ApeSwap Treasury Bills
Game Theory, Loyalty or Speculation? You are all covered.
The long awaited introduction of ApeSwap’s interpretation of DeFi Protocol-Owned Liquidity (POL) is finally upon us! What does this mean for us, as common folk and users of the protocol?
Here’s an article I wrote based on my understanding of how it can significantly improve our favorite DEX. However, it does require a new component of faith from the participants on a collective level.
The Problem Statement
Prior to Treasury Bills, there was a perceived thought that $BANANA emission and circulating supply was climbing in an uncontrollable state. There wasn’t simply enough mechanisms to “lock” the token to reduce circulating supply nor enough burn mechanisms to take down inflation to a point where most users will feel comfortable with.
Let’s take a look at the current mechanisms (before Bills):
Utility — Farms, Pools, Vault, Lending, $GNANA
Burn — IAO, weekly/quarterly burns, partner protocol burns, $GNANA, ApeLabs
It is extremely delicate to drastically make changes that impact supply/emission and Treasury Bills is a good introduction to stack some additional options on top of what ApeSwap has at the moment to bring supply/emission more inline for longevity of the protocol in a consistent manner.
What does Treasury Bills do?
Traditionally, most DEX/AMMs like ApeSwap will incentivize users to supply Liquidity Pair (LP) tokens to allow swaps to happen on the protocol. Incentives are usually in the form of a cut of the swap fees, as well as the native token, in our case — $BANANA.
The main gripe is that there are vampiric users who will join in and extract as much value as they can from the protocol, and when there are better pastures out there, sell everything and move on. At the end of the day, though the DEX does earn from the swap fees, sustainability is an issue as this cannot last for the longer term.
This is where Treasury Bills come in. The concept hails from the DeFi 2.0 trend from late 2021, where instead of “borrowing” liquidity from users, protocols owned the liquidity themselves. When this happens, it will open up additional doors to other options for the protocol like ApeSwap to be more flexible and most importantly — sustainable.
Users can now exchange selected LP tokens that they own for $BANANA, which will be priced at a discount. This exchange gives ApeSwap it’s own liquidity and the user, $BANANA at a cheaper rate compared to buying it directly off the DEX. The catch? The amount of tokens are vested linearly over a 14 day period.
Discount rates are calculated dynamically in the background over time. As Bills are purchased, it lowers the discount until it reaches 0%, where at that point, no more purchases are allowed. In time to come, the rate will climb again until somebody apes into another Bill, which will repeat the cycle.
Must I buy Bills?
Participating in Treasury Bills is not mandatory. There are folks who shun away from any kind of period lock in the DeFi space and I do respect their choice to remain fluid to respond to any market movements.
However, if you have been with us since the beginning or see the same kind of commitment that I do on the part of the core team, do consider contributing to this initiative.
The LP tokens that are swapped for Treasury Bills go into the treasury. As more bills get sold, the TVL grows and the protocol, on top of earning full fees from the supplied LPs, will have additional options when it comes to reacting to trends and market forces. At this juncture, there are no definite plans for the use of the treasury yet as it is in an accumulation phase.
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I’ve put this link here to the treasury for future reference on it’s size and LP quantities for reference.
Personally, I have been very excited with the pivot to DeFi 2.0 by ApeSwap. As most of us have already seen, the DEX landscape is extremely competitive with a limited amount of users and their liquidity moving in/out of the different blockchains.
Some protocols had to risk it all by offering ultra attractive but hard to sustain benefits to lure in TVL, only to finally collapse when another comes up with an even more unbelievable offer. In this anon space, deleting and recreating is an easy way out that some devs have chosen since there are literally no repercussions.
So having Protocol Owned Liquidity in the form of Treasury Bills is a good way to begin the next leg in the long journey ahead.
I would like to note down some of my ideas for the uses of the treasury as it grows over time. These are ideas I’ve taken from other DeFi 2.0 implementations and some I’ve thought about that are specific to ApeSwap. I hope the devs do consider them from the perspective of a regular joe in the ecosystem.
- Instead of holding the LP tokens in the treasury, consider taking a percentage of each pair, say 25%, to be put in a position to generate higher yields over time (in a SAFU manner). A good option would be to break the LPs and supply the individual tokens in Ola.
- Use liquidity in the treasury to prop up price floor of $BANANA when needed by swapping a portion of non-$BANANA pairs to $BANANA pairs.
- Use fees earned from swaps to create a high APR, single stake pool which rewards in $BNB or stablecoins using 100% unredeemed Treasury Bills (minimum silver tier or specific trait)
- Promote the NFA/NFB community with periodic airdrops of earnings from the treasury in the form of LP tokens or purchase $GNANA for the airdrop using earnings for an additional burn/reflect effect.
- ApeSwap could consider having IAO launch projects contribute a small portion of the initial liquidity to the treasury after the completion of the IAO.
It would be an honor to see any of these ideas become reality in the upcoming details for Treasury Bills!
And before I go, here’s a little tip for those who want to get the best out of Treasury Bills. The dilemma is the “when”. When is the best time to get a Bill of your own.
For now, the best way is to look at the discounts offered at the time of purchase. Discount % goes up over time when no one is buying and drops when someone buys. The consideration is what’s the best you can do with what you have vs what is the returns of the Bills over a 14 day period. When the Bills’ discount is displaying 2%, what it actually means is a 0.142% DPR in the growth of the quantity of $BANANA for what you are putting in. So you may want to “shop” around, compare and see what’s best for you.
Myself? From now on, it’s Treasury Bills, all day, everyday.
I am not a coder, so I can’t chip in with protocol development.
Neither am I a social media influencer that has thousands of followers to inspire.
Nor am I insanely rich enough to back the project.
But in my small little way, I do my part for ApeSwap with the knowledge that one day, I will be rewarded for my efforts — (Relationships/Knowledge/Wealth) Yes, in that order too!
So if you believe as strongly as I do in the long term for ApeSwap, I strongly urge you to put aside a part of your portfolio and join in the Treasury Bills growth!
Yours sincerely, JP.