits in trading while ensuring profits for projects with high liquidity.
Furthermore, Arc Finance initiatives will rely less on whales and will continue to attract individual users who can actively participate in trade and ecosystem development.
Market Value & Liquidity Premium Pool (LPP)
Arc Finance assists developers in managing project market value, allowing them to focus on project development and ecosystem construction. Arc Finance aspires to be Dex 2.0, unlocking the full potential of projects and increasing trading returns for users.
The Liquidity Premium Pool (LPP) is an important feature of Arc Finance that helps users maximize their trading earnings. The more a user invests in trading, the more money he or she can make. This is known as "Trade to Earn." Furthermore, more trading profits will be saved in the pool, contributing to a healthy economic cycle and enhancing liquidity value.
Arc Finance suggests a new course for DeFi’s growth. It reshapes DeFi’s tokenomics by adjusting the economic interaction between developers and users.