Liquidify.io: Introducing LAT & LFY Tokens
Liquidify is a decentralized protocol built to improve the liquidity and growth potential in long-tail crypto assets (assets with low liquidity, low trading volume, and low market capitalization). But, how does the Liquidify protocol transform previously illiquid assets into liquid ones? Plus, how does Liquidify ensure long-term and community-inclusive development in its ecosystem? To answer these crucial questions, we have to take a look at Liquidify’s two protocol tokens: the Liquidity Accelerator Token (LAT) and the Liquidify Token (LFY).
Liquidity Accelerator Token (LAT)
LAT will be issued initially on Binance Smart Chain (HECO and ETH will follow short after), and its prices and fluctuations will be anchored in the portfolio composed of assets locked into the Liquidify crypto asset pool. Simply put, LAT tokens track the combined prices of all long-tail assets collateralized via the protocol, plus speculation. Since the total amount of LAT is fixed, and the price-determining parameters include the volume of Liquidify’s long-tail crypto asset pool, it means that a larger asset pool will theoretically increase the LAT price. Additionally, the price of LAT will also be impacted by real-time price rises and falls of the long-tail asset pool portfolio and the asset weight ratio parameter.
Usage scenarios for LAT tokens in the Liquidify protocol include:
The total supply of LAT tokens is 45 million, and the distribution ratio is shown below:
The initial circulating supply of LAT will be primarily comprised of tokens sold to angel investors as well as those participating in private placement within a strict lock-up schedule (exact schedule: see Liquidify Litepaper). So far, 2.25 million LAT have been sold to angel investors and others participating in the private placement stage, and another 3.6 million LAT are scheduled to be sold. The private placement LAT unit price is 0.75 USDT (angel investors: 0.4 to 0.6 USDT), and the minimum purchase amount is 5000 LAT.
However, the vast majority of LAT will enter circulation via synthetization (or collateralization) mining, meaning users can lock up a number of predefined crypto assets, determined by an allowlist set up by the project team. A rating algorithm will determine the values of the locked-up assets based on several factors, such as last exchange price, liquidity (if any), and network utilization and issue a certain amount of LAT/LFY based on that. The amount of LAT that can be mined every day is limited to a certain share of the total.
But what happens once all of the LAT allocated to synthetization mining has been mined? In this case, a certain amount of LAT that is locked in a reserve pool within the liquidity accelerator will be recirculated. The reserve pool is where all LAT converted back by LAT-holders into the original long-tail assets is transferred. As Liquidify does not burn LAT, those LAT that holders want to convert back into long-tail assets will instead be transferred to a second pool, the reserve pool, part of which will be recirculated when the original synthetization mining allocation has been used up.
Liquidify Token (LFY)
LFY is the Liquidify protocol governance token, which is being designed as a partially fungible ERC-1410 protocol token that contains voting rights.
Token holders can exercise their own voting rights in the Liquidify governance system or delegate tokens to others for voting purposes. Any token holder can participate in Liquidify’s governance. As long as a user holds 1% of tokens via personal ownership or delegation, they can initiate governance proposals, including those that posit changes to the long-tail crypto asset pool allowlist, asset pool portfolio weight ratio, lock-up incentive policies, transaction fees, and other protocol-related parameters or variables. It is even possible to propose changes to the basic infrastructure of the protocol.
To obtain LFY, users must collateralize assets in the Liquidify long-tail crypto asset pool. When LAT tokens are generated through the liquidity accelerator, a certain amount of LFY tokens will also be generated. To encourage more users to lock up long-tail assets as collateral, a certain amount of LFY will be used to reward long-term stakers, thereby helping lock more long-tail crypto assets.
The total LFY amount is 45 million, but increases at a rate of 5% per year. In general, the primary function of LFY is to improve Liquidify’s community governance capabilities.
Conclusion
LAT and LFY both fulfill crucial roles within the Liquidify protocol architecture. While LAT is both a utility token for use within the protocol and an index token that tracks the combined prices of all long-tail assets that have been collateralized via the protocol, LFY is a governance token through which users can exert direct control over the protocol’s development. Both tokens have distinctive use cases to guarantee the stable development of the ecosystem, and new use cases may be added over time in a continuous process as it improves.