Defi focused ecosystem

Metis Governance General DApp
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I have been in Crypto since 2021 and I have seen trends come and bleed out but one general challenge plagues the entire crypto ecosystem irrespective of chain is “Liquidity fragmentation”. So far, METIS has done alot and I believe there’s room for further improvement. This brings me to the idea of building a DEFI FOCUSED ECOSYSTEM that preserves chain-owned liquidity (CoL) and improves the ecosystem.

Let me assume that we can call this project HERCULES 2.0

HERCULES 2.0 will focus on user retention and experience which will be driven by deep productive liquidity and high yield composability. HERCULES 2.0 core objectives will be and not be limited to:

  • Attracting users, apps, and the network into alignment with a DEFI flywheel.

  • instead of short term token incentives, HERCULES 2.0 provides sustainably high yield.

  • instead of fragmenting liquidity, HERCULES 2.0 concentrates it.

  • instead of idle assets, HERCULES 2.0 pushes productivity.

  • instead of extracting value, HERCULES 2.0 returns it TO USERS.

  • 90% of net sequencer fees and a cut of core app revenue also cycle back to the chain to build chain-owned liquidity (CoL) and 10% buybacks of TORCH token on quarterly basis

Features of this project can /will comprise and integrate every layer of DeFi you can think of:

  • DEX (CAMELOT V4)

  • Trading (HYPER LIQUID* on Spot, Perp DEX, Options)

  • Dark Pools PerpDEX with privacy (RAILGUN)

  • Lending (MORPHO "BTC, ETH, TORCH, METIS and other AI bluechips assets)

  • Restaking (LOMBARD for BTC, ETHFI for ETH and BTC)

  • Staking (METIS, TORCH & AI bluechips)

  • Vaults (MORPHO / D2)

  • Crosschain minting (STARGATE / LAYERZERO)

  • Stablecoins (MAITRIX / METIS/ AETHIR*),

  • Argentic stablecoin yield engine (PENDLE)

  • Oracle data (REDSTONE),

and more features i may have missed but i hope you got the concept.

The idea is to keep the users exposure to risk very minimal with hight yields

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What specific mechanisms will HERCULES 2.0 implement to ensure that chain-owned liquidity (CoL) remains concentrated and productive without fragmenting across multiple protocols?

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The current structure of Hercules runs on AMM / CLAMM model which the returns (xTORCH) on impartment loss is not favorable liquidity providers. However, the liquidity structure of Gamma-swap prevents that that by redistributing the liquidity as a a yield component to the protocol. However, additional Vaults from Etherfi or Morpho can be deployed on the backend to serve as another yield bearing mechanism which will be fueled by swap \txn fees to hedge against volatility to liquidity providers

1 Like
6

Thanks for the explanation. The integration of Gamma-swap’s model as a hedge is an interesting approach to IL mitigation. Adding vaults like Etherfi or Morpho for backend yield sounds strategic. One question though: how do you ensure that the vault strategies don’t conflict with real-time liquidity needs during high-volume swap activity?

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In theory it doesn’t but in practicality no one controls volatility that’s why the space is transforming to adopt new models that will significantly reduce IL.
Real time liquidity can be maintained if

  1. We have proper regulation standards, this is when users will be more comfortable to leave their assets in token standards not stables
  2. With the adoption of COL, the features i mentioned will work as 1 unit. The user goes from page to page using all intended options. Just imagine it as a one-stop-shop

In case you are thinking of some whale having a massive bag waiting for price appreciation, an option of vote by the community on “debasement of idle assets” might be an option to limit liquidity fragmentation

1 Like
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Thanks, very insightful points! Especially the COL integration and the “debasement” proposal offer thought-provoking ideas for improving liquidity efficiency.

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