Spoon Exchange — What and Why?

5 min readMar 26, 2023

Lets educate community about what ve3,3 is and how Spoon Exchange is here to change the game on Core Chain.

What is ve3,3 ?

Ve(3,3) is a new decentralized finance (DeFi) tokenomics design first proposed by Andre Cronje, founder of Yearn Finance. The model combines the (3,3) design behind Olympus DAO and vote escrow tokenomics (“ve”) from protocols such as Curve and Convex.

To explain what ve(3,3) is let’s first look at Olympus DAO and Curve’s protocol designs.

OlympusDAO — “(3,3)”

Olympus DAO, introduced the (3,3) game theory model that represents the set of actions for Olympus users which lead to the most positive outcome for them. On Olympus, users can interact through bonding and staking operations (which are both beneficial for the protocol), but they can also engage in selling operations (which are not beneficial).

The set of outcomes for users is the following:

If both stake (3, 3), it is the best action for both users and the protocol (3 + 3 = 6).
If one stakes and the other one bonds, it is also great because staking takes OHM off the market and puts it into the protocol, while bonding provides liquidity for the treasury (3 + 1 = 4).
When one of the users sells, it diminishes the effort of the other one who stakes or bonds (1–1 = 0).
When both users sell, it creates the worst outcome for both agents and the protocol (-3–3 = -6).

Curve — “ve”

Vote escrowed tokens (i.e. veTokens) is a popular tokenomics model in DeFi. It has proven to align the incentives of token holders and liquidity providers which has resulted in, among other things, market outperformance of projects that have incorporated “VeNomics”.

The VeNomics model locks user funds (usually the project’s token, for example CRV) and grants voting rights and trading fees, and other benefits (the veTokens, for example veCRV). The locking period is usually between a week and four years (!). The longer the lock, the higher the rewards and voting power. Curve‘s CRV tokens are governance tokens. Their function is to incentivize liquidity provision on Curve and to involve more users in the governance mechanism.
Vote locking might be the biggest innovation introduced by Curve Finance. Because of this feature, vote weights and share of rewards are proportionally assigned in accordance with the locking period. Hence, time locking a token increases the long-term commitment from the holders, reduces circulating supply, and removes potential downward price pressure.

ve(3,3)

Considering all this, Andre Cronje’s proposed ve(3,3) design aims at combining these two powerful tokenomics concepts to address the issues related to liquidity mining, the liquidity bootstrapping mechanism employed by the majority of DeFi projects that led to the 2020/2021 DeFi boom (and bust). According to Bankless:

As we know, much of DeFi’s growth over the past year and a half has been fueled by liquidity mining. While it’s often done at the product level, such as with a DEX or money market, many protocols have also incentivized liquidity for their native token through token emissions. While it’s important for a token to have deep liquidity, these programs have often been taken to the extreme to attract yield farmers, resulting in inflation rates that would make Jay Powell blush, and leading to perpetual sell-pressure on the underlying token.
It doesn’t take a PhD in economics to see why DeFi tokens would underperform: They have a massively inflating supply with no demand to help offset this.

The goal of ve(3,3) is to better align emission of tokens to beneficial actions and solve the problem with current AMM designs where liquidity provision is temporarily subsidized while fees generation, the more sustainable incentives-generating mechanism, is not.

But Why ve(3,3) model?

Oftentimes a DeFi protocol is judged by its TVL, which can be a misleading indicator in terms of how well a protocol is actually doing. So, we must dig deeper and ask: how effective is the protocol at converting available working capital into tangible value?
Let’s have a short look at Uniswap’s 7-day numbers:
According to Dune Analytics, UniswapV3 generated $19.41M in fees over the past 7 days, while the top 15 pairs did $14.54M or 74.9% of those fees. Those top pairs only account for $1.014B or 31.78% of its total TVL. Those numbers become even more astonishing when analyzing for specific pairs with high Fee/TVL ratios. So what are a big part of the other $2.176B or 68.21% of TVL doing? The short answer is: not much.
Those stats aren’t bad by any means, it just serves to demonstrate that we can classify TVL into more efficient and less efficient TVL.

This is merely just 1 example of many metrics that defines an Efficient DEX. If we focus on more some main stream issues that ou team could see in Classic DEXes are:

How is Spoon Exchange Different (Better)?

Spoon Exchange is a self-optimizing decentralized exchange. What does it optimize for? Capital-efficient acquisition of healthy TVL.
In contrast to Uniswap or Curve, which return 0% or 50% of fees to UNI or veCRV, respectively, Spoon Exchange distributes 100% of the fees to its governance token (vePOON). In turn, liquidity providers earn protocol emissions. Spoon Exchange improves upon the best of both worlds: combining Uniswap’s pioneering AMM design with Curve’s vested-escrow and stable-pool innovations, wrapping them into a capital-efficient ve(3,3) rewards incentive system to attract fee-generating liquidity. Spoon Exchange serves to maximize the yield for It’s stakeholders and be an efficient tool for protocols to deepen their liquidity.

Image above explains the benefits of Spoon Exchange over Classic DEXes.

Also a major Question — Why Core Chain?

Conclusion

The ve(3,3) tokenomics design should help Spoon Exchange decrease their dependency on large liquidity providers which was common during the first development phase of DeFi. Unlike the majority of protocols’ designs nowadays, ve(3,3) should incentivize both liquidity provision and fee generation. This approach aims at creating an optimized system where the incentives of a protocol’s users and its tokenholders are better aligned. That could be incredibly valuable because the two groups often have competing interests.

We are confident that ve(3,3)nomics is the evolutionary step in DeFi tokenomics development and are that is why we are implement it in Spoon Exchange.

What’s Next?

This article is to give you an overview and understanding of ve3,3 and its benefits, in our next articles we will dive deeper into the differences between the Classic DEXes and Spoon Exchange’s dominance over them with some metrics along side Explanation of features Spoon Exchange has to offer.

The best way to keep in touch with us is on our Discord channel.

Resources:

Website: https://spoon.exchange/
Twitter: https://twitter.com/SpoonExchange
Discord: https://discord.gg/ceCdGUrZp5