Decentralized finance is made possible by using decentralized exchanges in collaboration with liquidity pool smart contracts. For any token on the smart chain to have an availability to be swapped on a decentralized exchange, it must have an available liquidity pool of tokens for swapping.
The challenge remains on how to properly incentivize users to keep such liquidity pools maintained.
Recognizing this, developers have attempted to satisfy these conditions by using various tokenomic structures with incentives for the user to supply liquidity into the pools. An automatic liquidity acquisition can be featured as an alternative solution compared against the traditional “farming reward” structure.
An automatic liquidity acquisition function where users are offered rewards (via reflection) in lieu of traditional farming rewards. These reflections would act to distribute tokens proportional to volume, and could thus provide a more reasonable incentive for holding. Although reflection and automatic liquidity acquisition may contribute to stability, an inherent burn which can achieve token scarcity with a depreciating token supply.
The combination of these tokenomics seeks to eliminate the flaws of various predecessors, while providing useful incentives for use case and adoption. Effectively, any application that is added with these smart contract functions could have the effect of amplifying LibraProtocol’s tokenomics.
LibraProtocol is designed to have three main components:
-The first is the “reflection” where LibraProtocol transactions are charged a fee which is distributed among the token holders.
-The second is a commission levied on transactions that will be allocated to various pools of liquidity on Pancake Swap and other platforms.
-The third component is a token burn that occurs with every transaction taxed a 10% fee split in two ways.
5% goes to thinking rewards and 5% goes to cash pools. 2.5% of the 5% sent to the liquidity pools is converted to Binance Coin (BNB) to ensure the liquidity of the LibraProtocol and Binance Coin pair.
Some token burns will be done manually by the team.