Lira: A utility token used to purchase goods or services.
Lira Financial – [email protected] – https://lira.financial
Abstract
Lira Financial aims to solve the problems of prior cryptocurrencies including mining rewards, farming
rewards, and liquidity provisioning. Mining equipment can be both costly and harmful to the environment, but mining remains of interest due to the opportunities afforded by it. As an easy alternative to mining rewards, we propose allowing users to participate with DEX Liquidity Pools. Another challenge remains to facilitate and maintain liquidity on decentralized exchanges. By nature, decentralized exchanges require liquidity for user participation, thus the responsibility is on the developers to provide it. Historically, developers created incentives aimed at
users to provide liquidity which can be outweighed by risk due to the subjectivity of impermanent loss. As a solution, we propose utilizing reserve funds capture liquidity to be used on the decentralized exchanges and held in custody independent from user possession. Additionally, a smart contract that provides the capability not only to mint, but also to burn tokens can promote scarcity by reducing the total supply. Together, the combination of these tokenomics may afford far superior benefits for the community within the decentralized venue. Allowing these functions to be amplified and dependent on
volume provides an ideal incentive to expedite adoption and foster new use cases.
- Introduction
Decentralized finance is made possible by using decentralized exchanges in collaboration with liquidity pool smart contracts. For any token on the smart chain to have an availability to be swapped on a decentralized exchange, it must have an available liquidity pool of tokens for swapping. The challenge remains on how to properly incentivize users to keep such liquidity pools maintained. Recognizing this, developers have attempted to satisfy these conditions by using various tokenomic structures with incentives for the user to supply liquidity into the pools. Although pools and liquidity acquisition may contribute to stability, an inherent burn which can achieve token scarcity with a depreciating token supply. The combination of these tokenomics seeks to eliminate the flaws of various predecessors, while providing useful incentives for use case and adoption. - Liquidity Acquisition
We understand that liquidity is crucial in any trading environment. By definition, decentralized liquidity is simply the accessibility of tokens operated and controlled by a smart contract–hosted by a decentralized exchange. Historically, market makers have been used to provide a service for buyers and sellers on traditional order book exchanges for a better user experience. The main function of these market maker services was to fill buy and sell orders promptly and reduce overall
market volatility caused by large orders. However, traditional order books have long been outdated by newer technology, and have been replaced by liquidity pools in a decentralized venue. Just as market makers are compensated for providing a service in the order book environment, proper incentives for adding liquidity are a key factor in any decentralized environment. Problems arise when the liquidity pool provider loses the incentive to add tokens into the pool, which occurs
after the token pair is subjected to impermanent loss resulting from arbitrage. As a solution, Liquidity can be taken using market activity from tradings. Liquidity is then managed by the contract as it is sold and paired accordingly thereby alleviating the users from having to subject themselves to any impermanent loss scenarios. Large liquidity pools act to decrease the volatility of the swap impacts against the overall available supply. Therefore, as the token matures, the auto-liquidity can be attributed toward an ever growing market stability capable of absorbing large market activity. - Token Pools
Traditional mining is both costly and inconvenient for the user. Frictionless, static pool rewards accrue by simply holding your tokens, and features an innovative pool-farming rewards. The idea behind this function is to eliminate token dependencies that have created problems in the past, including, but not limited to:- Pooling funds in unverified 3rd party smart contracts;
- External website interfaces;
- Pool farming are costless and rely on user action to manually compound rewards. As a solution, we propose the utilisation of a compounding reward structure that requires no additional fees .
- Depreciating Supply & Burn Address
- In a decentralized smart chain environment, contract functions can be utilized to achieve token scarcity. To do this, we propose also distributing rewards to the burn address, which is publicly verifiable for all participants to see. We can then track the depreciating supply in real-time for added transparency. In our effort to establish a baseline token burn rate, we find that these values are dependent on three important factors: reflection rate, token quantity, and market volume. The rate of pool rewards is proportional to the total supply in each holder’s pool address. It is important to note that there are two particular variables which will affect our calculations: the increasing scarcity of tokens and the quantity of tokens absorbed into the burn address. It can be reasonably understood that these features will have synergistic effects that can stabilize the burn rate into the future.
