🔁Token distribution & Vesting
The shortcomings in tokenomics of DEXes
Bootstrapping liquidity has been a major challenge for decentralized exchanges (DEXs). In order to incentivize liquidity providers to deploy capital in their protocol, DEXs usually ressort to high token emissions : minting a high number of tokens that directly goes to mercenary yield farmers, resulting in an important sell pressure.
If you graph the charts of DEXs governance token vs ETH, you will probably see downward charts only. So now what? Should you give up on investing on DEXs?
Merlin approach : Distribute mainly escrow tokens that captures Real Yield and utility
At Merlin, emissions are distributed in the following way : 87.5% in $stMAGE and 12.5% in $MAGE.
The first immediate consequence of this design is an extremely reduced selling pressure compared to standard DEXs (that gives 100% of their emission in their liquid token).
$stMAGE, our escrowed token, is instrumental in achieving the long-term objective of the protocol and our objectif to become the leading DEX on zkSync Era. Essentially, most of our farming rewards require vesting to become liquid.
What value is there in accumulating $stMAGE? Is that a trap? No it’s not, because you can use $stMAGE to :
Capture Real Yield (dividends) by getting a share of all the protocol revenues (and the real yield will be partly distributed in ETH-USDC LP)
Boost the Yield on your favorite LP by allocating $stMAGE to it
Access to benefits of projects launching on Merlin Launchpad
But what about vesting $stMAGE to $MAGE?
Strategy : Staking vs Vesting? Real Yield vs Liquidity?
Investors can convert their stMAGE to MAGE by vesting their tokens for a minimum of seven days, which provides a 1:0.5 ratio. For a maximum vesting duration of six months, investors will receive a 1:1 ratio
In some protocols, those who vest their tokens still receive a part of the protocol fees. This is where Merlin made a drastic design change : users who vest $stMAGE will not get any dividends. This means all the Real Yield will be exclusively in the hand of Stakers.
So the user should be careful when executing his strategy
Deflationary mechanisms
Users that chose to vest their stMAGE for a duration inferior to 6m will only be able to get back a portion (between 50% and 100%) converted to MAGE tokens. The remaining excess MAGE portion is permanently burned, reducing the total supply.
Token Supply and Distribution
The table above is a summary. 4 important points :
We initially allocated 13.5% of tokens to the team. But after several discussions, we decided to allocate 3.5% of our own allocation as an airdrop to give back to the community.
A first part of this airdrop will be allocated to investors that participate to the public sale to thank them for their early support. Investors buying at listing will not be eligible to this specific airdrop
As you can see (and please read the exact details below), most of the emissions and vesting are in $stMAGE. This ensures a low selling pressure and long term sustainability
The Core Farming Pools and public sale will only be launched after Audit is completed by Certik in order to reassure investors
To dig into the depth of the numbers, find below the details :
28% or 22,400 tokens to liquidity mining with 12.5% or 2,800 MAGE tokens and 87,5% or 2,800 stMAGE linearly unlocked over the next 3 years
1% or 800 tokens to Advisors in stMAGE linearly unlocked over 2 years
5% or 4,000 tokens to Core Farming Pools in stMAGE linearly unlocked over 6 months
5.1% or 4,100 tokens to Partnerships in stMAGE with a 3 month cliff and then linearly unlocked over 2 years
10% or 8,000 tokens to Core team where 50% is in MAGE and 50% in stMAGE linearly unlocked over 2 years
3.5% or 2,800 tokens for an Airdrop in stMAGE with a 6 month cliff
Remaining allocations:
10% or 8,000 tokens for the Protocol Owned Liquidity where 100% will be unlocked at TGE
1.5% or 1,200 tokens for the Ecosystem linearly unlocked after 3 months
4% or 3,200 tokens for the Reserves linearly unlocked after 1 month
2% or 1,600 tokens for the Development fund where 100% will be unlocked at TGE
MAGE
4.5% or 3,600 tokens for the KOL sale where 35% or 1,260 MAGE tokens are unlocked at TGE and 65% or 2,340 tokens in stMAGE.
9.4% or 7,520 tokens for the private sale: where 25% or 1,880 MAGE tokens are unlocked at TGE and 75% or 5,640 tokens in stMAGE.
16% or 12.800 tokens for the public sale: where 60% or 7,680 MAGE tokens are unlocked at TGE and 40% or 7,680 tokens in stMAGE
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