Stakeholders
This section elaborates on the roles of each stakeholder, all stakeholders contribute to and benefit from the network in a meaningful way. The eventual goal to give sustainable returns while preserving the principal asset, maintaining transparency, and security, the protocol creates a uniform and incentivised network for all participants.
Farm Owner
Farm owners are typically institutions responsible for creating and managing specific strategies for yield generation. These strategies may include staking pools, lend-borrow strategies, or other yield-generating mechanisms for specific assets (e.g., $BTC, $ETH, $TAO).
Farm owners cannot act as verifiers within the protocol. However, they have the option to decide on a lower incentive split allocated to verifiers if they prefer to work with fewer verifiers. This reduced reward will be publicly visible to all stakeholders for ensuring transparency. This decision can, however, lead to lower confidence amongst the community members in that specific farm or strategy created by that particular farm owner, as fewer verifiers may indicate a reduced level of oversight and validation.
The number of Farms will be limited to start with, in order to maintain the quality of investors and strategies, only the most performant farms in terms of the consistency and reward generation will remain on the network.
Liquidity Providers
Liquidity providers (LPs) or Investors are the primary beneficiaries of the protocol’s incentive mechanism. By allocating their capital to their chosen Farm in the form of that Farm's principal asset, LPs participate in yield-generating strategies tailored to their preferences.
1. Rewards and Returns
Instant Rewards: Upon allocation, LPs receive instant rewards in $DXP tokens as an incentive for their participation.
Return Mechanics: While all farms generate returns in the input asset, these returns are typically unlocked at the contract's maturity.
Pre-Mature Exit: If an LP opts to terminate their participation before maturity, they are required to return the rewarded $DXP and will incur a fee deducted from the yield generated during their tenure.
Compliance and KYC Requirements
For farms requiring compliance with KYC regulations, LPs must acquire a Draft NFT. This facilitates the generation of a Soulbound NFT linked to the LP’s wallet address, ensuring their eligibility to participate while adhering to regulatory requirements.
Transparency and Optimization
LPs benefit from transparent performance metrics provided by the protocol, allowing them to monitor and optimize the utilization of their investments effectively.
Profit Allocation
The majority of the returns generated by the protocol’s yield strategies are allocated to LPs, solidifying their role as the primary beneficiaries within the ecosystem and aligning the protocol’s success with their financial growth.
Yield Yoda
Yield Yodas’ are masters of the yield force, skillfully guiding capital toward higher returns with precision and wisdom. In less playful terms, they are Yield Originating Entities (YOEs)— the foundational drivers of yield generation within the protocol. These entities provide the active work required to sustain the yield generation within the farm, where the mechanism may differ.
Yield Generation Mechanisms
Yield Yodas encompass a diverse array of yield-generating strategies, including:
Proof-of-Stake Validators: For example, staking on Ethereum.
Collateralised Debt Obligations (CDOs): Used for stablecoin minting.
Automated Market Maker (AMM) Pools: Liquidity pools facilitating decentralized trading.
Lending and Borrowing Pools: Mechanisms to generate returns through interest-based transactions.
Performance Optimisation and Monitoring
The protocol employs a rigorous ranking and weighting system, managed by verifiers, to ensure optimal performance and equitable liquidity distribution across Yield Yodas. Key aspects include:
Dynamic Competition: Performance is monitored on a block-by-block basis, creating a competitive environment where only the most efficient and reliable Yield Yodas retain their positions. Underperforming entities are systematically removed from the network to maintain high standards of yield generation.
Customisable Deployment: Each farm may deploy between 1 to y Yield Yodas, with the value of y defined by the Farm Owner based on their strategy and objectives.
Purpose-Driven Functionality
The protocol's emphasis on real-time monitoring and competition ensures that liquidity is directed to the most effective Yield Yodas, aligning performance with investor returns and reinforcing the protocol's commitment to transparency and efficiency.
Verifier
Verifiers are tasked with running the Sharpe Consensus mechanism, which serves a similar technical function to the Yuma Consensus used in the AI-DePIN[5] incentivisation framework pioneered by Bittensor. As the backbone of the protocol's decentralisation, Verifiers play a pivotal role in maintaining the network’s integrity. Their key responsibilities include:
Performance Monitoring: Actively validating the performance of Yield Yodas to ensure transparency and sustained efficiency.
Intelligent Benchmarking: Setting performance benchmarks using advanced AI algorithms to incentivise high-performing strategies.
Liquidity Allocation: Distributing liquidity among Yield Yodas based on their performance metrics and APY targets.
To ensure accountability, the protocol requires Verifiers to stake $DXP tokens. This staking acts as a deterrent against malicious behavior, with penalties such as slashing imposed for dishonest attestations—although the specific slashing criteria are yet to be defined. Farm Owners can also supervise Verifiers to provide an additional layer of oversight.
Verifiers are compensated for their critical role in the protocol’s operations through a share of the returns generated (in $DXP tokens), aligning incentives and ensuring their continued commitment to maintaining the system.
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