Understanding Tokemak

High Level Protocol Functionality

Tokemak allows for unique composability opportunities for both new and existing token projects as well as DAOs. Creating opportunities that allow more strategic and efficient liquidity deployment, ownership, and control.
Additionally, Tokemak offers opportunities for exchanges to reinforce their liquidity and for market makers to leverage the POA (Protocol Owned Assets) to create deep liquidity for a specific project.
Eventually, Tokemak will allow for new projects to stand up their initial liquidity as determined by TOKE governance.
Tokemak enables two key roles to be played by users of the dApp, Liquidity Directors and Liquidity Providers.

Liquidity Providers

Liquidity Providers deposit single-sided assets into individual Token Reactors and/or Pair Reactors (ETH, USDC etc.), and earn yield in the form of TOKE, Tokemak's native protocol token.

Liquidity Directors

Liquidity Directors stake TOKE and vote how that liquidity gets paired from the Pair Reactors and to what exchange venue it gets directed. They too earn yield in the form of TOKE.

Cycles [Epochs]

Tokemak operates on epochs known as Cycles. This functionality is designed for system stability and health. It is defined as follows.
  • Cycles are a week long period, beginning on Wednesdays and 'rolling over' to the next Cycle on the following Wednesday.
On cycle rollover, a series of actions are executed by the manager contract. More detailed information on cycle rollovers can be found in the Manager Mechanics section.

Cycle Considerations for Liquidity Providers and Liquidity Directors

  • When depositing assets as a Liquidity Provider or staking TOKE as a Liquidity Director mid-Cycle, you will begin to earn TOKE at the start of the next Cycle.
  • Liquidity Providers' newly deposited assets will not be deployed as liquidity until the start of the next Cycle.
  • Liquidity Directors votes are enacted upon once a new cycle begins.
  • When you want to withdraw, you must first “request” to withdraw, and assets will only then be able to be fully withdrawn at the start of the next Cycle. This is a two transaction process: first the "Request to Withdraw," then, when the Cycle rolls over, they can be fully withdrawed to the users wallet.
  • New TOKE rewards become available at the end of a given Cycle and can be claimed at anytime.

Protecting User Assets

Tokemak has several mechanics and guardrails in place to mitigate risk of impermanent loss to ensure that Liquidity Providers can always claim their underlying assets deposited, 1:1. These mechanics involve some risk to TOKE stakers, but only as a last resort.

Fee Capture

The protocol captures fees from providing liquidity across DeFi. Over time, this will allow Tokemak to continue building a strong reserve of various assets in Tokemak's POA (Protocol Owned Assets). In the end, the POA is controlled by TOKE holders through decentralized governance.