Équilibre Finance

Identified problems and solutions.

Protocol overview

Problems attracting liquidity

Any Defi protocol needs to attract liquidity through one route or another.

Liquidity	Example	Benefit
Native	VARA/BUSD	Protocol treasury access to markets
Stable coins	BUSD/USDC	Ensure stability minimizing depeg risk
Pegged assets	No avaliable in chain currently	Minimize opportunity cost of converting assets

Current solutions lack the capacity to solve them effectively.

• Pool 2 emissions (i.e., attaching a reward to LPs paired) can be costly to maintain and lead to high selling pressure, and often result in a farm and dump that follow in "non-sticky" liquidity.

• Protocol liquidity can be hard to maintain, and liquidity may be needed only occasionally, rather than continuously.

• Bribing voters in the CRV/CVX system can be costly, since incumbents already have considerable adventage.

Introducing Équilibre Finance

Équilibre addresses these issues and presents an alternative based on the development done by Velodrome to Solidly's core and add enhancements. To recall, Solidly's key innovation was to align protocol emissions with fees generated, not simply liquidity. To do this, it would allow protocols and other large stakeholders to become veNFT "voters," using their locked-in voting power to direct future issuances and collecting fees (called bribes in Solidly) from the pools that voted for.

Velodrome has introduced several upgrades to the Solidly codebase which we have used, all carefully chosen to ensure that the protocol carries out the originally intended mechanism of allowing voters to fairly compensate LPs for impermanent losses.

Solidly had several key problems that prevented its success in the Fantom ecosystem:

Improvement: Tying Rewards with Emissions

In Solidly, voting rewards (i.e., bribes) were claimable before the emissions from that vote were committed. Équilibre addresses this issue with new mechanisms:

• First, we allow voters to make only one "active" voting decision (i.e., Voter.vote(), Voter.reset()) each epoch (note: this does not include Voter.poke()).

• In addition, bribes from fees (internal) and from external (external) sources are treated differently. Internal bribes work the same way as in Solidly, sent to the voters who vote for them. External bribes, however, are rewarded per epoch rather than per streamed, and can only be claimed once the next epoch has started. This means that a bribe sent at the last minute of an epoch will accrue to all voters in that epoch, and will be claimable once the epoch changes.

The goal of these changes is to ensure a healthy balance between voters and external bribers. Bribers are incentivized to get their bribes early in that week, to attract early voters. They also benefit from bribing later, as they have more information about competing bribes. Voters face a similar dilemma, since voting too early means foregoing potentially lucrative bribes that come later, and voting too late means voting with a lower balance ($veVARA). The latter effect is especially pronounced for voters who have blocked for shorter periods of time (e.g., voters who have blocked for weeks rather than months/years will experience larger differences in the bribes they receive for voting later versus earlier in the epoch).

Improvement: Productive Gauges

• First, we have added a governor in the chain to whiten the pairs used in the gaages. Voters will need at least 0.02% to submit a proposal, and 4% to reach a quorum. To ensure that those whitelist gauges are financially aligned with our system, we have also eliminated the possibility of whitelisting by paying a fee. The governor contract will not be available from launch.

• Secondly, we have also added an emergency "Commissioner", which has the ability to remove any pair that it deems unproductive to the overall ecosystem. It is currently undefined who will act as commissioner.

• Third, we have doubled the initial swap fee from 0.01% to 0.02% to ensure that voters have twice the incentive to direct emissions into productive liquidity. It remains lower than alternative exchanges (e.g. Curve at 0.04%). Stable and volatile pairs also have different rates, both of which are modifiable up to 0.05%.

Improvement: Prolonged Emissions Decay

In Solidly, emissions from the protocol decay too quickly and start emitting a large number of tokens, which makes incentives for late entrants minimal and huge for early adopters. Obviously, early adopters of the protocol should be rewarded for the risks they take, but we observed that emissions decayed too quickly in the Solidly model. So we made a few adjustments to ensure that, while early adopters would continue to be rewarded, the protocol would remain an attractive opportunity for future users and protocols.

• First, we modified the emissions growth function to:

(veVARA.totalSupply ÷ VARA.totalsupply)³ × 0.5 × Emissions

• Second, we eliminated the negative vote, as we considered it too zero-sum.

• Third, we removed the "boost" of LP emissions for voters. Instead, those emissions are reallocated to all LPs, regardless of veNFT ownership status, to ensure that voters can incentivize external liquidity.

• Fourth, we have adjusted the initial distribution so that it is much more oriented to small players and other participants in the DeFi ecosystem. This was done to avoid a fleeting TVL race that brings nothing as much to users and the protocol, is implemented through a standard airdrop contract that dynamically mints VARA for eligible addresses.

Improvement: Team Support

At Solidly, the lack of a "team" meant a lack of post-launch support. Our team ensures that our protocol has white glove support for our contributors / blockchain and other parties. To ensure that our team has sufficient resources to pay contributors and scale our products, a % of perpetual emissions will go to our team through a multisig wallet.