Camelot: the Path to Sustainable Emissions

During the short history of DeFi, most decentralized exchanges (DEXs) have been viewed as risky investments, mainly due to their shortcomings in tokenomics. Unfortunately, DEXs generally face a chicken-and-egg issue: liquidity providers require competitive yields, but real yields only come from trading volume, which only takes off when there are enough liquidity providers.

The easy “solution” is to distribute sufficiently heavy token emissions during the initial weeks/months to bootstrap this liquidity. But this approach usually turns projects into Ponzi schemes, eventually doomed to fail, and primarily rewards merciless high-yield hunters who ruthlessly dump the native tokens before moving on to new prey.

We solve this dilemma by sticking to a few key principles:

• Yield farming should improve the protocol without turning it into a yield farm
• Growth takes time and rushing it decreases value in the long run
• Emissions should be accurately controlled and targeted

While this sounds pretty obvious, few protocols actually follow those rules. Camelot aims to overcome the above pitfalls and achieve sustainable growth with the following approach.

1. Genesis pools

Our genesis staking allowed us to reach almost $15M in TVL in just 10 days without a live token. This bootstrapped initial liquidity without aggressively devaluing our native token.

Genesis stakers now sit in a uniquely comfortable spot, as they essentially hold a call option on the GRAIL price. The genesis yield alone is solid, but on top of that, they have the option to continue earning undiluted token rewards for 6 months. This win-win rewards early stakers and creates sticky liquidity to bootstrap the exchange.

2. Emissions and APRs

While we allocated 22.5% of the total GRAIL supply towards liquidity mining emissions, we plan to emit them using a different schedule than most previous DEXs.

While many projects launch with 100%-1000%+ APYs, that won’t be the case with Camelot. Crazy high APYs temporarily work, attracting mercenary capital and lending the illusion of growth. However, this mirage of prosperity generally debases the native token and long-term spoils the yield, eventually resulting in a positive feedback loop toward project failure. Token holders and the project lose in the end.

At Camelot, we will start low and gradually increase rewards as the project grows and matures.

While some users might be surprised by the unusually reasonable (and yet still attractive) APRs for a new project, that’s precisely how we plan to attract the right money at the right cost. The slower short-term growth will reap serious rewards in the long term.

3. The escrowed approach — real yield

Our escrowed token — xGRAIL, plays a significant role in creating this sustainable tokenomics strategy.

Farming rewards will be mostly distributed in xGRAIL/GRAIL in an averaged 80/20 ratio. In other words, most of our emissions will require vesting to become liquid, ensuring that LPs are aligned with the long-term objectives of the protocol, and containing any short-term selling pressure.

But illiquid doesn’t mean unprofitable: xGRAIL allows its holders to boost their staked positions yield, and to earn dividends directly from the protocols earnings.

This creates a flywheel that encourages and rewards long-term players with a profitable yield, and most importantly, does not come at the expense of the protocol.

Coupled with deflationary mechanisms, this approach provides us with an efficient and sustainable growth model, made for Camelot to finally achieve real yield as a DEX.

These combined mechanics make our tokenomics a unique blend that focuses on sustainable yield and targeted incentives for long-term liquidity.

This will create the foundation that will allow us to reach the full potential of our custom-built infrastructure. By providing real utility and value to the ecosystem, Camelot will become the true home for all Arbitrum builders.

App: https://app.camelot.exchange
Twitter: https://twitter.com/camelotdex
Discord: https://discord.com/invite/camelotdex
Telegram: https://t.me/camelotdex
Linktree: https://linktr.ee/camelotdex