In our previous article, we discussed how Dubble stands out from other ve(3,3) DEXes by offering unique benefits to liquidity providers and veDUBBL lockers. However, today, we want to highlight how Dubble can be a valuable platform for protocols to park their liquidity.
When liquidity providers deposit funds into a $DUB pair on Dubble, they can reap real yields in the form of claimable $DUB rebases. This feature is not available on other DEXes in DeFi. For protocols, this can be particularly advantageous as they often have a pool of liquidity in their treasury that may not be generating any revenue.
Many smaller protocols tend to own a large portion of their native LP, which is a best practice. However, they usually keep it on larger DEXes like Uniswap or SushiSwap, where their LP does not generate much revenue besides trading fees. Moreover, if there is no trading volume, the LP becomes inefficient and ties up critical assets in its treasury, not doing much to benefit the protocol.
In some cases, protocol-owned liquidity (POL) can account for up to 50% of a protocol’s treasury reserves, which is a significant inefficiency in its revenue model. For smaller protocols, maximizing revenue is crucial, and for larger projects, it is equally essential to ensure that their stakeholders receive maximum benefits.
This is where Dubble DEX comes in.
Consider the hypothetical situation of Project X, a small protocol with a market cap of $1M and a treasury of $1.25M. They have a native LP, TOKENX/USDC, on SushiSwap worth $500k to provide liquidity to users. SushiSwap charges 0.3% swap fees, but Project X is not well-known and has a daily trading volume of just $3K.
In such a scenario, Dubble DEX can prove to be the answer.
- Project X’s POL revenue is ($3k * 365 * 0.003) = $3,285 per year.
Project X’s POL generates only $3,285 per year, a disappointing revenue stream for the small protocol. This means that over 30% of the treasury is not doing much to benefit the project apart from facilitating trades in their native token.
However, if Project X switches to Dubble DEX, they can avail themselves of several benefits that can significantly boost their revenue. By pairing TOKENX with $DUB instead of USDC, they can claim 70% of the $DUB rebases as rewards and receive an additional 15% as autobribes to incentivize voting for their pair. Assuming an average APY of 10% for $DUB, this becomes a brand-new revenue stream.
- Trading fees: ($3K * 365 *0.0015 Dubble trading fee) = $1,642.5 per year.
- $DUB rebases on half of the TOKENX/DUB LP = ($250K *0.1 *0.7) = $17,500 in stable income
This means that Dubble DEX can generate almost 5 times the revenue that Project X was generating on SushiSwap, proving to be a much more efficient platform for maximizing protocol benefits.
Suppose Project X takes a wise decision and utilizes some of their stablecoin reserves to pair with $DUB and lock for governance power on Dubble DEX. It is difficult to predict the APRs before the DEX launch, but let’s assume that they have a $100k DUBBL/DUB position that votes for the TOKENX/DUB LP. This results in the following benefits for Project X:
- They can generate an estimated $1,642.5 per year in trading fees.
- They can generate $17,500 in stable annual income through $DUB rebases on half of the TOKENX/DUB LP.
- They can earn an additional $3,500 in real annual yields through $DUB rebases on half of the locked DUBBL/DUB LP: ($50k *0.1 *0.7)
- They can receive Dubble emissions on their DUBBL/DUB LP.
- By voting for TOKENX/DUB to receive emissions, their native LP can also receive Dubble emissions.
- Assuming that Project X is the only voter, they can reclaim the 15% of $DUB rebases allocated as autobribes, which is $3,750.
By utilizing Dubble DEX, Project X can unlock several streams of revenue that can significantly increase its revenue and benefit its stakeholders.
It’s hard to predict how many votes DUBBL/DUB will receive by locking an LP for governance and receiving emissions. This innovative approach to ve(3,3) DEX governance makes it impossible to compare it with previous DEX models. Nevertheless, it’s likely that many LP lockers would also vote for their locked pool, which is not possible on other DEXes. The APR on DUBBL/DUB has the potential to be significantly higher.
Protocol-owned liquidity is no longer a necessary evil when paired with $DUB on Dubble DEX. It can become a legitimate investment strategy and a valuable asset for projects of any size.