We launched an intent-based swap aggregator as an initial proof of concept. The community we gathered believed in the mission, and we had put out a token to support the protocol. It's important to consider the environment and ecosystem when the UNIDX token was initially launched. This was near the end of Uniswap summer, where people had started to experiment with things like rebase tokens or reflection tokens.
The UNIDX token was released with an initial supply of 20,000,000, but only $25,000 worth of UNIDX was collected by the team during the initial LGE. As a result, any tokens not sold during the LGE and held by the team were burned, reducing the supply from 20,000,000 to 4,000,000. There wasn't any design choice to have 4,000,000, but rather the low turnover and further reduction of the team's share to maintain proportionality made 4,000,000 an easy number. From here, the token design was simple: holders gain 17% of fees, and 33% of fees are used to buyback and burn the UNIDX token. A snapshot vote was conducted by the community roughly 4 months in to temporarily direct all buyback burns to fees for holders, and holders can vote again once weekly fees go back above $1k or so.
Since then the tokenonmics have not changed at all and have remained solidified. Even during multiple circumstances both in and out of the team control, the token remained the same. 50% of supply side fees distributed to holders, 4,000,000 total supply, and nothing else. We never raised millions of dollars nor launched multiple sub tokens which was extremely popular at the time with protocols like GMX (XVIX → GMT→ GMX). Nor has the token evolved to fit the current market climate.
The proposal: We believe the token currently does not provide any value to the protocol and is severely stunting its growth with 0 scalability.
We believe that we can change the UNIDX token into something that lets the team scale all of its products, provide direct value to its users, and still keep the token aligned with holders.
The solution can be boiled down into 3 simple direction changes. 1 - Introducing a “push pull” 2 month community vote on token inflation 2 - Redirecting some supply side fees to token buyback burns to offset any inflation 3 - Utilizing the token to incentivize good and healthy usage of the protocol
Lets go over each category and some historical examples (the good and the bad)
We believe its time for UNIDX to join the modern world and allow the token to simulate protocol growth and adoption. Each passing day a new protocol is being formed, built, or launched all with the same goal. Be number 1 and the largest trump card they seem to hold is less about the technology behind the product, but how well they can be marketed and incentivized to use the protocol. Of course there’s the exception to the rule like defillama or uniswap, however these are called exceptions for a reason. All of the top protocols directly involves the token to stimulate or create a floor for its growth.
If we use Perps DEXs as an example we have
This list represents more than 96% of perpetual volume, and according to DeFillama, UniDex is ranked number 44 in terms of daily volume. The reality of the situation is that even if you offer the best prices or the best LP mechanisms, a protocol that has already accepted emissions as a good thing is using it as a weapon to maintain its position as the most used product. Even if this is done in a destructive manner like Level, they will be replaced by another player willing to do the same thing or provide a subpar experience (and in some cases, not even having a UI!) just because they can receive linear rewards as an LP or trade and receive future tokens as rebates to compensate for trading fees.
Some may say "just use some protocol profit to incentivize usage," but this is a heavily flawed approach as well within the current playing field. Protocols are able and willing to throw out $50k of token rewards vested over a year AND keep 100% of the team's share of protocol profits and scale their business, team, ship faster, deliver better, and repeat the cycle. They can also use protocol profits to incentivize usage at the same time (back to square one again).
Entirely relying on cutting the scalability of the team has other considerations like providing really limited rewards, and ship slower with a reduced treasury for grants/hires. For an early stage growth protocol achieving 1m in volume or 500 active users, having the team forfeit a months of fees where as another team wont be just doesnt make any sense business or value wise.
The solution?
This is where the push pull model comes into play. We believe a modal where token holders vote every 2 months on an inflation budget allows for a flexible and scalable protocol while still putting token holders in direct control of spending. The budget split is designed to be flexible, burning the unused surplus, and more modern and akin to protocols like GMX.
We define the inflation budget into a 33,33,11,11,11 (total 100%) split
Trading incentives (33%): roughly 33% of the emitted tokens that epoch would go towards trading rewards targeted at rewarding volume, fee rebates on loyal high volume users, and OI balancing to keep the pool and protocol healthy. Any unused tokens would be burnt to reduce the yearly inflation
LP incentives (33%): Roughly 33% of the tokens in the 2 month epoch would go towards linear LP incentives rewarding liquidity providers with a comforting safety net for these pools that are risky than your traditional uniswap pool. This concept worked extremely well for GMX creating the largest LP in the entire perp dex ecosystem and still continues to do so. Its the same model thats now adopted by every perp dex in 1 way or another such as gains (backstop), mux, vertex, and more. Any unused tokens would be burnt to reduce the yearly inflation
ve(3,3) DEX incentives (11%): In order to grow token liquidity, the team can use emissions to incentivize liquidity providers without sacrificing the teams runway. It should be noted for the past 6 months now, the team provides less than 5% (currently provides 0% for the past few months) of total liquidity for UNIDX. This is all entirely done through ve(3,3) incentives and community LPs but with native inflation, this can become more sustainable and create a more positive flywheel. We target a certain floor APR where if its over a certain percentage through trading fees, no tokens are needed and can be burnt. Token burns as explained below will also help provide incentive to LP and provide trading activity for the pair as well, however securing some amount just in case would be good. Any unused tokens would be burnt to reduce the yearly inflation
Perp and Spot PRMM hook integrations/grants (11%): In order to get people building their own perp custom perp pools such as the ones we’ve laid out, we believe its also smart to have a dedicated bimonthly grant fund budget for people building and running these types of pools. These pools are UniDex innovation with no one else doing them. It completely changes how the perp dex space envisions liquidity and how traders tap into them. Incentivizing community development would unlock greater liquidity, tradable pairs, and market edge for UniDex. Any unused tokens would be burnt to reduce the yearly inflation
Team treasury/marketing growth in esTokens (11%): Building a treasury has been difficult with no inflation. This serves the purpose to allow outside funding, leverage for future expansion, and extending runway to continue to build innovative applications. It can also be used to help onboard KOLs and run referral program bonuses for those attracting larger audiences. For example, GMX and other similar perp DEXs offer an exclusively high tier paying out an additional 5% of the fee rebate in esGMX when holding monthly referred volume above $50m. A similar program can be adopted here if something is set aside for it.
So in simpler terms we have… Every 2 months the community decides how many tokens to inject into the ecosystem. Then from those tokens, split the amounts into budget for…
Trading incentives (33%) LP incentives (33%) ve(3,3) DEX incentives (11%) Perp & Spot PRMM hook integrations/grants (11%) Team treasury/marketing growth in esTokens (11%)
We do expect that over time, as incentives and LPs grow into something self-sustainable and the chicken or the egg problem is resolved, the bimonthly budget allocation would be adjusted to prioritize grants or Molten-related activities. It's also worth noting again that during these bi-monthly budget votes, token holders can simply signal their vote against minting new tokens. If things feel ineffective, no longer needed, or simply don't make sense for those 2 months.
Perps: Fees are earned from the leverage trading protocol when a trader opens, closes, or has a trade liquidated.
Currently the fees vary with… 30% of the fees going to the pooler who is the counterparty 35% of the fees going to holders 35% of the fees going towards development
In the new model to offset inflation which is paying liquidity providers and incentivizing trading activity the model would work like this
20% of fees going to the pooler 50% of the fees going towards buying back and burning the token 15% of fees going towards holders 15% of the fees going towards development
There is also a large fundamental difference in how fees go towards holders. Instead of using a model where the entire supply is effectively staked and forced into receiving weekly fees (which can be complicated based on certain jurisdictions, tax wise, or even centralization wise). Users would stake tokens are no lock up penalty outside of a 0.1% fee tax on withdrawing earning them fees for the protocol deployed on that chain. This would be similar to any other staking pool effectively where you can stake UNIDX and earn fees from all the prmm pools & whitelabel pools deployed on that chain. In the future as its more battle tested, we can implement LayerZero cross chain claiming for these fee claiming contracts just like Level, radiant, connext, and others have done. But this means you can claim on your own terms and earn fees in real time.
Spot: Fees are earned from the spot side when positive slippage occurs which is not as common as it seems. There are certain other aggregators that rebate you a percentage of the GAS spent on each transaction such as conveyor but that relies on them being the best rate. Currently fees are split 50% to holders 50% to the team but no more than $700 in fees has been collected so far for swaps.
Instead we would take 100% of the fees generated to buy back and burn the UNIDX token given there isn’t a staking contract for the spot side and the spot protocol is live on many more chains than the perp protocol.
How do these burns help promote healthy usage of incentives? We did a breakdown on numbers to see the economics of both.
The current model is as follows…
Supply - 4,000,000
Max Supply - 4,000,000
Emissions Year on Year - 0
LP rewards - 0
Trader rewards - 0
Amount burned each year - 0
Method of value accrual - Percentage of revenue airdropped to holders
Approx Revenue share - ~37.5% of fees collected
Annualized V3 data of Holder rewards - $255,000
Annualized buy pressure of the current marketcap - 1.7%
Monthly most optimistic case of buybacks - $21,000
New revised model is as follows
Supply - 4,000,000
Max Supply - Starts at 4,000,000 Push Pull
(every 2 months holders decide how much to allocate to mint like governmental monetary policy. If holders decide only 10k gets minted this 2 months then only 10k gets minted. If holders decide 0 gets minted then no inflation and pure deflation for 2 months)
Emissions Year on Year - Variable but capped at a maximum of 10% per year
Emissions Bi-Monthly - Variable but capped at a maximum of 3% per epoch
LP rewards - 33% of bimonthly allocation
Trader rewards - 33% of bimonthly allocation
Method of value accrual - Percentage of revenue buys back UNIDX from open market and burns it + fees from the leverage protocol going to holders
Approx Burn of fees collected - ~50% of fees collected
Approx Revenue share - 15% of fees collected
least optimistic case using current numbers with no incentives
Annualized V3 data Burned amount - $363,000
Annualized V3 data of Holder rewards - $108,900
Annualized supply reduction based on current numbers - 2.45%
Monthly least optimistic case of burn amounts - $30,250
Monthly USD emissions into circulating supply - $56,664
Normal case using 7/31 - 8/21 arbitrum 20k USDC incentives numbers annualized which was poorly advertised
Annualized V3 data of Burned amount - $1.12M
Annualized V3 data of Holder amount - $336,000
Annualized supply reduction based on current numbers - 7.60%
Monthly est. case of burn amounts - $92,600
Monthly USD emissions into circulating supply - $56,664
Note if we’re doing top 10 perp dex volume numbers this should also means roughly 20% reduction a year at current levels
We also believe it's a good time to undergo a rebrand for the token with our upcoming app chain entering the market. UniDex has evolved into a unique intent-based protocol backing a hyper-efficient Layer 2 called the Molten network. We currently have our testnet open to the public named the Magma testnet, and we believe we can use this opportunity, like many other projects have in the past, to rebrand and merge the two products.
UNIDX would be rebranded to MOLTEN as a Layerzero OFT token, meaning all bridging would be done through Layerzero rather than the synapse as part of our partnership building between the two protocols. As we use Layerzero to allow cross-chain aggregation for Molten and enable crosschain fee staking from perps, we can also deploy the token as an OFT token. What this allows is setting our own fee and having significantly faster bridge times and availability on many more networks. There would be no need for a redeployment as you would be able to send UNIDX to the new token contract and automatically receive the new MOLTEN token in the process. Because things are 1:1, that means you can use existing charts for price reference just like you can still use other older tokens like gfarm2 from GNS or MATIC for their new POL. This also means LPs don't need to worry about people waiting to sell their old tokens and can migrate whenever they feel comfortable.
As part of the merger process, we have also received high interest from venture capital funds, DAOs, and seed investors willing to OTC tokens over a vesting period. However, we have never had any tokens to OTC as all our tokens had to be used to market make and sustain development. We believe that it would be a good opportunity to further increase the supply by 15% and gain more capital to accelerate the growth of our products. We don't believe we can deliver a quality perpetual aggregator, swap aggregator, oracle aggregator, and Layer 2 network built for trading, and much more to come with the current team capacity and go to market strategy. These 600,000 tokens would be minted if they can be sold in a 2-year vesting period (these tokens cannot be staked while vesting, so they earn no fees) to interested parties. This means no immediate supply dilution or fee dilution for perpetual fee stakers for a long time but still gives the team capital to work with. If things go to plan and the protocol gains momentum, this supply increase will eventually be offset potentially within the 1st year.
This would give immediate runway to build out a dedicated marketing department for the project. Our goals right away to onboard…
This allows more of our developers to focus on developing and even allocate resources that need additional attention like stat pages, MOLTEN token dashboards, partner integrations and more.
We believe this proposal strengthens the impact we can make as a protocol more than 100 fold. Having more capital to do outreach, biz dev, marketing, and accelerate development progress for better quality products. We’re alot more than just an aggregator now and we’ve come very far, but we believe things need to change in order to successfully deliver not just in delivery, but also multiple years after delivery.