Liquidity Management Strategy
Last updated
Last updated
We've designed a robust, sustainable liquidity model for $SYNC that promotes healthy market dynamics and prioritizes longevity and community trust. This document outlines our strategy, complete with fund allocation details, liquidity pool operations and future considerations for liquidity management.
15% of the $ADA raised during the IDO will be allocated to liquidity operations.
5% of the total $SYNC tokens will be reserved for initial liquidity provisioning.
Both of these amounts will be stored in a multi-sig wallet earmarked specifically for liquidity operations.
In the event of returned tokens from the pro-rata IDO, they will be prioritized for:
Strengthening liquidity operations, if additional resources are required.
Enhancing staking rewards.
This structured approach ensures strong initial liquidity, with Protocol-Owned Liquidity (POL) fees expected to accumulate in the pool, deepening its liquidity over time. Furthermore, this strategy provides the necessary resources to sustain long-term liquidity management, which will be detailed further in upcoming discussions.
The minimum and maximum raise amounts will be mapped linearly to an ADA allocation range of 200,000 to 300,000 from the 15% liquidity pool allocation. Based on the amount raised, this $ADA will be paired with $SYNC tokens from the 5% allocation to support liquidity operations. A pool will be initiated on Minswap with a 1% fee, designed to enhance pool depth amidst the expected initial volatility.
The remaining ADA raised will be allocated to the ongoing zap-in operation, which is detailed in the following section. The table and graph below illustrate how these liquidity sub-allocations adjust based on the total raise amount.
Zap-in refers to utilizing 15% of the ADA from the sale to buy back tokens from the market, gradually adding them as liquidity over time. These algorithmic zap-ins are designed to sustain the long-term health of the token.
For example:
Note: These do not represent exact raise amounts. They are for illustrative purposes only.
Ada Raised | Initial Seed | Zap In Allocation |
4.0 | 212,500 | 387,500 |
4.5 | 225,000 | 450,000 |
5.0 | 237,500 | 512,500 |
5.5 | 250,000 | 575,000 |
6.0 | 262,500 | 637,500 |
6.5 | 275,000 | 700,000 |
7.0 | 287,500 | 762,500 |
7.5 | 300,000 | 825,000 |
The ADA allocated to this portion of our liquidity strategy will be gradually zapped-in over time. Using a progressive approach like this, rather than a one-time liquidity seed, allows us to:
Spread out liquidity injections, giving the market time to absorb and adjust to the changes.
Demonstrate our commitment to reinvesting in our own token.
Promote healthy levels of volatility, contributing to a more robust market.
Deepen the liquidity pool over time, enhancing overall market stability.
In order to minimize the potential for gamification and enhance unpredictability for our zap-in schedule, we will implement a multi-layered randomization strategy.
By integrating a On-Chain Random Number Generation Library (RNG) developed by Nucast into our formula, both the scheduling and the exact timing—down to the minute—of each zap-in will be randomized.
Additionally, the duration of this operation will be randomly determined based on the total amount of ADA raised. The complete schedule and formula will be disclosed once the zap-in process has been fully completed. Below is an example of what a schedule might look like (real figures will vary upon schedule generation).
We combine a randomized schedule with a trend-based zap-in resource allocation strategy to achieve various outcomes. Below are the approaches we explored, along with the chosen method and the rationale behind it. All figures are for demonstration purposes only and may vary.
Linear Zap-In:
Equal amounts of ADA are zapped in at each interval.
Provides predictability but may be less effective as pool depth increases.
Exponential Ascending Zap-In:
Starts with smaller ADA amounts and increases exponentially over time.
Offsets the increasing pool depth and maintains consistent volatility.
Sustains public interest even after initial IDO hype subsides.
Exponential Descending Zap-In:
Begins with larger ADA amounts and decreases over time.
Generates strong initial interest but may lead to reduced activity later.
The exponential ascending strategy was selected as the preferred approach because it ensures consistent market engagement, sustains volatility even as the initial IDO hype subsides and the pool depth increases with each subsequent zap-in, and supports sustained growth well beyond initial pool seeding. This makes it the ideal choice for long-term stability and success.
Liquidity management must be a continuous effort, requiring careful monitoring of market conditions, liquidity depth, and other key factors to ensure informed decision-making. We firmly believe that no single individual should be solely responsible for a task as critical as liquidity management.
To address this, we've established a Liquidity Council that will be equipped with a range of tools and mandates to ensure the effective and transparent management of liquidity for $SYNC
The council will initially be composed of individuals with extensive experience across diverse fields, all of whom possess a strong understanding of tokenomics and have made significant contributions to Web3. This diversity ensures that we can cover a wide range of perspectives and expertise when utilizing the tools outlined below. Our long-term goal is to open council positions to the DAO, once we roll out a robust governance structure in the post-expansion phase.
All fees generated from trades within a liquidity pool are automatically reinvested back into the pool, deepening the pool and increasing the value of each liquidity provider's LP token, which then represents a larger share of the assets. This mechanism makes it prudent to perform liquidity sweeps regularly, which is the reasoning behind the biweekly interval. If adjustments are necessary, it’s efficient to address multiple liquidity-related matters during the same meeting.
As a result, the council will convene biweekly, during which a vote will be held to determine whether it is appropriate to deploy any of the tools at their disposal. These tools include:
Adjusting the initial seed pool depth, with a maximum change of 10%.
Modifying the depth of any Protocol-Owned Liquidity pools on-chain, with a maximum change of 10%.
Seeding a new on-chain pool with appropriate starting liquidity depth, provided sufficient funds are available in the liquidity operations wallet.
It is important to note that not all tools will be utilized during every biweekly meeting. However, when a tool is deployed, each council member is required to provide a rationale for their vote. Any funds removed from liquidity pools will be securely stored in the liquidity operations multisig wallet.
Although the council is equipped with various tools, a well-defined set of goals is essential to guide their effective use and achieve optimal outcomes. Much like the Federal Reserve’s dual mandate, the council will operate with the following primary objectives, listed in order of importance:
Ensure the longevity and sustainability of the $SYNC protocol This objective is paramount and supersedes all others. Every decision made must prioritize the long-term health and stability of the protocol.
Maximize trading volumes Increasing trading activity is key to generating fees for the protocol, which will strengthen its financial position and contribute to growth.
Maintain healthy volatility Volatility plays a critical role in sustaining interest and driving token trading. However, it must be managed in a way that supports the protocol's overarching goals of sustainability and volume maximization.
The council will consist of no fewer than 7 and no more than 11 members, ensuring a balance between diverse perspectives and efficient decision-making. An odd number of members will be selected to guarantee decisive voting outcomes. This structure allows for a broad range of expertise while maintaining a manageable size for effective collaboration.
At least two members will come from the founding team, ensuring that the council remains aligned with the protocol’s original vision. Each member will hold one equal vote, promoting fairness and collective decision-making.
To ensure commitment and accountability, council members are subject to removal if they miss two consecutive biweekly meetings without providing at least one week’s notice in advance. This rule helps maintain the integrity and consistency of the council’s operations.
The full list of initial council members is yet to be announced.
SyncAI Team and Liquidity CommitteeTo ensure the long-term sustainability of the $SYNC ecosystem, we may explore various strategies to attract organic liquidity providers (LPs) as the protocol evolves post-TGE. These options are potential avenues that could be considered, and we will remain flexible, adapting to the protocol’s needs over time:
Potential Options for Incentivizing LPs:
Farming Rewards: Any $SYNC tokens refunded from the pro-rata sale or left over from the liquidity allocation may be used as farming rewards over a set period to attract organic LPs.
X Token Rewards (TBA): Additional network staking rewards will include X (TBA) tokens earned through the use of their infrastructure, providing further incentives for liquidity provision.
Partnerships with LPs: We may consider partnerships with liquidity providers, possibly establishing lockup agreements to pool resources for a specified duration. Upon completion, liquidity and accrued fees could be shared proportionally.
Utilization of Resources: Trading fees, refunded $SYNC tokens, or protocol-owned liquidity might be allocated toward initiatives such as potential listings on centralized exchanges (CEXs).
Any future decisions regarding CEX listings or other liquidity-related strategies would involve consultation with the Liquidity Management Council to ensure alignment with our evolving objectives.
These potential approaches leave room for flexibility, allowing us to adapt as necessary to the future needs of the $SYNC ecosystem. Our goal is to involve the DAO in such decision making as well once we begin rolling out our governance framework.
