Tokemak's native protocol token, TOKE ("toe-kuh"), serves several purposes:
Its primary use case, which is to be staked into a Token Reactor in order to vote to direct deposited assets as liquidity across exchanges - this is why TOKE can be thought of as tokenized liquidity
It is the network's incentivization / reward token for participants, both LPs and LDs
Protocol risk mitigation, as it acts as a backstop for potential losses incurred during liquidity deployment, eg if an LP attempts to withdraw their assets and cannot be made whole
Tokemak users can earn TOKE in a number of ways.
During the pre-liquidity deployment phase (Cycle Zero), early movers can earn the first emission of TOKE tokens by staking in the following pools. ETH, USDC, TOKE, Sushi LP, Uni LP
Liquidity Providers earn TOKE at a variable APR dependent upon the balance of the Token Reactor. LPs also earn TOKE by depositing assets in the Genesis Pools.
Liquidity Directors earn TOKE at a variable APR also dependent upon the balance of the Token Reactor.
TOKE can be thought of as a homogeneous form of tokenized liquidity. It’s representative of the ability to direct any of the deposited LP assets in the form of liquidity.
When an LD stakes TOKE into the protocol, the LD is given votes proportional to the TOKE staked which can then be allocated to any number of token reactors within the system.
The staked TOKE’s voting power is determined by the amount of TOKE in a given token reactor. If there is a large supply of assets in a token reactor but a small amount of TOKE directing those assets, those TOKE have a greater liquidity directing power. However, in this described imbalanced state, the APR offered for TOKE staked to that reactor will adjust variably to attract LDs to stake more TOKE. In this sense, the higher APR is meant to compensate for the slightly higher ‘risk’ taken due to fewer LDs collateralizing the reactor — the reverse state is also true: overcollateralization will lead to a decreased APR. More can be found in the Reactor Balance & Rewards Logic section.
While the contract spend approval and staking process are standard gas transactions, the TOKE voting process is a simple signature to mitigate gas costs.