Chronos, a newly-launched decentralized exchange, is now the third-largest dApp on Arbitrum with $230M in total value locked (TVL) after just one week.
Chronos aims to bolster the “stickiness” of liquidity by improving on the vote-escrow (ve) tokenomics made popular by another leading DEX, Curve Finance.
Borrowing from Curve’s design, Chronos rewards LPs for locking their liquidity for longer durations. LPs can also vote on “gauges” which direct token emissions to their liquidity pools of choice.
“While [liquidity mining] does an excellent job of attracting liquidity in the short term, it’s less effective at sustaining liquidity for the long haul,” Chronos said in a blog post. “So-called ‘mercenary capital’ seeks out high APRs, dumps inflationary rewards into oblivion, withdraws liquidity, and moves on to the next.”
Chronos’ native CHR token launched on April 28, topping out at $2.57 the following day, according to Dextools. While it rallied to a Friday high of $1.75, traders have since pushed its price down to $0.56.
Liquidity mining emerged as a popular means to bootstrap a new protocol amid 2020’s DeFi Summer. Early users would usually be rewarded in native governance tokens for contributing to early-stage protocols.
Although liquidity mining campaigns proved useful for attracting short-term liquidity, yield farmers are always looking for the most profitable opportunities and tended to move on to newer and higher-paying protocols to deploy their capital.
Solidly Fork
Chronos is a fork of Solidly, the protocol from controversial DeFi developer Andre Cronje, that pioneered “ve(3,3)” tokenomics.
With Solidly, Cronje sought to create a tokenomics design that prevents LPs from getting diluted, arriving at a Curve-inspired system where a token’s annual inflation would decrease as staking participation increases.
“As more tokens are vested, the impact of emission is decreased,” Cronje wrote on his blog. “Our goal is to ensure that ve- lockers are never diluted.”
But despite amassing more than $2.2B in TVL within three weeks of launching in Feb 2022, Solidly quickly crashed after Cronje announced another hiatus from crypto the following month.
Chronos builds on Solidly’s design with “maturity-adjusted” ve-tokenomics design, which offers a 33% weekly boost in the native token rewards offered to LPs over six weeks, tripling the rewards paid out to loyal LPs.
“We think we’ve come up with the optimal model — one that truly fulfills Solidly’s original vision, and aligns incentives in a way that’s maximally beneficial to every participant in the Chronos ecosystem,” Chronos said.
ve(3,3)
Velodrome, another fork of Solidly and the largest protocol on the Optimism network, has steadily grown its TVL to $265M since launching last June, giving hope that modified ve(3,3) tokenomics could bolster liquidity retention.
Hermes, a fork on the Metis Layer 2 network, has also enjoyed a consistently high TVL after an explosive launch last March. The protocol is currently the largest on Metis with a TVL of nearly $10M TVL, up from $3M 10 months ago but down from $18M last October.
BNB Chain’s Thena is another prominent fork, ranking as BNB Chain’s 10th-largest network with $75M in TVL after launching in January.
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- Source: https://thedefiant.io/chronos-dex-attracts-usd230m
