Boot Finance Litepaper

BOOT FINANCE Litepaper v0.6.0
Boot Finance LitePaper
Authors: chickenpie347, sabretooth, denett, deltatiger, cider
Abstract
Boot Finance is a project that is focused on an AMM that lets other
projects control their own liquidity, with the eventual goal of being the
primary AMM/DEX for the majority of projects in Defi.
As the majority of defi infrastructure moves to L2s over the coming
months/years, the existing DEX/AMM ecosystem will be disrupted. It’s the
thesis of Boot Finance that the current AMM dex landscape with
one-size-fits-all solutions cannot persist as projects move to L2s. As gas
costs reduce, there is a reduced need for massive single source liquidity
pools(the main competitive metric right now in DEXes), as arb bots can
inexpensively arb the price across multiple liquidity sources. Many
projects will want both the advantages of custom AMMs that provide
features/parameters that are governed by the project itself, along with the
ability to manage their LP positions in traditional DEXes across the entire
EVM L2 landscape.
Problems with current AMM/DEX market structure;
1. Crypto projects are extremely reflexive, poor token price
performance can adversely affect the fundamentals of a project and
vice versa. Projects spend inordinate amounts of dev time focusing
on tasks that enhance their token price. Endless amounts of time are
spent optimizing token distributions, vesting schedules, bonding
price curves, etc… Yet the one thing that affects the price the most,
the X*Y constant product swap curve present in nearly all AMMs,
warrant nary a second glance.
2. The most profitable projects in crypto are all related to exchanges of
some sort from CEXes to Dexes, to derivatives CExes and Dexes,
etc… There is a massive value leak from projects whose tokens are
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being speculated on and generating massive value for exchanges of
one kind or another, none of this value is flowing back to each
project.
Boot Finance proposes a 3 pronged L2 native tooling for AMMs.
1. Stableswap public AMM - traditional AMM as seen by
Uniswap/Curve, as L2s proliferate, there is a desperate need for
stableswap solutions on newer EVM chains.
2. Project controlled AMMs - projects can take control of their own
token price, by designing their token swap curves just as carefully as
they design their presale bonding curves. Helping projects
“in-source” their liquidity provision, will not only allow a project to
transparently market make their own token trades but also drives
significant speculation revenue back into the project itself.
3. Unified Cross-chain AMM - As the L2 ecosystem matures, there
will be a need to unify the fragmented liquidity pools across the
various public and project-controlled AMMs from different L2s so
that for the end-user, which L2 they are transacting on becomes
inconsequential, they will always get the best liquidity.
Background and Motivation
The core team of Boot Finance is comprised of some of the earliest
contributors and supporters of Swerve Finance (a fork of Curve Finance).
Having been with Swerve Finance behind the scenes since the day of
launch, witnessing the meteoric rise of TVL to almost $1B, and then
dealing with the complications that arose from a sharp drop in LP rewards,
and finally, as the lead dev abandoned the project.
We bring with us the many lessons learned from the launch, operations,
crisis management, and rescue operations at Swerve Finance.
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Table of Contents
Boot Finance LitePaper
Abstract
Background and Motivation
Table of Contents
Problem
Token price affects the fundamentals of a project
How can a project capture more L2 audience when there is no winner takes all L2
chains?
Solution
Custom Swap Curve controlled by Project
The “Up Only” Pool
Seller subsidized LP fees
Omni-chain Universal AMM
Solution Architecture
Problems with Bridges
Gas Costs
Hurdles in Adoption
Liquidity Pools
Native Pools
Custom Pools
Universal Pools
Cross-chain Rails (Boot Rails)
Universal AMM
Interchain Message Relay (IMR)
Infrastructure Architecture
Tokenomics
Governance/Utility Token
Token Distribution
Vesting Data
Token Emission Schedule
Roadmap
Phase 1 - Dual-Chain Launch of Boot Finance
Phase 2 - Experimental Pools
Phase 3 - More Experimental Pools
Phase 4 - Universal AMM
Phase 5 - Full Featured Cross-Chain Connectivity
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Problem
Token price affects the fundamentals of a project
Constant Product AMMs such as Uniswap and Sushiswap dominate the
DEX market today. The reason is that they have a simple product that
involves minimal gas cost, hence they prevailed over traditional order book
exchanges that while dominating in CEX space, have excessive gas
requirements to succeed on L1s.
Constant product AMMs are not the preferred swap curves for nearly all
projects. Examine how projects conduct their public sales, very few of
them use a constant product swap curve. Projects that want to do price
discovery during the public sale, often resort to a “bonding curve” or some
sort of “auction mechanism” as the preferred option.
A custom-designed bonding curve is the preferred option for price
discovery during public sales due to the ability to “shepherd” the market
towards a price discovery zone and guide a price floor and ceiling.
Founders recognize that for the health of a project, token prices that are too
low OR too high will result in misalignment of project goals with token
holder interests. A slow controlled price appreciation will give the best
chance that a project does not fall prey to “moon bois” and “FUDders” that
endanger the project.
A traditional market maker controls both the slippage of any trades and
also controls how that slippage adjusts as the price moves up and down.
Yet despite the careful aims of project founders to control the token price
during a public sale, post said sale, there is currently no on-chain
decentralized solution to transparently market make a project’s token and
prevent a constant product swap curve from wreaking havoc on the token’s
price.
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How can a project capture more L2 audience when there
is no winner takes all L2 chains?
The defi ecosystem has assumed that there is one winner takes all chain
that all infrastructure resides on. In this case, it is Ethereum L1.
Increasingly the evidence suggests that it will be a multichain world with
multiple “contenders” rather than one “winner”.
This poses challenges for a project’s work processes since dev practices
have come to be optimized for single-chain operations.
Those who do not adapt to a multi-chain mode of operation are destined to
be overtaken by those projects who do.
This means that simple bridges are not sufficient infrastructure, to truly
facilitate connectivity between ecosystems, fragmented liquidity pools
must be united by extended capabilities such as Interchain Message Relay
(IMR) allowing independent projects to access unified liquidity pools.
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Solution
Custom Swap Curve controlled by Project
Up to this point, there have only been two widely used swap curves in all
of defi.
1. Constant product (uniswap): used for most assets. Price based on
these curves are sensitive to buy and sell orders.
2. Stableswap: used for assets that have a common peg and are hence
expected to maintain a price close to one. Price changes of these
curves are minimal around a targeted price but is amplified far from
the peg. In a sense, the pool uses its liquidity to ‘defend’ the price
(keeping from moving) near the target price.
Boot’s hypothesis is that nearly all projects will benefit from a swap curve
that is different from these two. Let’s see two examples.
A) An Algorithmic stablecoin which is nominally pegged to $1, but that
can go above $1 if demand dictates. This project might choose to
have a stableswap swap curve from $0 to $1, this ensures that
normal selling pressure below $1 will only result in a very small
deviation from the peg, a situation that the FEI stablecoin could have
avoided if they did not use a constant product AMM for their
stablecoin.
But because an algorithmic stablecoin can grow when demand
exceeds $1, they might decide to have a constant product swap curve
above $1. It stimulates demand above $1 as price deviates far from
the peg resulting in more stablecoins being printed.
B) A new defi project that has just finished its public raise, and is two
months away from mainnet might want to set a stableswap swap
curve below the public sale price, thus ensuring that the price has
support at that price. it might also set a uniswap price curve above
the public sale price, to enable price appreciation.
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These custom swap curves will be controlled by the projects themselves if
they are a DAO or a multi-sig.
The “Up Only” Pool
Let’s examine the advantages and tradeoffs of using a Boot Finance
Customswap AMM over a traditional constant product AMM like
Uniswap. The main innovation is the use of two difference amplification
factors (A values, as defined in stableswap paper) around a select target
price. Amplification factors near 0 create swap curves similar to Uniswap,
where high amplification factors, such as 85 create“stiff” swap curves
similar to Curve’s Stableswap algorithm. The added flexibility of having
two A values enables the pool to use its liquidity to ‘defend’ the price
below the target price but allow it to increase above this price.
Fig. 1 below shows how the price of a token (here, Boot vs USDC)
changes as a function of the ratio of tokens in the pool for Uniswap,
Stableswap and Customswap:
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Figure 1, shows the change in price after repeated buy/sell orders (each
5000 tokens) in a pool initially containing 50,000 of each token.
Each orange dot in Fig. 1 represents the price after a Boot purchase order
(paying 5000 USDC) and each blue rectangle represents the price after a
Boot sell order (exchanging 5000 Boot tokens for USDC). As you see,
Customswap can be configured to behave similar to Stableswap below a
target price (here, $1) and behave similar to Uniswap above the target
price. This facilitates the increase in price due to buy orders near the target
price, but reduces the effect of sell orders on the price (as long as the price
stays near the target price).
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Figure 2 shows the asymmetric price slippage of Customswap compared to
symmetric slippage of Uniswap and Stableswap curves. Again, we see a
low slippage at prices near the target price (here, 1) for Customswap,
indicating price resilience, but high slippage above the target price. The
cost of the low slippage right below the target price is having a
significantly higher slippage at prices much lower than the target price.
Figure 2, shows price slippage after repeated buy/sell orders (each 5000
tokens) in a pool initially containing 50,000 of each token.
For projects which are concerned about maintaining a “floor” price, e.g. the
price of the public sale, or a key liquidation level if the token is being used
internally to collateralize loans, this tradeoff is a no-brainer: liquidity and
slippage are being moved from the parts of the token price (the bottom
end) in order to defend the price at a key support level.
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As the name suggests, a project will be able to make its own choices as to
which price level to support, and the slippage/liquidity tradeoffs that are
required to do so. Here are two examples of such tradeoffs:
Figure 3, shows price slippage after a trade of %1 of pool tokens for
Uniswap (orange) and Customswap with amplification factors, as defined
in stableswap paper, A1=A2=2 (blue).
For a native token that had an ICO at $1, the customswap curve at Fig. 3,
could offer “strong support” at the Uniswap all the way down to $0.35.
This would be a good “all-rounder” price support option for a project.
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Figure 4, shows price slippage after a trade of %1 of pool tokens for
Uniswap (orange) and Customswap with amplification factors, as defined
in stableswap paper, A1=A2=100 (blue).
For an algo-stablecoin, the customswap curve at Fig 4. would offer a viable
solution as it has a much lower slippage near price of $1. Algo-stablecoins
once they have lost peg tend to reflectively downtrend in price, hence the
priority is to “empty the clip” defending the peg, hence you see this curve
takes all the slippage and liquidity below $0.85 and transfers it into
defending the peg closer to $1.
Seller subsidized LP fees
Currently, every single DEX AMM in existence has equal LP fees applied
for both sellers and buyers. e.g. Uniswap sets a 0.3% fee for trades. For a
project-controlled AMM however, there is no need to be “neutral” in
applying the LP fee. Most projects already do a lot of incentives to
encourage hodling/buying of tokens and discourage selling.
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E.g. On most CEX’es, maker fees are lower than taker fees, since it’s
important to encourage that behavior.
However, for most projects, they wish to encourage buying/hodling
behavior over selling behavior. Hence the Boot Finance project-controlled
AMM has an option to allow projects to set fees for buyers and sellers
differently. e.g. A project could decide to set the Seller fee at 0.6% and the
buyer fee at 0%, hence on a net basis, it would be similar to the uniswapV2
fee of 0.3% but the cost is borne primarily by sellers and short term traders,
while long term holders and buyers are subsidized.
Omni-chain Universal AMM
In a future where multiple L2 chains have viable ecosystems, there arises a
strong need for a unified interconnectivity layer that can operate on a fixed
set of standards. The traditional cross-chain model of AMM has assumed
that the end-user is ultimately the entity that is hopping across multiple
chains and porting their liquidity from chain to chain.
In our thesis, the largest users of cross-chain AMMs will be projects (not
the end-users). They will mostly interact transparently with a Universal
AMM that pools fragmented liquidity across both custom project AMMs
and traditional DEXes.
Solution Architecture
Problems with Bridges
Gas Costs
Bridge contracts are largely inefficient and demand a much higher gas cost
than general transfer functions within the chain.
Even if the side-chain assets are being swapped to are low-cost, low-gas,
and efficient, the in and out transactions need to be executed on both the
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main chain as well as the sidechain, with the main chain gas costs making
the transaction far less efficient than it could be.
Hurdles in Adoption
Users find interacting with bridges cumbersome, and not something they
can do away with. The complexities of cross-chain bridge interactions are a
big hurdle to the adoption of cross-chain solutions, since the average user
either lacks the knowledge, is afraid of unintended consequences, or rather
chooses to ignore the cross-chain solution due to lack of ease of use.
At the heart of the Boot philosophy is usability. With Boot’s IMR
solution we hope to abstract away the complexities away from the user
to the protocol layer to facilitate seamless cross-chain transfers without
the user having to directly interact with bridging solutions and being
technical enough to know the nuances of cross-chain transfers.
Liquidity Pools
A liquidity solution that focuses on the immediate ecosystem it is a part of
(localized) may or may not offer a more efficient swap depending on the
variables that change from one ecosystem to another. But such localized
solutions would almost always be less efficient and more slippage prone
for larger transactions.
A liquidity solution that focuses on combining all the ecosystems (L2s,
Sidechains, EVMs) into a singular pool, solving the problem of
interoperability, does not have all the benefits a localized pool would have.
Thus, the solution Boot Finance intends to adopt is one that would be the
best of both worlds:
- Localized pools that operate within the boundaries of their
ecosystems and facilitate local swaps.
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- A unified virtual AMM (Universal Pool) layer that is essentially an
amalgamation of all the similar localized pools present on the
supported chain, e.g. all L2 and side-chains of Ethereum mainnet.
- Users could opt to use a local swap or a swap via the unified layer.
Since the liquidity would be commonly shared between both the
approaches, it results in the most efficient scenario and some of the lowest
slippage swaps for both local and interchain offerings depending on the
size of the swap.
Native Pools
Native pools are standalone localized pools, that would also be a part of the
Universal AMM and support some of the most use-intensive markets such
as that of BTC/ETH like-assets and USD stables.
Custom Pools
As the name suggests, the pools in this category adopt a novel approach to
market demands and come up with liquidity solutions that do not yet exist.
Some of the pools planned in this category are:
- Stableswap-based algostable pools
- Algo-based Uniswap v3 Liquidity pools
- FX swaps (e.g. EUR to USD stableswap pool)
Universal Pools
Universal pools are an extension of Native/Experimental pools that exist
on more than one network. They rely on cross-chain rails to connect the
liquidity across the chains and treat the multiple fragmented pools as a
single source of liquidity, thereby creating a virtual AMM offering swap
rates that encompass all the liquidity present in Boot Finance across the
chains.
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Cross-chain Rails (Boot Rails)
Current industry efforts are primarily localized to either intra-chain or
inter-chain bridging solutions that have limited functionality and focus on
token interchanges between the supported networks.
A good example of this is the infrastructure currently being developed by
projects such as Cosmos and Polkadot. Most other inter-chain bridges are
purpose-built by individual projects and vary in features and capabilities
across the board with no set of standards.
There is a strong need for a unified interconnectivity layer that can operate
on a fixed set of standards, whereby all supported chains can operate on a
standardized set of features and instructions, increasing the interoperability
between the chains, as far as the supported chains’ capabilities permit.
Boot Finance’s cross-chain connectivity solution, dubbed Boot Rails,
aspires to fill this gap that exists in the ecosystem by undertaking the
development of a specialized connectivity base layer that would offer a
standardized set of executables.
Universal AMM
Universal pools are powered by a virtual AMM called the Universal
AMM. The Universal AMM is a specialized virtual AMM that relies on
Boot Rails-powered oracles that facilitate the near-real-time transfer of
liquidity data to provide optimum swap rates and handles the processing
and execution of the swaps.
In a lot of scenarios involving cross-chain swaps, there would be a natural
need to rebalance assets across the chains, or even complete swaps by
using pools on more than one chain. The Universal AMM is the
powerhouse of cross-chain swaps.
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Interchain Message Relay (IMR)
The IMR component of Boot Rails would allow other projects to utilize
Boot Rails to exchange messages across the supported chains. These could
also be utilized for remote code execution on any of the supported chains.
We believe this layer of technology would be very beneficial for the
current ecosystem and would ensure more connectedness between the
chains.
Infrastructure Architecture
Figure 5, Architecture diagram of Boot Rails, connected to several
blockchains and Universal Pools.
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Tokenomics
Governance/Utility Token
$BOOT – the native token of Boot Finance would serve as
governance-cum-utility token. Once the transition to a DAO begins,
$BOOT would be used to vote on all governance proposals related to the
future of the project.
IMR and other features within the $BOOT ecosystem would be accessible
with $BOOT tokens, thereby giving additional utility to the token beyond
governance. $BOOT borrows heavily from the Synthetix Token
Distribution and features an inflationary emission schedule – starting off
high, reducing over the years – and then leading to a constant 3%
inflation/annum beyond Year 5.
Token Distribution
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Vesting Data
Allocation Vesting
Swerve Airdrop Perpetual Emission Curve
Team 10% Team 4 Years, Emission Curve
10% Reserve, Emission Curve
Community Incentives Ad-hoc Incentives
Customizable Emission Curve
Pre-seed Round 4 Years, Emission Curve
Seed Round 4 Years, Emission Curve
Public Round TBD
Token Emission Schedule
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Roadmap
2021 Q2
Phase 1 - Dual-Chain Launch of Boot Finance
● USD/BTC/ETH pools on Ethereum and Skale - launching soon with
a liquidity program partnership with SKL
● one Token based ICHI pools - Following mainnet
● oneBOOT token in partnership with ICHI - following mainnet
● Custom Swap AMM - Following OneBOOT Launch
2021 Q3
Phase 2 - Experimental Pools
● Custom Swap AMM expansion Polygon, BSC, FTM, Arbitrum,
Optimism
● Uniswap v3 Pools
2021 Q4
● Snapshot Voting
● On-Chain DAO
● UX/UI Improvements
● Gradual decentralization and start the process of transferring
decision-making power to community
2022 Q1
Phase 3 - More Experimental Pools
● FX Pools (Currency Swaps)
● Strategy-based Vaults
2022 Q4
Phase 4 - Universal AMM
● Cross-chain Connectivity (Boot Rails)
● Multi-chain Pools utilizing Boot Rails
2023 Q1
Phase 5 - Full Featured Cross-Chain Connectivity
● Interchain Message Relay (IMR) on Boot Rails
● Incentivize external projects to use Boot Rails
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● R & D for further roadmap
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