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Three phases to build a sustainable DEX tokenomics

ShimmerSea will undergo three main phases of growth towards independence from liquidity providers and long term sustainability. All functionalities for these three phases are built into ShimmerSea from day one.

Phase 1: Bootstrapping growth and building up liquidity

In phase 1, the initial liquidity of the DEX is built up over several months. Especially at the beginning, there is still little liquidity on the DEX and there are still very few LUM tokens in circulation. Since the pools are still correspondingly small in this phase, farming and staking is very lucrative. Especially for the native pool pairs with LUM, the goal in phase 1 is to build up enough liquidity to keep slippage low and thus promote trading volume.

Phase 2: Decentralization of DEX and burning LUM on the way

In phase 1, the focus was on building up the initial liquidity and bringing LUM tokens into circulation, because the DEX was still very small in this phase and had to establish itself first. Strong burning mechanisms would have been counterproductive in phase 1.
After three months, phase 2 begins. In this phase, the Booster goes live and the DAO votings are further distributed by dispensing Magic LUM. Everyone can upgrade LUM to Magic LUM in the Booster to participate more closely in the success of ShimmerSea. The higher the long-term interest in the platform is, the higher the demand will be for Magic LUM which will simultaneously burn LUM in the booster. In phase two, large portions of revenue streams continue to be allocated to the Treasury, increasing POL Liquidity.

Phase 3: Maturity Phase - DEX is completely self-sufficient and no longer reliant on Liquidity Providers

Phase 3 is the final phase of the DEX and occurs after 5 years. At this point, the DEX should have built up enough logs of its own liquidity, which is overseen by the ShimmerSea DAO, to stand on its own feet and no longer be completely dependent on liquidity providers. All governance tokens of the DEX are distributed and there is no Booster burn mechanism anymore. However, this is not a problem as POL can be efficiently positioned for the DEX and it no longer needs such a high LUM minting rate. Since there are other LUM Burning mechanisms on the DEX, further amounts of LUM can be distributed without any problems. These newly issued LUM can be used for new pools which could be for example decided via governance votes. In this phase, the focus is on Capital Efficiency. Protocol Owned Liquidity can be used for the best purpose of the ecosystem and DEX. In Phase 3, ShimmerSea is fully independent from liquidity providers.

ShimmerSea is a leading decentralized exchange (DEX) on Shimmer focused on offering a premier trading experience.