Fair Fungible Vote Token
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Protocols with vote escrow (ve) lock tokens typically set the maximum lock period at 1 to 4 years and grant voting power in proportion to the remaining lock period. At first glance, this system of earning more shares the longer you lock may seem advantageous, but in reality it presents several critical issues:
Designed for Absolute Team Dominance Regardless of Tokenomics:
A 1-4 year lock-up in the crypto scene is almost an eternity. Users who lock up for just a few weeks gain near ZERO voting power compared to their locked amount. Specifically, a 1-week lock grants only 1/208 the voting power of a max 4-year lock. This implies that if most people do not opt for the max lock, even starting with just 10% of the tokens locked in a max lock can allow the team to monopolize most of the voting power. Thus, the lock-up period is just misleading, and to genuinely participate in governance and share in protocol profits, one must lock up almost eternally anyway.
Inefficiencies and Inequities Due to Non-Uniform Lock-Ups:
The necessity to use NFTs, given that each lock-up is distinct, makes liquidation difficult and inefficient. NFTs, often with negligible trading volumes, require complex calculations due to varying discount rates based on the lock period. The reasonable market price changes over time, requiring continuous adjustments to listed prices, leading to constant value extraction by arbitrageurs. Moreover, voting must be repeated for each NFT, consuming significant gas and time, and quickly becoming tiresome. It's also challenging to verify voting power in one's wallet.
Inevitable Emergence of 3rd Party Wrappers:
The difficulties and inconveniences of liquidation lead to the creation of 3rd party governance wrappers. These typically accept NFTs in exchange for corresponding fungible tokens, voting on the user's behalf, and compounding rewards. Naturally, this process extracts substantial fees and introduces risks of rugs, security breaches, and de-pegging.
Kyo Finance rejects these deceptive tokenomics and introduces transparent fungible voting tokens, ensuring equal lock-up conditions for everyone and facilitating immediate and easy liquidation through the $KYO/$veKYO pool.
This approach has significant advantages:
Lowered Barrier for Lock-ups : The ease of liquidation actually reduces the fear of lock-up. The fact that once locked up, you cannot exit for 1-4 years regardless of circumstances acts as a barrier, preventing entry unless there is strong conviction. In NFT markets where transactions rarely occur, items don't sell well without at least a 50% discount. In comparison, being able to receive market price by just paying a swap fee encourages more lock-ups.
Historically, this method has maintained a 1:1 peg well unless the chain or platform completely dies. If the peg breaks, the demand for veToken lock-ups shifts entirely from direct locks to swaps, driving it back to re-peg.
Active trading in the KYO-veKYO pair generates substantial fees, which creates a virtuous cycle by increasing the pair's APR and promoting more KYO lock-ups.
This is actually happening in all other NFT-based veDEXes. The two most commonly used methods are NFT marketplaces and Discord channels.
In Discord, you find someone to trade OTC, negotiate a suitable price, verify if it's detached through platforms like Debank, and then trade through an escrow.
The second option is NFT markets, but aside from the typically high fees of 2.5-10%, there's barely any trading volume available. Let's look at an example.
First, you need to decode this cipher to calculate the actual value of this NFT.
The value represents the actual locked amount with 18 decimals, so you need to divide it in the calculator. Of course, since the NFT marketplace image doesn't allow text copying, you'll have to type everything manually.
Lockend date 1844640000 is in Unix timestamp format, so you should convert it using a specific website.
In the end, the decoded result shows they're selling an NFT containing 20 tokens worth $1.32 each, locked for 3 years. In other words, they're trying to sell $26.4 worth of tokens that will unlock in 3 years for $388 now! So you can consider him a scammer.
As you can see, since proper valuation itself isn't easy, most NFT listings are fake listings, and you can only trade primitively by finding bidders on Discord channel, with actual trades typically happening at discount rates between 20-60% according to the unlock days left. Like this, the fact that users need to accept large discount rates and high NFT marketplace fees for early exit, and even then they need luck to match with a buyer, is preventing many users from willingly participating in lockups. It's hard to find any cases where the total cumulative volume after launch exceeds $200k.
Since it can be composed of regular LP pools, trading is unrestricted and you can exit at market price anytime. When discounts occur, the market buying route takes priority, so the price continuously returns to the pegging price. Compared to the NFT market, the fees are much lower, and you can adjust the quantity as desired. Since it maintains a pegged state on average, the discount rate rarely exceeds 5%. While depegging can occur if bribes go to zero and demand disappears, in such cases, if trading is only possible in the NFT market, bids would immediately go to 0, making the situation much more severe.
Trading volumes are much higher, reaching from hundreds of thousands to millions daily.
