Tying it together
Putting the pieces together
Last updated
Putting the pieces together
Last updated
The world saw the power of a decentralized, trustless financial system, and blockchain as a business model was proven beyond all doubts. Rapid innovation introduced us to novel web3 technologies and applications of value transmission.
Indeed, we borrow the powerful concept of the AMM to facilitate universal access to game tokens and the trustless borrowing / lending mechanism pioneered in DeFi for our NFT platform offering. However, for all its benefits, DeFi also introduced a number of inefficiencies, especially for liquidity provision.
Ultimately the limitation of early DeFi projects comes from its inability to generate credit growth, and therefore leverage. Without credit growth, capital is fundamentally underutilized. An excellent example can be seen on tradition DEX platforms.
The capital consumption vs trading facilitation of a platform such as Curve finance is 21bio USD TLV for facilitating 300mio USD of daily trading volume at the time of writing.
While these numbers are undoubtedly impressive, one can instantly see the issues described by comparing Curve capital utilization to that of Citadel, a large traditional market maker utilizing leverage. By its own metrics, Citadel trades over 96bio USD in daily stock volume (with stocks being only own of its trading focuses), using a capital base of 35bio USD.
The difference is staggering: the biggest DEX in DeFi 1.0 provides 0.0143 USD of trade facilitation per 1 USD of capital vs a traditional finance firm which provides at least 2.76 USD of trade facilitation per 1 USD of capital. (30nov21 data)
The difference of course is the leverage Citadel employs on its balance sheet to facilitate liquidity provision. We use the example to illustrate the difference in capital efficiency only, and should note that we are much more aligned with the mission statement of DEX AMMs rather than Wall Street establishments such as Citadel. Our goal is to bring the advantages enjoyed by traditional finance institutions to everyone and improve the playing field.
We strongly believe DeFi is the future, and wholeheartedly admire the innovators who opened the doors to this new fair model of value exchange. At the same time, we are looking at the optimal way to accelerate the growth of crypto gaming and help studios gain market access in the most time and capital-efficient manner.
Our aim is to do this while protecting and preserving the experience of gamers who transact in the game token, as well as attracting investors who don’t want to be exposed to rapid token inflation.
Is aimed at bringing partner studios onboard by providing pair liquidity. The treasury will issue a revolving credit facility of Versa tokens to the LP and will receive back trading fees and partner incentives. The treasury will return the tokens from the LP as external liquidity providers enter to support the pair. This mechanism achieves a number of aims. First it allows far more optimal capital usage which means more partner games can be quickly onboarded, and gamers experience better trading costs. Second, it keeps the Versa token supply well controlled. The treasury will issue and withdraw liquidity and will supply it very attractive rates, ensuring the token and project remain highly profitable and attractive investments. We believe our unique treasury management offers a compelling edge and will help accelerate development the NFT gaming ecosystem.
