Part I — Driving Volumes to DeFi Projects: Exploring the impact of advanced Referral Systems
I am happy to finally be breaking the silence and giving you guys an intro to the idea that has been living in my head for a long time.
The DiBs Protocol.
A glimpse of nostalgia
Before we called it DiBs, it was “Affilio,” & the idea has been going back to the summer of 2021.
We even created a group on telegram already back then, so might throw this in here for nostalgia https://t.me/affilio_xyz (join and throw in some memes). The chat was never used as the idea was put into the closet to dust a little bit more.
But the core idea back then was the same as it is today;
Use Muon to build a decentralized, permissionless, easy-to-integrate referral system, without touching the smart contract integrity of the protocol.
The vision, DiBs should become a platform that improves every crypto project by driving volume & attention to it.
With its innovative “volume as a service” approach & reliance on muons off-chain infrastructure, DiBs is easy to integrate without changing the smart contract integrity of the protocol. It offers a cutting-edge solution for driving volumes to DeFi projects.
I am excited to see it being adopted in the wild. This article is an in-depth exploration of the vision behind the DiBs referral system.
Revolutionizing DeFi Liquidity:
Before we dive into the impact of advanced Referral Systems in DeFi and Liquidity, let’s first take a quick look at the history of onchain Liquidity incentives in general.
A Journey through LP Farming from Synthetix to Curve to Solidly
To truly comprehend the power of the Solidly model, it’s necessary to look back at the history of DEXs and LP farming, particularly in 2020.
For those who weren’t around back then, here is a quick recap:
It’s Q1 of 2020; covid just hit the world, and everyone is in peak panic mode. Uniswap still needed to gain popularity at the time, and onchain volume and TVL were meaningless.
People were skeptical about Uniswap’s potential in crypto, and the term DeFi still needed to be coined. Most on-chain trades, if any at all, still went through IDex, an order book-based DEX like EtherDelta. Despite the non-existence of the on-chain DEX space, one specific project, Synthetix, was innovating in a way that would change the landscape forever. Synthetix invented “LP farming,” which involved depositing SNX/ETH into Uniswap, taking the LP, depositing it into a staking contract, and receiving yield.
Yield Farming was born in the earliest days of DeFi; the rest yearn, compound, balancer,sushiswap, DEUS, and Curve came shortly after.
The glory days of “DeFi Summer.”
read more about the first LP farming it in this thread:
Andre Cronje, the godfather of DeFi & Yieldfarming
It makes sense that Andre Cronje is the one that came up with the ve(3,3) model as the “godfather of DeFi” he is the person that understood the game of farming better than anyone else, as he describes in his article; he & the fantom foundation were probably one of the biggest winners of DeFi summer: https://andrecronje.medium.com/fantom-an-inside-fModelial-peak-at-being-a-crypto-company-323d29fb5e81
But before we dive into the ve(3,3) model, let's take a closer look at the beginnings & how the veCRV model paved the way for the innovation.
The issues of incentivizing LP & TVL directly
Despite its initial success, Incentivizing LPs directly with governance tokens of a protocol deemed itself unsustainable, as LP farmers are inclined to buy into the token, farm it, and dump it as soon as the APR decays.
Many projects attempted to solve this issue in one way or another.
Ohm was one of the protocols that tried to change the game by creating protocol-owned Liquidity to farm and create more sustainable Liquidity. In addition, Frax further improved the game of protocol-owned Liquidity by using their stablecoin backing to farm on protocols.
However, the protocol that revolutionized the emissions game forever was Curve by introducing the veCRV model.
The game-changer veCRV
The veCRV model’s ability to promote a significantly more sustainable and stable liquidity supply stands out as an achievement that has garnered much recognition.
Curve’s idea was to incentiModelLPs and token holders to lock their CRV into veCRV for four years to receive:
- Boosted APRs based on their veCRV share compared to other farmers.
- A share of the platform revenue is generated by trading volume and fees.
- Voting power empowered them to direct the emissions of CRV tokens where they deemed fit.
Bribing for emissions was born.
With veCRV having ownership and voting power to direct CRV emission, there was a genuine, viable future economic interest in owning veCRV. Still, there was also an economic interest every week to get veCRV voters to vote for the pool you wanted emissions going towards.
DeFi developed a novel mechanism called “Bribing” protocols, or projects could now use their governance token emissions to “bribe” veCRV holders to vote for their pool and redirect emissions to their pools.
By this, veCRV became technically a funnel for all protocols that wanted to bribe to get short-term emissions; this incentivized users to buy CRV, lock it into veCRV then receive weekly cash flow for their votes.
Protocols could also decide to buy CRV and lock it, creating a real deflationary force in tandem with the inflationary token emissions to drive Liquidity to the platform.
Andre’s ve(3,3) innovation — Fees transform into Bribes.
In the Curve model, a small percentage of fees generated by the exchange is paid to veCRV holders.
However, in the Solidly model, fees are no longer paid to liquidity providers but are instead redirected to veCRV or veNFT holders.
This redirection of fees is a crucial innovation that aligns incentives within the system and drives all rewards to token holders.
The success of the Solidly model is predicated on the belief that redirecting fees to voters in the form of bribes is an improvement over general bribes received from protocols.
This approach pays all emissions to LPs & all profits to token holders, providing a perfect alignment of incentives.
It long-term drives token-holders to lock emissions, creating even more deflationary pressure than the veCRV model.
Only one minor detail, needed to get more attention. Volume.
Volume — The key metric for growth and success.
Volume is the primary goal for crypto projects, especially for DEXs it’s a key metric, and while most focus on liquidity building, the real goal is volume.
In Solidly, volume translates into fees that translate into bribes making it the perfect system for adding DiBs and allowing partners to bribe volume directly instead of voters.
As we learned in physics, friction affects motion.
Let’s take a look at the flow inside a DEX:
- Low efficiency — the initial model of SNX was to bribe LPs directly, as we learned before, it has the lowest efficiency
- Medium efficiency — veCRV and veNFTs model to funnel all bribes through the governance token was genius and increased the capital efficiency by manifolds
- Lowest friction & Highest efficiency — integrate DiBs into your Solidly DEX and make it possible for projects to bribe for isolated pair volume directly, which gets translated into fees > then bribes > then votes > then emission.
Dibs' isolated pair leaderboard tech creates a frictionless flywheel.
Using DiBs isolated pair leaderboards to drive volume directly to a specific pair revolutionizes the liquidity game; projects can now create a DiBs pool for their pair, then deposit their weekly bribes into it and generate a direct incentive to trade that pair, which drives volume to it that generates fees that will be paid to voters to direct emissions to the pool.
It creates a virtuous cycle, the frictionless flywheel.
Dibs offers any DEX “trading competition as a service.” As we learned from $LOOKS or recent $BLUR, incentivizing traders directly allows projects to steal massive market share even from established players like opensea.
DiBs maintains your project’s smart contract integrity.
By using the decentralized oracle network MUON, DiBs operates almost fully off-chain, significantly increasing security without compromising benefits.
DiBs can be easily integrated into any DeFi protocol as a fully operational referral system without requiring significant changes to the contract infrastructure. With minimal, smart contract changes needed, DiBs offers an ideal solution for driving volumes to DeFi projects while maintaining your projects' smart contract integrity.
Check how it is to integrate DiBs into uniswap in this integration guide:
DiBs is effective for any DEX, not only Solidly based ve(3,3) ones.
DiBs offers a versatile referral system that can benefit any DeFi project, not just Solidly-based DEXs.
If your project generates any volume or sales, DiBs can be helpful; if you’re curious about integrating DiBs into your project or want to learn more about how it can boost your revenue streams, don’t hesitate to reach out to our team of experienced developers, that are happy to help you integrate.
Fill out the form now:
DiBs is already making significant progress behind the scenes even tho we haven’t launched a website or finished all the documentation. But with the highly successful integration into thena, more integrations are already waiting. If you want to implement DiBs into your DEX, fill out the form, and we’ll contact you shortly:
Join the growing number of projects that have already integrated DiBs and experience the benefits of a highly efficient and sustainable referral system.
Some more references
My latest Twitter intro to dibs:
Thena’s documentation of their dibs integration:
THE (3,3) Referral System
THE (3,3) Referral System, also known as DiBs Referral System, is a growth-hacking feature of THENA that allows users…
Github, uniswap in this integration guide: