Decentralized exchange (DEX) platform Maverick Protocol has unveiled a novel incentive system that can help stablecoins and Ether (ETH) liquid stake derivatives maintain their price pegs, a press release from the protocol said on Tuesday.
The incentive system allows token issuers such as liquid stake protocols or stablecoin issuers to create so-called “boosted positions” and offer liquidity providers additional rewards at an individual price range in Maverick's liquidity pools.
Maverick is based on an AMM (Automated Market Maker) algorithm that allows traders to exchange digital assets in liquidity pools without intermediaries. Token holders can also stake their assets in the pools to provide liquidity for trading while earning a share of trading fees.
The latest update to the protocol comes at a time when decentralized exchanges (DEXs) are competing fiercely to attract traders and traffic to their platforms, as crypto investors seek decentralized trading venues following multiple collapses of centralized marketplaces and an increasing regulatory stranglehold.
To this end, some DEXs offer additional rewards on top of transaction proceeds for liquidity providers to stake their capital, such as Curve Finance's “Gauge” system. These rewards are generally paid by the token issuers in the liquidity pool.
However, “current incentive systems are too blunt,” said Bob Baxley, lead developer of Maverick.
Baxley explained in an interview that Maverick's tool is more efficient than existing offerings because it allows token issuers to concentrate reward payouts at a specific price range and build price barriers.
This could also help pegged assets such as stablecoins and liquid staking derivatives keep their prices more stable while allowing liquidity providers to earn additional revenue, the press release said.
Token issuers such as decentralized finance (DeFi) protocols or stablecoin issuers can pay out rewards in the form of any token of their choice over a period of three to thirty days, the press release said.
The story goes on
For example, Lido Finance, the largest Ether (ETH) liquid stake protocol and issuer of the stETH token, has already approved in May to incentivize Maverick's wstETH ETH liquidity pool paid out in Lido's governance token LDO, according to a Lido become governance forum contribution.
Baxley said the development would help position Maverick as the preferred marketplace for ETH liquid stake derivatives following the highly anticipated Shanghai upgrade, which allowed users to withdraw locked tokens from the Ethereum blockchain. Liquid staking allows investors to earn stake rewards while maintaining their ability to borrow and borrow using a derivative token that represents their assets locked in staking.
Liquid staking protocols are becoming increasingly popular among investors and analysts are predicting further growth for the sector following the Shanghai upgrade.
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