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The Chronos Solution
Chronos Re-imagined ve(3,3) Model
While the ve(3,3) model offers a promising approach to solving challenges faced by decentralized exchanges (DEXs), there are still issues with the current implementations. Chronos addresses these issues by introducing innovative improvements, such as no-rebasing for long-term sustainability and maturity-adjusted LP returns, to align incentives with the project's long-term health.
One concern with current ve(3,3) models is that the rebase mechanism can lead to an imbalance in voting power, disproportionately favoring early adopters. Over time, this hurts the economic value of new token emissions (locked token APR is lower), and disrupts the entire flywheel.
Chronos tackles this problem by implementing a zero-rebase model. This ensures that voting power is more evenly distributed and that new participants in the ecosystem are not unfairly disadvantaged.
Through rigorous research and analysis, the Chronos team has determined that the zero-rebase model is the most effective for the long-term health and sustainability of the project. This approach not only provides optimal economic incentives for all participants but also makes it more attractive to new protocols seeking to join the Chronos ecosystem post-launch.
On some existing ve(3,3) exchanges, there is a feature that allows veTOKEN voters to receive boosted emissions by voting to their own liquidity pools.
This feature has not been included to prevent toxic and centralized value extraction on Chronos. Rather than rewarding concentrated holdings, we have reimagined the LP reward boosting to be egalitarian based on time staked in Chronos (see next section on Maturity-Adjusted LPs). This allows fair and healthy decentralized governance over
$CHRemissions while aligning LPs with the health of Chronos.
Traditional ve(3,3) models often do not provide sufficient incentives for liquidity providers (LPs) to commit to a project for the long term. While token voters are aligned with the project because of the lock function, liquidity providers can leave at any time.
What we have witnessed in other implementations is the counter-cyclical effect supporting the price of the emission token is disrupted the moment the price declines, and liquidity providers withdraw their liquidity, reducing TVL and further reducing the token value. This negative feedback loop disrupts the flywheel and happens because LPs are not incentivized toward the long-term health of the project, only their returns at the moment.
Chronos addresses this issue by introducing Maturity-Adjusted Returns, a groundbreaking feature allowing liquidity providers to earn boosted emissions over time. This means LPs will be more inclined to keep their liquidity through temporary CHR price volatility, making the platform robust, anti-fragile, and sustainable. This innovative approach is made possible through the Reliquary, an upgraded version of the MasterChef contract.
- 1.The advantages to liquidity providers are:
- Increased revenue (APR) the longer your liquidity remains with Chronos.
- Increased rewards for being early to new launched pools, allowing increased revenues while being ahead of the maturity curve.
- Reduced TVL volatility, stabilizing
$CHRprice, which benefits LPs as they are the primary receiver of emissions.
- Reduced TVL volatility will help keep emissions on your liquidity pool so pools can be managed less (no more jumping to different platforms and farms every week)
- The maturity of your maNFT will carry a premium for your liquidity position to the underlying assets. By utilizing a secondary marketplace, you can realize this premium as a capital gain when selling to "exit" your position. This provides a secondary value to liquidity providers, both incentives yield and capital appreciation.
- 2.The advantages to protocols incentivizing liquidity are:
- More predictable liquidity for your token that will be more resilient to price and reward volatility.
- 3.The advantages to
veCHRvoters / chrNFT stakers:
- More predictable voting conditions, pools should be more sustainable with long term committed capital continuing to generate trading fees for voters.
- Less volatility on the platform TVL, leading to more favorable, sustainable, and predictable revenue stream.
- Sustainable liquidity, building Chronos up for a resilient future.
By incorporating Maturity-Adjusted LPs, Chronos revolutionizes the ve(3,3) flywheel.
With a 2 year lock, veCHR holders align themselves with the long-term success of Chronos. And now, we are also able to align Liquidity Providers for long-term growth and ensure a more sustainable, rewarding ecosystem for all participants.