Broad Distribution And Compelling Tokenomics: Introducing The MEX Economic Model

Lucian Todea
·
Apr 30, 2021
·
8 min read

Fast. Secure. Scalable. Inexpensive. Decentralized. The Maiar Exchange will be the first DEX/AMM to have all these properties at once. And with the Maiar app, it will also have 300k+ users on day 1, seamless authentication & a powerful mobile experience.

Perhaps most important, its MEX token will be 100% owned by the community, through the broad distribution and compelling economics that will enable it to capture value in a positively reinforcing feedback loop.

The primary function of the MEX token is to incentivize providing liquidity to the exchange. Without block rewards, there would be much less incentive to provide liquidity. Liquidity mining programs are unique to crypto and will act as both a token distribution and liquidity bootstrapping mechanism.

Everyone will be able to participate in the success of the Maiar Exchange, both from a governance and rewards & value perspective.

Bootstrapping The Maiar Exchange

When bootstrapping a new exchange, there is a chicken and egg problem that exists when low initial liquidity and low volumes generate low rewards, which fails to attract further liquidity and volume.

We work around that problem with the MEX liquidity mining, which will incentivize actions that increase the Maiar Exchange platform utility via rewards paid out in its native token, thus kicking off a positive feedback loop.

In short, liquidity mining (LM) incentivizes liquidity provisioning through token rewards (MEX). This allows liquidity to flourish and attract greater trading volumes.

Liquidity can create the following feedback loop: More Trading Volume > Higher Market Makers (MM) Profits > More Liquidity Provided > Less Slippage & Tighter Spreads > More Trading Volume.

In order to bootstrap the Maiar Exchange, we will focus on the following factors:

Maiar DEX will leverage a competitive incentive program to bootstrap its growth

Maiar DEX’s native token, MEX, follows a balanced mint and burn token mechanism; it’s a temporary inflationary token with no defined hard cap which can become deflationary if burns outpace emissions. This design allows the Maiar DEX to incentivize deeper liquidity, which is critical to the health of the AMMs.

In the beginning, very high APYs will serve to attract liquidity providers (LPs), effectively bootstrapping the supply side. The immediate effect will be an increase of the TVL, kicking off a reflexive feedback loop, which will serve as a catalyst for more token demand, resulting in even higher APYs and TVL.

To further expand user growth, Maiar DEX will also create a separate incentive to enable participation for Ethereum-based and BSC-based DeFi users, sharing the opportunity to convert ERC-20 tokens and BEP-20 tokens to ESDT tokens, so users can earn MEX.

In order to properly manage the inflation and Liquidity Mining (LM) expenditure, we’ve identified two approaches that will be very useful:

  • deflationary pressures so burns reduces supply minted
  • set a weekly/monthly LM budget and mint supply accordingly

With the benefit of community governance, subsequent to the initial bootstrapping period, other approaches will be taken into consideration, like for example: setting a long term LM budget, allocating % of total supply towards it, and capping the supply.

Combining weekly/monthly LM budgets with more effective deflationary pressures seems to be for now a better path forward.

Maiar DEX is not just an AMM; we are building a full product suite that enhances the growth of Elrond, Maiar DEX, and Maiar App

Maiar DEX will first serve a distinct community already growing around Elrond and the Maiar wallet, expanding the product suite by building synergistic DeFi primitives on top of Maiar DEX AMMs.

For example, the just-announced Maiar Launchpad and the projects debuting on it will tap into decentralized funding and will be introduced to our global and passionate community, partners, and investors, along with the broader Elrond ecosystem. These new projects will get access to a launchpad, enabling them to raise funds and directly bootstrap their initial liquidity.

The Maiar DEX will also introduce MEX Pools that will allow MEX to be staked to earn more MEX and soon after, other tokens. This will increase the eagerness for community projects to partner collaborate and launch MEX Pools because they will be able to leverage Elrond’s and Maiar’s reach and market attention.

Moreover, MEX’s pool staking options not only take MEX off the market, but also dilutes the non-stakers. This creates a strong impetus for staking the token, as stakers will receive immediate value from staking, whilst non-stakers will be penalized for not staking.

Mechanisms such as  lending, borrowing, options and margin trading, zero-loss lotteries, etc. will, in the near future, drive even more attention and engagement.

Decentralized Ownership: A Fair Launch

The Elrond community participated in the upsides of the Elrond Network growth. This is why we are bootstrapping the Maiar Exchange as a 100% community-owned DEX/AMM, to allow our supporters to participate in the upside of the explosion of its liquidity and volumes.

On top of participation through ownership, the community will be able to also directly contribute to the protocol’s innovation via governance and developers grants. New products and features that will be desired will be promoted and implemented through community vote. Everyone will be able to participate in Maiar DEX’s success both from a governance and ownership perspective.

MEX Tokenomics

We acknowledge the importance of establishing a direct link between the value generated by the Maiar Exchange and the value captured by its MEX token.

By building several revenue options to reward those engaging with the MEX token utility, we provide strong long term incentives for traders and holders. Through these mechanisms, the MEX token will be able to evolve in tandem with the cash flows generated by the Maiar Exchange.

MEX’s emission schedule is also very important. Liquidity mining is unique to crypto because it acts as both a token distribution and liquidity bootstrapping mechanism.  

MEX’s economics design begins with an aggressive token emission schedule, to rapidly bootstrap and accelerate growth, followed by a gradual reduction of rewards in favor of token conservation, combined with lockup incentives favoring longer-term alignment and contribution.

MEX Supply, Distribution and Emission

MEX's primary function is to incentivize providing liquidity to the exchange. There's currently no hard cap on the supply of MEX tokens, making it an inflationary token. Without block rewards, there would be much less incentive to provide liquidity.

However, the aim is to make deflation higher than emission, by building deflationary mechanisms into MEX's products. The goal for the medium-long term is for more MEX to leave circulation than the amount being created.

At present 0.05% from LP fees will be used to buy MEX and burn them. In the future more burn mechanics will be created, with every new product we will launch on top of Maiar DEX (like lottery for example).

The Maiar DEX will be a 100% community owned DEX

Below is the actual number of MEX to be distributed or created in the first year.

Here is a more detailed document on the first year distribution and emission:

https://docs.google.com/spreadsheets/u/1/d/1PuDuWsD6CrkkYJ0AbPlPCSmbC0iCukx3-Gw_wYCglmM

eGold Holders

Prior to the launch of Maiar DEX, MEX will be distributed to eGold holders to bootstrap the Maiar DEX with the existing community members. After the launch of Maiar DEX, eGold holders will continue to receive MEX for the next 8 weeks. Subsequent to the first 8 weeks, MEX will only be distributed via liquidity mining and MEX staking on the Maiar DEX.

A total amount of 604,800,000 MEX will be allocated to eGold holders. This amount will be distributed over a time-span of 12 weeks following this schedule:

  • Week 1: 201,600,000 MEX
  • Week 2: 151,200,000 MEX
  • Week 3: 100,800,000 MEX
  • Week 4: 50,400,000 MEX
  • Week 5: 25,200,000 MEX
  • Week 6: 20,160,000 MEX
  • Week 7: 15,120,000 MEX
  • Week 8: 10,080,000 MEX
  • Week 9-12: 7,560,000 MEX

Distribution of MEX to eGold holders is done through weekly snapshots of all eligible addresses. Please refer to this post for more info.

All MEX allocated to eGold holders will need to be manually claimed by the address owner in 30 days after the weekly snapshot was concluded (might be increased since the claim was not available for first snapshots). Unclaimed MEX will be considered “lost” after the claim period expires and will never be minted.

All MEX allocated to eGold holders will be subject to an initial lock or vesting period, to be released following this schedule:

  • 10% to be unlocked after 30 days after the Maiar DEX launch day - TBD
  • 90% will begin unlock after 1 year, with a linear release of 15% per month for the following 6 months

All locked/vested MEX will be used to provide liquidity in all pairs using MEX: like EGLD/MEX, or to be staked in the MEX Pool, so that more MEX is earned.

An option to double the APR and lock up your new MEX rewards for 12 months will also be available. After the lockup passes, there will be a linear release over the span of 6 months with 15% per month.

UNI/CAKE/SUSHI

All UNI/CAKE/SUSHI holders will be able to claim 80,000,000 MEX tokens. The claim will be done based on snapshots on balances held on April 5.

  • UNI: 50,000,000 MEX
  • CAKE: 25,000,000 MEX
  • SUSHI: 5,000,000 MEX

All MEX allocated to UNI/CAKE/SUSHI holders will need to be manually claimed by the address owner in 90 days after the snapshot was concluded. Unclaimed MEX will be considered “lost” after the claim period expires and will never be minted.

Security Fund

Emergency funds to be used only in case of critical bugs or security concerns.

Developer Grants

MEX to be used to incentivize developers and startups to build on top of Maiar DEX. Allocation of funds will be decided through community governance.

Initial liquidity

These MEX will be used to provide initial liquidity to the EGLD/MEX pair. After the TVL is considered big enough and things stabilize the remaining MEX and the MEX rewards earned for this initial liquidity will be burned.

MEX ecosystem growth

To ensure growth of the MEX ecosystem and increase strategic outreach, collaborations with centralized exchanges will be considered for MEX. These collaborations will provide opportunities for CEX users to farm MEX in preparation for a listing there.

Governance

Emision per block, MEX distribution per pool, vesting schedule, burn, etc. will be voted and applied through community governance.

New pools and liquidity will be created by the Elrond community. MEX rewards will be decided through governance as well.

The Operations multisig (3 of 5) is primarily composed of core team members and is the hurdle that needs to be passed for any changes to our Smart Contracts:

  • Adding / removing pools
  • Changing pool weights (rewards)
  • Changing the MEX block reward
  • Approving transactions coming out the dev fund/security/liq. fund
  • Overall changes to the Smart Contracts

Important note: all above calculations are approximations, and could be subject to change, updates, or rebalancing during the next few weeks.

References:


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Written by
Lucian Todea
Co-Founder and COO, Elrond Network.