Idle Token Utility

IDLE Token Utility

Summary: This is a living post about the $IDLE token utility that can also be found in the Idle docs space.

The IDLE token was originally launched as a governance token to manage the DAO structure of the Idle protocol. Since then, the Idle Leagues sub-DAO structure was established, as the team has been working on adding additional token utility for the IDLE token. Some of these we have listed below.

Governance

Participation in the governance of Idle: the Idle protocol is organized in the DAO structure, with protocol upgrades and parameter changes to be voted by IDLE token holders. You can find out more about how to vote and participate in governance here. Previous governance proposals can be found here.

Staking

Idle holders can stake their IDLE tokens within the Idle protocol to receive a share of the protocol revenues accumulated from managing assets. As the Idle protocol grows it’s Assets Under Management (a.k.a TVL), the performance fees grow and subsequent rewards to IDLE Stakers. The Staking program has turned the $IDLE token into a value accrual asset, as holders can earn a share of the protocol revenue in the form of $IDLE tokens.

More info on IDLE staking can be found on Medium and Docs.

Liquidity Providing

Idle holders can provide liquidity to any of the decentralized trading pools in a trading pair such as IDLE/ETH. Providing Liquidity on AMMs generally requires an equal amount of ETH and IDLE. It is also worth noting that exposure to impermanent loss is undertaken by providing liquidity in an AMM pool.

Sushiswap Liquidity Pool

A liquidity pool is a core mechanism of AMM (Automated Market Makers), where at least two assets are deposited to form a trading pair. Whenever liquidity is deposited into an AMM pool, specific tokens known as liquidity providers tokens (LP tokens) are minted and sent to the provider’s address. The proportion of the pool’s liquidity provided determines the number of liquidity tokens the provider receives, and so by staking your LP tokens into the Idle LP Staking Program, Liquidity Providers are entitled to receive additional rewards in the form of $IDLE.

Currently, there is an IDLE-WETH liquidity mining program on the Sushiswap AMM as voted by the Idle Community. The Sushi liquidity mining program was voted with a total allocated budget of 180,000 $IDLE with a daily distribution of 6-months starting from April 2021. The community chose to use the Ampleforth Geyser model for distribution.

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Risks

Impermanent Loss and smart contract risk are the concerns to be aware of when providing liquidity at Sushiswap.

Insurance

For insurance that would cover events such as contract bugs, economics attacks, or governance attacks, you would need to insure Uniswap to have full coverage via an insurance protocol such as Nexus Mutual offers this type of insurance coverage.

Uniswap Liquidity Pool

Uniswap is another AMM pool, similar to Sushiswap, where $IDLE token holders can provide liquidity into the pool trading pair of your choice (e.g., IDLE-ETH, IDLE-DAI, etc.). Currently, Uniswap has a V2 and a V3. On Uniswap V3, as the Liquidity Provider, you can concentrate the liquidity price range you would like to provide liquidity for.

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Risks

Impermanent Loss and smart contract risk are the concerns to be aware of when providing liquidity at Uniswap.

Insurance

For insurance that would cover events such as contract bugs, economics attacks, or governance attacks, you would need to insure Uniswap to have full coverage via an insurance protocol such as Nexus Mutual offers this type of insurance coverage.

Loopring Liquidity Pool

Loopring is a decentralised Layer 2 AMM with high transaction throughput due to it being built on zkRollup, an Etheruem Layer 2. Providing liquidity in the Loopring AMM works similarly to Sushiswap, with similar risks, except you have to activate your wallet onto layer 2. Liquidity providers earn a 0.20% fee on all trades proportional to your share of the pool.

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Risks

Impermanent Loss and smart contract risk are the concerns to be aware of when providing liquidity at Loopring.

Bancor single-sided Liquidity Pool

Bancor is an AMM like Sushiswap and Uniswap, but with one key difference, which was rolled out in Bancor v2.1. Bancor now has Impermanent Loss (“IL”) protection if you stay in the pool for longer than 100 days. This protection starts at 30 days and scales to complete protection over 100 days. Currently, there are no incentivized rewards for the IDLE pool, but keep an eye out as there may be in the future.

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Risks

Bancor smart contract risk and trusting the bancor v2.1 model 2. Bancor is audited.

Insurance

Impermanent loss protection in-built in the Bancor pools acts as a pseudo insurance provision to prevent loss. For insurance that would cover events such as contract bugs, economics attacks, or governance attacks, you would need to insure Uniswap to have full coverage via an insurance protocol such as Nexus Mutual offers this type of insurance coverage.

Collateral (coming soon)

We are currently exploring ways to integrate IDLE into borrowing and lending protocols so that $IDLE holders will be able to borrow using IDLE as collateral for the position. More updates are coming soon.

9 Likes

Great post breakdown.

Looking forward to the further updates.
Good work.

4 Likes