Education is key in the crypto world. Things move so quickly on all fronts that it is impossible to keep up.
Today I'm going to do a deep dive into Unibar's key fundamental pool mechanism; single-asset liquidity pools (SALP’s), and their future plans.
In simple terms, SALP’s are created by depositing a single token into a pool, that can then be traded upon with a liquidity provider token or "receipt" to claim back swapped assets and the initial deposit.
The core purpose of these pools is to act as the foundational primitive for all other functionality within the system.
Uniswap and balancer pools
We have been inspired by Uniswap's Liquidity Pools and the creator concept of pools within the #DeFi community. One notable project, Balancer, provides the ability to customize pools to fit many use cases; including, fundraising through the use of weighted pools. In this scenario, different token ratios can be used to generate capital.
A number of companies such as, Tapmydata and Perpetual Protocol have used this model as their Initial Dex Offering (IDO), having it act as a fair launch, allowing the market to decide the initial price value of a given token.
Our approach at Unibar was to strip everything back and focus on first principles; the foundational lego’s in the system:
- I have minted a token
- I want to sell the token and receive value
- I don't want to sign every transaction
But before we continue any further, keep in mind that there are five primary entities to be aware of:
- A seller of tokens, an actor that deposits tokens into a pool.
- A buyer of tokens, an actor that can atomically swap value.
- The token pool, the parent account where a remaining token balance is stored.
- Pool receipts, tokens that can be used to claim swapped value from a pool.
- The reward pool, a unique account for every pool participant which enables the fair distribution of value for all participants over time. The reward pool mints receipts.
Why is this approach worth pursuing?
Unibar enables users to create new pools, make deposits into them, and in return they can receive any kind of token. This infinitely increases the vector for network exposure for any participant to swap tokens with them.
We are removing the need for token pairs entirely - at the foundational level. The requirement for token routing within a transaction for unpaired tokens is removed.
This means that different actors can deposit into the same pool and request different tokens to be swapped for. This exposes a new opportunity for value to be extracted with token swaps, enabling tokens that are up and coming, unknown to the masses.
What are reward pools and why are they needed?
The short answer.
An onchain ledger for the equal and fair distribution of swapped assets to all pool participants over time.
Let's break this down.
Imagine there is a token, we'll call it UNIBAR.
There are 2 holders of UNIBAR, Alice and Bob.
On day 1 Alice creates and deposits 2 UNIBAR into a pool. A new "reward pool" account is generated just for Alice, she receives 2 UNIBAR:LP pool tokens which allow her to extract her value.
In Unibar's conceptual protocol form, pre-price oracle, all buyers may purchase UNIBAR with any token. Upon purchase, a buyer will receive a 1:1 unit of a token through an atomic swap.
So on day 1, let’s assume that a buyer "Bob" purchases 1 UNIBAR worth of value but this value is split as 2 tokens:
- 0.5 UNIBAR for TOKEN_A
- 0.5 UNIBAR for TOKEN_B
Bob has 1 UNIBAR in his account, the liquidity pool has been depleted down to 1 UNIBAR and inside of Alice's reward pool she has access to TOKEN_A and TOKEN_B if she submitted a portion or all of her pool tokens.
Now on day 2, Bob deposits 1 UNIBAR into the pool. (bringing the total value back to 2 UNIBAR) All value which is swapped within the pool is equally distributed between Bob and Alice's reward pool thereafter.
If a third actor, "Carol" swaps 1 TOKEN_C for 1 UNIBAR, both Bob and Alice will have access to 0.5 TOKEN_C respectively.
By creating new "reward pool" accounts for every liquidity provider you have a new simple mechanism for the decentralised time locked distribution of value - completely fair.
Current liquidity pool providers can be considered centralised in nature - even smart contracts themselves. As a result, smart contracts can actually be a single source of failure:
- What if a developer or audit failed to pick up an issue with the contract?
- What if a contract is drained through a front-running issue?
We assume that smart contracts are decentralised but even if we think about the base ERC20 token contract, all token balances are ultimately ledgered with an account.
A contract links an address to a balance.
A contract can do whatever actions they want to an owner's value; think elastic-supply rebase tokens.
You need to trust that a contract will conduct the behaviour that it has promised you it will carry out in a deterministic fashion.
There are no smart contracts with Unibar. This provides a number of challenges and steps against the status-quo of how dapp development should be. For better or worse, there will be individuals that will reject this approach.
There are elements which need to be worked out here and there, but in this model, the only trust you need to place on the system is when a "pool" account receives funds, it will swap value and distribute fairly in a decentralised manner. Unibar does not want to hold different tokens, it wants to get rid of them in as little transactions as possible.
As a participant of Unibar, all you need to do is simply trust in a token swap occuring. No forked contracts with potentially problematic behaviour.
The Hedera Token Service (HTS) provides the ability for distributed atomic swaps.
In the case of Unibar, when a pool account receives value it can swap for value in as few as 2 transactions:
- Send the pooled tokens to a buyer.
- Fairly distribute the gifted tokens to the liquidity provider owned "Pool rewards" in 1 atomic transaction based on prorated ownership.
Yes, ALL "reward pool" accounts will receive their token value in the same transaction – we call this process Starburst Transfers.
This is conceptually decentralised, in terms of distributing swapped value to the accounts of network participants. No smart contract holding custody of value.
For the medium-term, all reward pools will be configured with approved whitelisted tokens that a user would want to explicitly expect.
Put together, multiple liquidity providers can contribute to the same pool but configure to receive different tokens through atomic swaps creating a one-to-many relationship.
Dripping value to network participants over time
There is one aspect that we have glossed over - the pool tokens. Inside of Unibar, these pool tokens are similar to those found in Uniswap. By providing liquidity to the system, a user receives these tokens
Think of them as a "receipt" which can be exchanged to return the original token value.
They do not have tangible value by themselves, but they have access to value.
Pool tokens are used to extract value but they can also be used as the core token to create new liquidity pools. So buyers can trade value to get access to a pool token where they may use to claim value.
Think of this in the following way:
Within Unibar, I don't need to send you a token. I can send you the receipt to claim value when you are ready.
Perhaps you are an airline with a pool of airmiles to give away for loyalty. Instead of directly sending value, you can offer a "pool/receipt" for your customer to claim the value.
Alternatively, perhaps you are a farmer and you want to tokenize the carbon in your land and sell in a marketplace, to gain income over time. As the storage of carbon is an ongoing process that needs attention and care, there is a need to ensure that a "rug pull" situation cannot happen.
In this case, pool tokens can be dripped on a schedule over time. This ensures that a farmer gets access to income, whilst proving they are correctly tending to their land with ongoing evidence. ❤️
Presenting our first use-case, the focus of our efforts: 👇
DOVU, market driven and reputation based carbon offsetting
DOVU is the first platform that will combine tokenization, DeFi, and accountability for carbon offsetting. It will provide safety to investors of carbon assets and will track that farmers and land managers work over a period of time.
The focus here is around delivering a marketplace platform to facilitate connecting anyone who wants to offset their carbon footprint with farmers from all over the world. Land owners will get paid long term, but along the way, they need to prove they are being a good citizen.
If an agent is not delivering on their committed promise, and is not providing evidence, they will not receive further income. If this is prolonged, the original asset value is returned to the investors.
Unibar will be the DeFi backbone of DOVU's carbon NFT issuance platform. Combined with our dynamic NFT specification, these will form the core basis for accountability using IWA ecological token specifications.
DOVU with Unibar combines tokenization on top of real life assets and incentivises positive action to gain income over time for rural communities; Unlocking the carbon in the soil under our feet, as income by being a good citizen.
Unibar is a protocol for the fair and accountable distribution of value. We accomplish this through a combination of our unique Dynamic NFTs and novel approach to DeFi.
We can issue a token that relates to any asset and link an infinite amount of evidence to track its changes over time.
Unibar's vision is a frictionless cross chain world, it can be used to add DeFi magic to any SaaS solution. It is an API by default. Accessible for any development team to implement.
In order for any action to occur, you authenticate through locally signing with your Metamask. Sign once and your browser stores your signature for subsequent actions for a given session.
As with any new technology, there will be rigorous testing, improvements and more along the way, but the direction we are heading in now is refreshingly new. For an industry where there seems to be an endless line of forks, with only minor changes being made, this new paradigm feels different and very exciting!
For those who may not know, full disclosure, I am also the CTO of DOVU.
DOVU's carbon token issuance platform is the first key use case for Unibar. It is currently only using a subset of Unibars full potential - together, we will grow.
The future is green!