AllianceBlock Liquidity Mining (ABLM) Program 2.0.0 Sneak Peek 1 — Staking and Single-sided LP

Nexera Foundation
6 min readFeb 3, 2021

1. Highlights

  • ALBT Staking
  • ETH and USDT Staking
  • Single Sided Liquidity Provisioning
  • No Impermanent Loss incurred to the users participating in the SSLP

2. Overview

At the heart of AllianceBlock is our vision to connect Traditional Finance markets (TradFi) with Decentralized and Digital Assets markets (DeFi), bringing new financial opportunities to both worlds. Such disruption, however, does not happen overnight and can be achieved only by the process of systemic innovation and gradual improvements. One of the first steps on our journey is to bring sufficient liquidity to DeFi ecosystems and prime them to accommodate transaction volumes and liquidity demands associated with global financial markets.

In November 2020, we launched the AllianceBlock Liquidity Mining (ABLM) product — the first of the many products to be released to form the AllianceBlock ecosystem’s foundation. ABLM seamlessly integrates with AllianceBlock Protocol — our blockchain-agnostic layer-2 protocol that bridges traditional and decentralized finance and automates the process of converting any digital or crypto asset into a bankable product.

With our long-anticipated launch of the AllianceBlock Liquidity Mining 2.0.0 product coming ever closer, and because of the sheer scope of the upcoming features, we have decided to launch a series of articles titled “ABLM 2.0.0 Sneak peek”. This article is the first article in this series. It aims to introduce the upcoming staking and single-sided liquidity provisioning initiatives — complementary products to our existing passive income products such as Alliance Block Liquidity Mining pools.

3. Economic consideration

In AllianceBlock, we firmly believe that each part of the ecosystem has to provide value; thus, “staking for the sake of staking” is counterproductive to this core tenet as it brings inflation whilst providing limited additional value to the rest of the ecosystem. AllianceBlock’s staking and single-sided liquidity provisioning programs were designed to combat potential inflation by being an integral part of the ecosystem. All staked funds will be used to provide sufficient liquidity to facilitate the true transformation of both DeFi and TradFi markets, and staking returns are tied to the system utilization and economic performance, virtually eliminating the impact of any potential inflation. This is achieved by using an unburnt portion of ecosystem fees as a staking reward source, meaning the staked funds are fully automatically used to “earn their wage” by:

  • Securing the network
  • Participating in nodes
  • Acting as a liquidity source
  • Acting as a counterparty to single-sided staking (more later)
  • Providing collateralization to loans backed by the NFTs
  • Support liquidity of client pairs deployed via Liquidity Mining As A Service
  • Support fixed income products powered by ALBT DeFi lending
  • Facilitate remittance for FIAT backed saving products bridging Traditional Banking with Digital Banking

4. Development Progress and Release Schedule

We are pleased to announce that the implementation and testing of both staking and single-sided liquidity provisioning were successfully completed. The products are currently going through the final stages of an independent security audit to ensure our users’ maximal safety and security. The release of both features is anticipated in the middle of Q1 2021.

All features mentioned in this article will also be included in our upcoming Liquidity Mining As a Service (LMaaS) product released in early Q1 2021 and our DeFi Investment Terminal, driving further adoption, consumption, and utility for our native ALBT token. More information about LMaaS are coming soon.

5. ABLM 2.0.0 Staking

Staking is a process of locking up an asset in a staking program, in our case Smart Contract, and earning risk-free interest on staked funds. Unlike Liquidity Mining, where staked assets are subject to potential risk due to market volatility and impermanent loss, staking provides predictable returns regardless of underlying market conditions. ABLM 2.0.0 will bring two basic types of staking:

  • Direct Staking
  • Accumulative reward staking
Note: All values are just testing values from our testing environment and have no significance, live version configuration will differ

5.1. Direct Staking

Direct staking represents the direct lockup of assets in a staking contract. There will be four staking smart contracts with different lock periods. The user will be able to choose at what “Period” staking contract to stake their tokens. There will be a fixed number of tokens distributed towards each staking contract once the contract is launched. As a rule of thumb, the longer the lockup duration, the higher yield will be provided. Lockup durations are as follows:

  • 3 months lockup
  • 6 months lockup
  • 12 month lockup
  • 24 months lockup

These contracts will act as “open door” contracts allowing new participants’ entrance throughout their whole duration, meaning that some users might enter the “6 months lock” contract with 3 months already elapsed. The reward that the individual participant is entitled to is a function of two variables:

  • The share of the total staked the user provides
  • The duration for which the miner has provided liquidity for

5.2. Accumulative reward staking

Accumulative or compounding reward staking is a unique feature developed to further promote funds retention and provide users with a fully automated ability to gain increased APY by automatically staking their earned rewards. This concept is similar to the functioning of many popular index funds in traditional finance with “ACC” or accumulation designation as income earned on your investment is automatically reinvested. Accumulative rewards staking will be initially supported for two primary products:

  • Accumulative staking of Liquidity Mining rewards
  • Accumulative staking of Direct Staking rewards

All users participating in our Staking and Liquidity Mining Campaigns will be able to choose via our UI whether they want to receive their rewards directly or stake them in staking smart contracts for additional gains.

6. Single-sided Liquidity Provisioning

One of the core and most requested features coming with ABLM 2.0.0 is Single-sided Liquidity Provisioning (SSLP). In traditional Liquidity Provisioning (such as our own Liquidity Mining program), participants must provide liquidity in the form of all assets the liquidity mining pool consists of. For example, in ALBT/ETH pool, the user has to provide both ALBT and ETH. While these pools are often lucrative and provide many benefits to their users, they may be unsuitable for many users because:

  • Users bullish on a particular asset might not have sufficient capital to match their favorite holding’s size and are forced to either sell half or get additional funds.
  • The volatility of both assets increases the risk exposure of users and Impermanent Loss.
  • Other assets in the pool are not appealing to the user, and they are not willing to have exposure to them.
  • Stablecoin pairing in some pairs is not ideal in the current macro market trend.
  • The user wants to maximize the potential upside potential by being exposed only to a specific asset

Single-sided liquidity provisioning will allow users to provide any supported asset, be it ALBT, ETH, Stablecoin, or token, and enjoy liquidity mining benefits whilst avoiding the aforementioned issues while enjoying the benefits of our upcoming Impermanent Loss Protection (to be discussed in future article).

6.1. How does Single Sided Liquidity Provisioning (SSLP) work?

A common pitfall for many of the existing SSLP solutions is that internally they rely on selling part of the provided assets into their LP pool counterparty. For example, a legacy SSLP system for ETH/USDC pool would sell half of the ETH for USDC and stake them as liquidity provisioning, with the hope of buying back the sold ETH once the liquidity provisioning ends. We consider this solution as inadequate as it significantly increases the risk of Impermanent Loss, decreases potential profits, and creates unnecessary sell pressure on the provided asset.

AllianceBlock’s Single-Sided Liquidity Provisioning relies on the concept of automated peer-to-peer matching of participating assets. Users will stake their assets into our matching smart contract (via UI). The system then automatically scans all suitable matching pools for a given asset and gives the user a choice of various pools they may enter. Once other users provide sufficient counterparty liquidity, the system will automatically pair up their funds and deploy them into the relevant liquidity pool. This novel system will allow us to provide additional liquidity to DEXes and our own products alike.

About AllianceBlock

AllianceBlock is building the first globally compliant decentralized capital market. The AllianceBlock Protocol is a decentralized, blockchain-agnostic layer 2 that automates the process of converting any digital or crypto asset into a bankable product.

Incubated by three of Europe’s most prestigious incubators: Station F, L39, and Kickstart Innovation in Zurich, and led by a heavily experienced team of ex-JP Morgan, Barclays, BNP Paribas, Goldman Sachs investment bankers, and quants, AllianceBlock is on the path to disrupt the $100 trillion securities market with its state-of-the-art and globally compliant decentralized capital market.

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