TORCH: Redefining the DEX Value Proposition
The TORCH sale begins on the Hercules Launchpad on April 18
Everyone reading this is familiar with how DeFi liquidity pools work: DeFi traders need liquidity pools in order to swap tokens, and those pools need to be big enough (or “deep,” in DeFi vernacular) to make the trade capital efficient enough for the trader to actually use it to swap. So, users are incentivized in some way to provide their assets to a smart contract on a protocol so that other users can use it for swapping.
These incentives are usually paid in a protocol-owned token. That token is emitted out evenly to liquidity providers, continually devaluing that token as people or aggregator protocols sell them to compound their positions and earn yet more tokens. Mercenary capital and farmers contribute to this substantially. Usually this leads to the collapse of the token price and, eventually, the protocol itself.
Hercules takes a different approach.
Our token, TORCH, grants you access to real, long-term yield supported by platform fees, unlike most other protocols. We use Camelot’s proven model. For users, the only way to access this yield is to provide liquidity and/or hold xTORCH (escrowed TORCH).
This approach of course requires fees to be substantial enough to make hodling xTORCH and providing liquidity attractive, which, in turn, requires the liquidity itself to be present so that users can efficiently swap.
So, let’s take a look at fees.
Enjoy Your Fee Lunch
Hercules uses careful dynamic and directional fee mechanics to capture a healthy, sustainable stream of revenue while keeping costs low enough to still be the most attractive DEX on which to trade. These fees are adjustable, based on market conditions, and protocol-specific. This customization leads to increased fees and trading volume as fees more accurately reflect the market’s risk profile.
This is why Hercules is perfect for protocol-owned liquidity. With enough volume, protocols providing their own liquidity for users to trade upon can earn most or all value back on the incentives they provide to those pools. In other words, it’s possible for a protocol to have free, or even profitable, liquidity on Hercules.
Does It Really Work?
Hercules utilizes Camelot’s codebase. So, let’s take a look at their performance.
Camelot has distributed more than $3,300,000 in dividends in less than a year and a half to users who allocate their xGRAIL to the Dividends plugin (Dune Analytics). As of this writing, that’s about to increase by another ~$90,000 once the current weekly epoch ends, representing more than $6 per xGRAIL, for only one week!
Those are just the fees it distributes to dividend plugin participants.
Fees distribution to liquidity providers is many more times that. Camelot has seen more than $16 billion in volume since its launch (DefiLlama), resulting in more than $18 million in fees.
That translates to more than $15 million in fees given back to liquidity providers.
These fees collected have also resulted in a half million dollars in GRAIL buyback and burn. More info about our deflationary mechanisms is given later in this article.
Better yet, during times of high volatility (i.e., during big market moves), DEXs see a lot of volume as traders change their positions. More volume means more fees, meaning more yield for xGRAIL holders. Holding xGRAIL and providing liquidity on Camelot is essentially a hedge against volatility.
And very, very soon, Holding xTORCH and providing liquidity on Hercules will do the same for you.
Starting to get the picture?
What This Could Mean For Hercules & TORCH
Hercules has already generated nearly $100,000 in fees. Our TVL is just under one-tenth that of Camelot’s at present, and we just launched three weeks ago.
These fees — roughly 80% — are returning to liquidity providers and, soon, to xTORCH users, too. Our fee distributions are described in more detail in our documentation.
Yield Boosting With xTORCH
Yield farmers will especially appreciate xTORCH’s utility as a yield booster. By allocating xTORCH to their staked position NFT (spNFT) in the Yield Booster, users can significantly increase their APR rewards derived from liquidity farming. The typical yield boost plugin multiplier will usually be 100% (x2). The protocol caps the maximum Yield Booster boost at 150% (x2.5).
By locking liquidity, liquidity providers can earn yet another yield boost. The sum of these two multipliers is used to determine the total multiplier of the position. Every pool has its own maximum boost, with a 200% (x3) default cap and an absolute cap of 250% (x3.5).
It is important to note that this boost is exclusively applied to farming incentives and does not influence LP trading fees or other pools such as Nitro/Genesis.
TORCH Deflationary Mechanisms
As yet another token control device, Hercules applies several deflationary mechanisms to reduce the TORCH circulating supply:
Buy Back & Burn: In order to apply continuous buying pressure on TORCH, a portion of the protocol earnings is used to buy back and burn the TORCH token. This means that the Hercules team buy TORCH on the open market and sends TORCH to a null address from which it can never be recovered, thereby removing it from circulation forever.
xTORCH Redemptions: When a user transitions from xTORCH to TORCH, if the vesting duration is below the maximum limit of 6 months, the xTORCH:TORCH ratio is reduced, reaching a minimum of 1:0.5. Any unvested xTORCH tokens automatically are burned.
xTORCH Deallocations: When a user deallocates xTORCH from a Plugin, a deallocation tax is applied. It can vary between contracts, but will usually be of 1%. The corresponding TORCH amount will undergo automatic burning.
So, why hodl xTORCH?
To share our success.
You’re early.
When Can I Buy TORCH?
The TORCH sale begins on the Hercules Launchpad on April 18 with a three-stage Whitelist sale round, followed by a first-come, first-served and fully public sale round. The raise will be in METIS tokens on the Metis Andromeda network. TORCH will be claimable on April 22 on Hercules in a 66/34 TORCH/xTORCH ratio.
About Hercules
With a composable, efficient liquidity protocol featuring seamless swaps, staking, real yield, and a launchpad, Hercules aims to become the native liquidity layer for the Metis Andromeda network. Its flexible features are tailored to protocol-owned liquidity, allowing dynamic fees and customizable incentives packaged in a user-friendly interface.
