Tokemak: Nuclear Efficiency with Liquidity-as-a-Service
The dot.com boom of the early 2000s ushered in a new era of innovation and entrepreneurship across the budding internet sector. However, the lack of computing infrastructure was an industry-wide problem that threatened to stifle the explosive growth. Tech startups were spending increasingly more time and money building and maintaining their server farms rather than investing in their product or team. The solution to this systemic weakness came in 2006 with the introduction of Amazon’s AWS which outsourced IT infrastructure and introduced the concept of “pay-as-you-go” server farms. Today’s DeFi ecosystem faces a similar infrastructure risk with a different base problem: liquidity. Just like in the early 2000’s, teams are dedicating an increasing amount of time to sourcing, directing, and incentivizing liquidity rather than developing their protocols. Tokemak’s Reactor model looks to solve this issue by establishing critical liquidity infrastructure in the form of Liquidity-as-a-Service (LaaS).
Liquidity-as-a-Service
The massive growth in DeFi TVL on Ethereum, which recently surpassed $200B, has in part been fueled by the outrageous APYs offered by many protocols. These irresistible yields have attracted investors looking to capitalize on the yield opportunity rather than the underlying protocol. Once the rewards dry up, these mercenary liquidity providers withdraw their assets and move on to the next opportunity leaving a diluted token and under-utilized protocol in their wake. The LaaS model looks to provide an alternative method by outsourcing liquidity sourcing and direction to a third-party (i.e. Tokemak). In order to understand how this crucial infrastructure service could work, we need to take a look at the outsourced infrastructures supporting the DeFi ecosystem today.
Electricity Layer
Layer one consists of both the generation and distribution of energy, in this case electricity. Without electricity we would not have the internet, and without the internet, the entire digital asset ecosystem would not exist. The impacts of public electrical infrastructure have radiated throughout every corner of human life leading to the greatest technological achievements thus far in our species’ existence.
