Treasury swaps
Liquidity incentive mechanism for protocol revenue.
Treasury Swap is a unique mechanism used by Cluster to increase protocol revenue by rewarding liquidity providers with anti-matter ($aMTT) an real yield.
$aMTT holders have the right to acquire $CLR at a discount which is currently set at 50%, but this rate can be changed through governance.
How to acquire $aMTT?
Cluster provides $aMTT as an incentive to liquidity providers. To receive $aMTT incentives, provide liquidity and stake the liquidity in Cluster’s dedicated pool.
Why $aMTT?
Instead of using $CLR as the reward token, Cluster uses a dedicated treasury token which acts as a "ticket" to access the discount.
This approach allows the protocol to accumulate a large cash reserve, regardless of market conditions while allowing loyal holders to buy $CLR at a significant discount.
To illustrate this mechanism, let's consider an example:
Suppose the price of $CLR is $100, and a liquidity provider that deposited its liquidity into Cluster's pool has earned 1 $aMTT.
This one treasury token allows the holder to buy up to 2 $CLR tokens (via the treasury) at the price of one, effectively providing a 50% discount.
After the Treasury swap, the holder can then choose to sell the newly-earned tokens on the open market or compound them into the LP.
Here's a summary of the gains and losses:
The Treasury: -2 $CLR, +1 $aMTT, +$100
The LP provider (after selling on DEX): +$100 (net)
The DEX LPs: +2 $CLR, -$200
In contrast, regular liquidity mining, where the farmer doesn't pay anything to the protocol, results in:
The protocol: -1 $CLR
The LP provider: +$100
The DEX LPs: +1 $CLR, -$100
In light of these facts, we make the following observations:
Profit Sharing.
Using $aMTT instead of $CLR as the reward token effectively shares cash gains between the farmers and the protocol, without affecting the net profit of the LP providers(farmers).
Ensuring Consistent Cashflow.
In our previous example, for each $aMTT token issued, the LP provider is eligible for up to 2 $CLR tokens. Assuming equal conditions between regular Liquidity mining and Liquidity swaps, the latter is more efficient as it guarantees constant cashflow without impacting the farmer’s profit.
Continuous token sale.
Instead of giving away tokens for free like in regular liquidity mining, Cluster incentivize with a continuous “token sale” at the current market price. This approach allows the protocol to potentially capture more cash compared to a one-off token sale, especially when the market price increases.
Funds distribution.
$ETH and $SOL Revenue from Treasury Swaps will be allocated to three different causes to enhance the sustainability and improvement of the protocol.
LP & LP Holders
50%
25% towards LP, 25% to LP holders.
Insurance Fund
30%
Will be used to protect the protocol from potential bad debt events.
Growth & Development
20%
Will be used to fund audits, expand team and overall improve Cluster.
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