Multichain Relay Token- Part-1 (Liquidity Relay)
In this article, we explain GTON’s use as a proxy token for pairing wrapped tokens with liquid assets on destination chains, enabling an interconnected system of pools with fast and low-slippage token swaps.
Token in the middle…
Bancor’s original idea of the “relay token” $BNT was groundbreaking, but a bit ahead of its time and therefore did not find much traction. Nowadays, we observe a growing demand for cross-chain technologies and tokens in DeFI, and it might be time to revive this approach in the form of a cross-chain relay token.
At its core, $GTON is being developed as a relay token playing a similar role as $BNT in Bancor, but why adopt an early approach which was not particularly successful?
At this point of DeFi evolution, with a multitude of new competing blockchains, a wide adoption of cross-chain technologies is essential for the synergetic growth of the industry. In the meantime, the demand for wrapped assets is growing, and hence the demand for their liquidity.
The concept of LP liquidity mining and farming has become well-known among DeFi users and is currently an optimal strategy for incentivizing them to make important actions. All popular chains have AMM dApps with LP rewards as the basis.
Therefore, we strongly believe that the current state of the market and technology demonstrates a renewed interest in the “token-in-the-middle” concept, as we now possess all the necessary pieces to finally make this approach useful for a wide audience while also stimulating the growth of the token itself through network effects.
Within such a system, LP produces a network effect when the more liquidity is added to a single pool, the more liquid the overall system becomes due to being interconnected. Increasing liquidity is always beneficial because it decreases slippage for buying/selling, and since the relay token plays an important role in that, its value also increases.
How does a relay token (RT) work?
Let’s review a system with three tokens: X, ETH and RT.
Token X has a large liquidity in pair with the RT token. If in turn the RT token has enough liquidity to ETH, it is easy to buy/sell X for ETH via RT in two transactions: X -> RT -> ETH.
This means that increasing liquidity for all RT pairs is increasing liquidity for proxy pairs as well.
Within such a system, LP produces a network effect when the more liquidity is added to a single pool, the more liquid the overall system becomes due to being interconnected. Increasing liquidity is always beneficial because it decreases slippage for buying/selling, and since the relay token plays an important role in that, its value also increases.
What is a cross-chain relay token?
If a token only exists on a single chain, it cannot be traded/used on another chain. To make this possible, cross-chain bridges are necessary that can wrap assets onto other chains. However, wrapped assets are worthless for traders unless they become added to AMM DEXes and acquire enough liquidity.
So, an asset with a large liquidity for native tokens/stablecoins on different destination chains and liquid AMM pairs for wrapped assets are two necessary components for solving liquidity issues of wrapped assets.
Exactly the same logic of Relay Token utility is applicable for all non liquid in DeFi assets such as CEX tokens, new projects and wrapped tokens (already well described in this article).
This is the main goal that $GTON solves by being at the very core of the Graviton’s cross-chain LP reward system.
Token in the middle…
Explore: https://v1.graviton.one/gton
Follow: https://twitter.com/OneGraviton
Discuss: https://t.me/graviton_community
Contribute: https://forum.graviton.one/
