🛡️DeFi 2.0 - PCV

“PCV” (Protocol Controlled Liquidity)

It is no exaggeration to say that YieldFarm DeFi's success in DeFi 1.0 was driven by the Liquidity Mining system. The DeFi 1.0 service had to provide huge incentives to Liquidity Providers(LPs) to maintain the Liquidity Mining system. As a result, the protocol, in terms of its service and utility, which did not provide sufficient incentives to LPs, quickly declined. This brings out the conclusion that the YieldFarm DeFi 1.0 model, without any deflation triggering system that can offset surplus incentives, will hold fatal disadvantages of short lifespan and long-term operational difficulties. Defiant introduced the concept of “Defi 2.0”.Link

DeFi 2.0 moved away from the Liquidity Mining system and released “PCV” (Protocol Controlled Liquidity) for long-term management, and Blokfield.INC has actively been embracing this system to service WisteriaSwap. WisteriaSwap is a new DeFi 2.0 (PCV) model that combines two models: a system in which the protocol can secure its own liquidity, and a system in which inflation can be controlled by burning tokens continously. WisteriaSwap aims to overcome the risks of Liquidity Mining of DeFi 1.0 and the short life span of DeFi 1.0.

How does it work?

Basically, WisteriaSwap(WST) builds and maintains its own WST-BUSD LP from initial IFO and deposit fee. Since more than 90% of the liquidity supply in the market is provided by the WisteriaSwap protocol, WisteriaSwap can reduce the over-incentives to maintain the Liquidity Mining system, and this incentives can be shared with WST holders. All WST-BUSD LP owned by the Wisteria Protocol are not staked in WisteriaSwap and all LPs are stored in Treasury.

Call Option (1,1)

WisteriaSwap is mined for “Call Option” with certain % of WST issuance, and only mined WST is distributed through “Call Option”. Call Option gives users opportunity to purchase WST at a discounted market price. Funds raised through “Call Option” will be used to provide WST-BUSD liquidity or to build Treasury Fund. Since the amount of WST that can be sold as “Call Option” is limited, users can accurately predict the expected supply pool of WST. The Treasury Fund will be held with several altcoins including BTC, ETH, BNB and BUSD and will be used for “WST Token Buy-Burn system”. Through the Treasury Fund, WisteriaSwap can burn more WST tokens and stably provide users liquidity. WisteriaSwap is a DeFi 2.0 model that does not apply a stable coin system model such as “OlympusDAO Fork Service”. Therefore, we do not guarantee the formulation of WST=1USD

The Game Theory of Wisteria – (3,3), (1,1)

(3,3) is the idea that, if everyone cooperated in Wisteria DAO, it would generate the greatest gain for everyone (from a game theory standpoint).

Currently, there are three actions a user can take:

Staking (+2)

MINT(Call Option) (+1)

Selling (-2)

Staking and minting are considered to be beneficial to the protocol, while selling is the opposite. Staking and selling will also give fluctuation to price, while minting does not (we consider buying WST from the market as a prerequisite of staking, thus causing price changes). If both actions are beneficial, the actor who moves the price also gets half of the benefit (+1). If both actions are contradictory, the bad actor who moves the price gets half of the benefit (+1), while the good actor who moves price gets half of the opposite (-1). If both actions are detrimental, which implies both actors are selling, they each get the downside factor (-1). Thus, given two actors, all scenarios of what they can do and the effect given to the protocol is shown as listed: If the actors both stake (3, 3), it is the best thing for both of them and the protocol (3 + 3 = 6). If one of the actor stakes and the other one mints, it is also positive, as staking takes WST off the market and puts it into the protocol, while minting(Call Option) provides liquidity and Fund for the treasury (3 + 1 = 4). When one of the actor sells, it takes out the effort given by the other one who stakes or mints (1 - 1 = 0). When both actors sell, it will create the worst scenario for both of the actors and the protocol (-3 - 3 = -6)