Izumi Finance Token Economy Model Analysis

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A summary of key points about Izumi's updated token economy model.

Izumi Finance, a liquidity optimization protocol based on UniSwap V3, recently announced a two-phase development plan for its token economy. TokenInsight summarizes the full highlights as follows.

Phase 1: Initial launch phase, aiming at project promoting and developing long-term loyal users

  • Native token iZi are mainly used for iZiSwap cross-chain transaction fees and setting up the LiquidBox liquidity incentive pool.
  • iZi can be obtained mainly through liquidity mining, in addition to secondary market exchange.
  • Izumi Finance incentivizes users to stake iZi for higher liquidity mining rewards, borrow from Curve Finance's Boosting mining mechanism.

Phase 2: Decentralized governance phase, dedicated to motivating users to actively participate in proposal voting, as well as protecting the long-term interests of users

  • When the project reaches a certain point, Izumi Finance will enter a decentralized governance phase and open up the stake of iZi to obtain the derived utility token ve-iZi
  • ve-iZi is designed to be non-tradable and non-transferable. It can only be obtained by staking iZi, which cannot be withdrawn before the timelock expired
  • Similar to the calculation of Solanium's derivative token xSLIM, the balance of ve-iZi is determined by the number of iZi staked and the time until unlocking: the more iZi staked by and the longer the time until unlocking, the higher the balance of ve-iZi
  • If the iZi is staked and no other action is taken, the user's ve-iZi balance will decrease as the unlocking time gets closer and closer
  • At the beginning of Phase 2, Izumi Finance will terminate the iZi Stake Mining Boosting in Phase 1 and replace it with ve-iZi Holder Mining Boosting
  • ve-iZi holders will gain a portion of the ecological revenue: at the beginning of Phase 2, 50% of the protocol revenue, including iZiSwap cross-chain transaction fees and liquidity incentive pool setup fees, will be used to repurchase iZi and distribute to ve-iZi holders
  • ve-iZi holders can make DAO proposals and vote, with the voting weight based on the ve-iZi balance at the time of voting

Conclusion

Izumi Finance's token economy is designed in two phases to fuel the goals of the project at different stages of development. It also borrows from the token economic design of some other DeFi projects and guides iZi holders to stake iZi in smart contracts for as long as possible through incentives such as increased voting weights and protocol revenue dividends.

DeFi

Uniswap

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