Token Economics

Lets innovate how DEX Economics should be built

The token economy is a central component of a DEX and a key factor in its long-term success or failure. As described in the chapter before, ShimmerSea has developed an innovative dual token system inspired by a balancing mechanism which is used successfully in many fields and also finds its presence in traditional financial markets.

ShimmerSea's two tokens, LUM and Magic LUM, each have different, important features that provide value to both the DEX and its holders. LUM can be upgraded to Magic LUM through the specially developed smart contract, which we call "Booster". This unique upgrading process creates a link between LUM and Magic LUM, giving the DEX more stability and resilience.

The following graphic is a simplified illustration of the concept:

Both the properties (utilities) of LUM and Magic LUM, as well as the unique functionality of the booster, are critical to the token economy of ShimmerSea and will be examined in more detail in the following chapters.

$LUM: Reward token

The LUM token is the reward token of the ShimmerSea. It offers an additional incentive to bring liquidity to the DEX.

Launch

The LUM Token will be launched for the first time via a Fair Launch liquidity event. This means that no tokens have been previously minted and distributed to liquidity providers/community/developers via ICOs, private sales, or pre-airdrops. This is very crucial because the more tokens that have been distributed in advance, the higher the selling pressure can be on the token after the launch.
Conversely, LUM is therefore very attractive and in demand, especially in the early months when there are still very few LUM in circulation, as the largest amount of rewards is paid out on the LUM pools.

Minting

A constant 4 LUM per second are minted and distributed as described in the table below:

Minting per Second	LUM per Day	Allocation
4 (100%)	345.600	Liquidity Incentive for Farming & Staking

*The minting rate will be reduced at the beginning of the DEX to reduce inflation impact. In addition, we will mint some LUM into the DEV wallet to pay for infrastructure costs.

Utility

The LUM token is the reward token of the ShimmerSea DEX. Through participation, such as providing liquidity, the LUM token can be earned and traded on the market. The demand for LUM is additionally spurred by the fact that particularly high rewards can be expected for staking and farming with LUM.
Moreover, LUM is crucial for anyone who wants to obtain Magic LUM via the Booster. Accumulating LUM and refining it in the Booster can be a strategy to get Magic LUM and thus participate in the long-term success of ShimmerSea by having access to particularly lucrative staking pools.

Burning

In addition, several burning mechanisms are built into the DEX, which go live one after the other and remove LUM from circulation. The first burning mechanism, which is activated from the beginning, comes from the trading fees generated by the DEX and NFT Marketplace. 25% of the total trading fees from the DEX and 100% from the NFT Marketplace are used to buy and burn LUM from the market.
Another burning mechanism, which is activated later, comes from the booster. In the booster, LUM are upgraded to Magic LUM, which removes the entered LUM and thus takes them out of circulation.
In the long run, additional LUM are removed from circulation by the Protocol Own Liquidity, which is constantly building up, through own farming and reward burning. Further burning mechanisms, which can be introduced in the long run, are already in development.

$Magic LUM: Governance Token

Magic LUM is the governance token of the ShimmerSea DEX. It offers owners the opportunity to participate in the success of ShimmerSea.

Launch

Unlike the LUM token, Magic LUM is distributed exclusively via the Booster contract. Hereby LUM is upgraded to Magic LUM. The Booster Contract will go live about three months after the launch of ShimmerSea. There are several reasons for this, which will be explained in more detail in the Chapter “ShimmerSea Fairlaunch”.

Minting

Magic LUM has a maximum supply of 1 million tokens. The tokens will be distributed over a 5 year time frame via a restricted growth curve in the booster.

Timeframe	Distributed ML per Month	Cumulative # Magic LUM Distributed
Before Booster Launch	205.000	205.000
Month 1	30.000	235.000
Month 2 - 56	13.200	961.000
Month 57 - 59	13.000	1.000.000

The distribution rate for the Magic LUM in the Booster is adjusted monthly to ensure the maximum amount of 1 million tokens. Each monthly distribution rate is fixed in the booster smart contract.

Utility

Magic LUM is the governance token of the ShimmerSea DEX. Magic LUM combines several features that make it more resilient and powerful than LUM:

1. Magic LUM is limited to a total quantity of 1 million tokens.
2. The price of Magic LUM is supported by a diversified portfolio of coins in the DAO Treasury which could be used to buy back Magic LUM from the market.
3. Magic LUM holders receive special rewards via special staking pools.
4. Magic LUM gives voting possibilities in the ShimmerSea DAO.

Thus, Magic LUM fulfills important characteristics of a robust token. Magic LUM is limited in total amount, generates rewards through special staking pools, is diversified through the treasury and gives the holder voting possibilities over the DEX.

Magic LUM is therefore suitable for everyone who wants to shape ShimmerSea in the long term and participate in its success!

The Booster - The connection of LUM and Magic LUM

The Booster is a specially developed smart contract that upgrades LUM to Magic LUM. All Magic LUM tokens are distributed by this smart contract. The Booster combines several functions in its structure:
On the one hand, it ensures that new Magic LUM Tokens are primarily distributed to ShimmerSea users who also provide liquidity. On the other hand, the Booster uses a unique burning mechanism to remove LUM from the market.

To upgrade LUM to Magic LUM, LUM must be placed in the booster and in return Magic LUM will be distributed. However, since this is a so-called refining process, the inserted LUM tokens in the Booster are burned in percentage over time, while Magic LUM tokens are distributed in the same turn. This means that the process is time dependent. The longer the LUM Tokens are in the Booster, the more LUM are converted to Magic LUM. For security reasons, the deposited LUM tokens are locked in the booster for 72h. So in each case a certain percentage of his deposited LUM tokens will be converted into Magic LUM.

However, this conversion process from LUM to Magic LUM is not a 1 LUM to 1 Magic LUM conversion. Rather, the Booster works similar to a staking pool. A defined amount of Magic LUM is distributed per second to all participants of the Booster. The payout rate of Magic LUM is independent of how many LUM tokens were placed in the Booster. With an increased amount of deposited LUM, the yield decreases. However, unlike a staking pool, LUM is continuously removed from the pool through the refinement process. So over time, the amount of LUM in the Booster steadily decreases and thus the yield steadily increases if no new LUM is contributed to the Booster.

The Booster Dynamic is an innovative feature that creates a balance between LUM and Magic LUM. For users who want to participate in ShimmerSea for a long time and share in its success, the Booster offers an opportunity to get Magic LUM.

Summary: DEX Economics 3.0 Key Facts

Token economics are one of the most important components of a DEX. ShimmerSea has developed an innovative dynamic of setting up the DEX for long-term success and not losing sight of the most important KPIs (Key Performance Indicator) of a DEX:

• Constant LUM minting rate (no soft cap) as an incentive for liquidity providers enables the offering of competitive APRs
• Innovative refining process from LUM to Magic LUM that continuously takes LUM off the market and burns it.
• Constant positive price pressure on LUM through the use of platform fees for buyback & burn strategies for LUM
• Limited Magic LUM governance token with access to lucrative dedicated staking pools
• Ensuring DEX stability over the long term by building Protocol Owned Liquidity (POL)