ITSA DeFi Insight: Taking a look at Tokemak
by Valentin Kalinov on Oct 1, 2022 4:42:42 PM
Tokemak enables users to both provide liquidity and control where that liquidity goes. The current state of DeFi is fragmented. Often protocol liquidity is locked in silos and incentivized through secondary tokens, which can dry up when the incentives are exhausted. Providing paired liquidity on decentralized exchanges can result in an impermanent loss for investors. Having liquidity split between protocols leads to insufficient liquidity, poor pricing, and volatility negatively impacting other projects. As the community is moving to a multichain future, projects interacting with other projects will require reliable liquidity. This is where Tokemark jumps in to become an omnipresent liquidity layer that spans across all DEXs. The protocol positions itself as a liquidity router. As such, assets provided on the Tokemark platform benefit from global exposure to the entire liquidity layer.
Authors: Valentin Kalinov, Christian Viehof
How it works
Tokemak focuses on creating sustainable liquidity in DeFi through a decentralized market-making protocol. Each asset has its own pool called a reactor, where the protocol token, TOKE, is used for directing liquidity. Users supply only one token to the pool (called a reactor), and TOKE holders become Liquidity Directors, who vote on where the liquidity should flow. The TOKE crypto asset is designed to represent a homogeneous form of tokenized liquidity throughout the Tokemak platform — from staking to liquidity providing and yield farming via Token Reactors and Pair Reactors. Token Reactors are essentially specialized token pools for user-provided assets on Tokemak. Users deposit their assets into their desired Token Reactor. At the same time, liquidity directors allocate TOKE crypto assets to a specific Token Reactor to direct the liquidity of that asset to different DEXs (like Uniswap). Liquidity directors (LDs) are users who stake the TOKE they earn by allocating votes to a specific Token Reactor. Pair Reactors are token pools composed of ETH or stablecoins paired with TOKE. Non-TOKE assets deposited into Token Reactors will be paired with assets in Pair Reactors and deployed as liquidity to exchanges.
Tokemak deploys liquidity on Cycles, which will be set to weekly upon live liquidity deployment. Assets deposited or TOKE staked mid-Cycle only become ‘active’ when a new Cycle begins. Assets requested to be withdrawn cannot be fully withdrawn until a new Cycle begins. TOKE rewards only begin for newly deposited assets or staked TOKE at the start of a new Cycle.
T-Assets are tABC tokens that a Liquidity Provider receives on a 1:1 basis when they deposit tokens into a Pair or Token Reactor. T-Assets represent the LP’s underlying claim to the deposited assets. T-Assets are transferable; however, whichever wallet holds the tABC tokens can claim the underlying deposited assets. When withdrawing T-Assets, users need to consider the pending Cycle withdrawal period.
Tokenmak’s native token TOKE serves several purposes:
- The token is staked into Token Reactors in order to vote on directing deposited assets across exchanges.
- TOKE is also the network’s incentivization and reward token for LPs and LDs.
- TOKE holders can vote on DAO decisions.
- Protocol risk mitigation as it acts as a backstop for potential losses incurred during liquidity deployment, e.g., if an LP attempts to withdraw its assets and cannot be made whole.
- Liquidity Providers earn TOKE at a variable APR.
- Liquidity Directors earn TOKE at a variable APR.
Classifying TOKE according to the ITC
Economic Purpose (EEP): The TOKE token is listed as a Settlement and Governance Token(EEP22TU03) due to its design as a market-making protocol and a DAO.
Industry Type (EIN): The issuer behind the TOKE Token is the Tokemak Foundation, active in the field of Decentralized Exchanges, Markets and Market Making(EIN06DF01).
Technological Setup (TTS): TOKE is an Ethereum ERC-20 Standard Token(TTS42ET01), running on the Ethereum blockchain.
Legal Claim (LLC): TOKE does not entitle its holder to any legal claim or rights against the issuing organization, therefore it is listed as a No-Claim Token(LLC31).
Issuer Type (LIT): The dimension “Issuer Type” provides information on the nature of the issuer of the token. TOKE is issued by Tokemak Foundation. Hence, its Issuer Type is Private Sector Legal Entity(LIT61PV).
Regulatory Framework (EU) (REU): TOKE qualifies as an Other In-Scope Crypto Asset (REU51ZZ) according to the definition provided in Article 3 (5) of Regulation Proposal COM/2020/593 final. The dimension “Regulatory Status EU” provides information on the potential classification of a token according to the European Commission’s proposal for a Regulation on Markets in Crypto Assets (MiCA, Regulation Proposal COM/2020/593 final).
The International Token Standardization Association (ITSA) e.V.
The International Token Standardization Association (ITSA) e.V. is a not-for-profit association of German law that aims at promoting the development and implementation of comprehensive market standards for the identification, classification, and analysis of DLT- and blockchain-based cryptographic tokens. As an independent industry membership body, ITSA unites over 100 international associated founding members from various interest groups. In order to increase transparency and safety on global token markets, ITSA currently develops and implements the International Token Identification Number (ITIN) as a market standard for the identification of cryptographic tokens, the International Token Classification (ITC) as a standard framework for the classification of cryptographic tokens according to their inherent characteristics. ITSA then adds the identified and classified token to the world’s largest register for tokens in our Tokenbase.
- The International Token Identification Number (ITIN) is a 9-digit alphanumeric technical identifier for both fungible and non-fungible DLT-based tokens. Thanks to its underlying Uniform Token Locator (UTL), ITIN presents a unique and fork-resilient identification of tokens. The ITIN also allows for the connecting and matching of other media and data to the token, such as legal contracts or price data, and increases safety and operational transparency when handling these tokens.
- The International Token Classification (ITC) is a multi-dimensional, expandable framework for the classification of tokens. Current dimensions include technological, economic, legal, and regulatory dimensions with multiple sub-dimensions. By mid-2021, there will be at least two new dimensions added, including a tax dimension. So far, our classification framework has been applied to 99% of the token market according to market capitalization of classified tokens.
- ITSA’s Tokenbase currently holds data on over 4000 tokens. Tokenbase is a holistic database for the analysis of tokens and combines our identification and classification data with market and blockchain data from external providers. Third-party data of several partners is already integrated, and API access is also in development.
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Valentin Kalinov is an Executive Director at International Token Standardization Association (ITSA) e.V., working to create the world’s largest token database, including a classification framework and unique token identifiers and locators. He has over five years of experience working at BlockchainHub Berlin in content creation and token analysis, as a project manager at the Research Institute for Cryptoeconomics at the Vienna University of Economics and token analyst at Token Kitchen. You can contact Valentin via firstname.lastname@example.org and connect on Linkedin if you would like to further discuss ITSA e.V. or have any other open questions.
Christian Viehof is an Executive Director at the International Token Standardization Association (ITSA) e.V., working to create the world’s largest token database including a classification framework and unique token identifiers and locators. He completed his Bachelor in Economics at the University of Bonn, the Hong Kong University and the London School of Economics and Political Science with a focus on Behavioral Economics and Finance. Currently pursuing his Master of Finance at the Frankfurt School of Finance and Management, you can contact him via email@example.com and connect with him on Linkedin, if you would like to further discuss ITSA e.V. or have any open questions.