To Participate in Smart Matching deposit CHEX and then lend CHEX in the leasing pool.
Chintai token leasing markets are based on a unique feature of EOSIO technology that enables token utility to be decoupled from token ownership. Being able to delegate token utility from one account to another without transferring token ownership has unlocked the possibility of servicing numerous token utility rental markets. Token owners can lend their token utility for a fee to users who can benefit from borrowing. This is the same concept as renting a car without transferring the title.
History of Token Leasing
After launching the first high performance token leasing market in 2018 for EOS utility (CPU/NET), Chintai built a foundation for leasing any token. Five token leasing markets are live, including EOS, WAX, BOID, DAPP and CHEX. The sixth token leasing market for SOV is expected in Q4 2020.
The original EOS market has generated more than $250M in total volume. More than 33,000 accounts have participated in token leasing on the platform as whole. Demand for token leasing has been proven as a concept. However, token leasing markets on Chintai currently have minimal demand. This is not surprising given the early stage development of token economies and the general lack of adoption in the blockchain technology industry as a whole.
As we’ve seen in the past, demand for token leasing is a forward indicator of adoption meeting an inflection point where utility can rapidly become scarce and therefore expensive.
On multiple occasions token leasing markets have lacked ample supply to meet demand. These events resulted in severe restrictions of network usage and burdensome prices to access token utility. Because token utility economies are in a nascent stage, it can be very difficult to predict when demand will increase rapidly. We’ve witnessed token leasing markets with an abundance of liquidity dry up virtually overnight. Without a system in place to account for a sharp rise in demand, networks can quickly become very expensive to use or potentially unusable.
An important part of any token leasing market is high liquid depth. To help eliminate the problem of rapid reduction in liquidity, Chintai developed a protocol called “Smart Matching”. The protocol is designed to autonomously ensure highly liquid token leasing markets. This helps stabilize availability of token utility in token economies, thereby ensuring uninterrupted usage of networks and low cost access.
Smart Matching is a core aspect of CHEX utility. By staking CHEX in the CHEX token leasing pool, an algorithmically based market making protocol is activated to incentivize robust liquidity in all token leasing markets. By incentivizing liquidity into token leasing pools, CHEX holders can help ensure that users of a variety of networks have access to low cost token utility, which keeps networks running smoothly.
How it Works
Chintai has several token leasing markets that generate fees from users borrowing token utility. Fees are converted to CHEX and accumulate in an account called the
When a token leasing market needs additional liquidity, CHEX tokens in the
chexfunctionare autonomously released by smart contract to entice lenders to participate in a given market. This means lenders receive the market rate for lending, plus an additional reward from the
chexfunctionaccount. As lenders add liquidity, more borrow orders can be filled to match demand. To ensure lenders cannot game the system, they only receive rewards based on the amount of time they lend.
If leasing markets do not require additional incentive (high liquid depth), fees from
chexfunctionare distributed to the CHEX lenders who have their tokens in the CHEX leasing pool. This encourages CHEX holders to continuously make their utility available for borrowing and liquidity to move from leasing markets that have very high liquid depth (maintain a healthy balance between markets).
A portion of CHEX incentives that are allocated to the CHEX token leasing market will be burned. This ensures the total distribution of CHEX remains decentralized. We recognize that not all CHEX holders will be able to lend their CHEX. In many cases CHEX holders will need to use their tokens for other purposes (Charm, staking, etc.). Therefore, rather than CHEX incentives only being funneled to the CHEX leasing market (centralizing distribution), a portion will be burned to discourage concentration of the overall distribution.
Smart Matching creates a cyclical feedback loop in which fees from borrowing are circulated back to lenders to keep or add their liquidity in token leasing markets. By ensuring liquidity is ready to be leased in token leasing markets at all times, Smart Matching participants can help stabilize token leasing markets and preemptively supply liquidity to meet sharp increases in demand that have paralyzed token economies in the past.
How CHEX incentives are allocated
The entire process is autonomously maintained by smart contract. All parameters are predefined.
- Every hour the Smart Matching contract will check liquidity of each leasing market
- If a market has low liquidity, CHEX in the
chexfunctionaccount will be and distributed to that market to incentivize liquidity.
- If all markets have high liquidity, CHEX will be distributed to the CHEX leasing pool to incentivize liquidity and ensure the Smart Matching protocol is active.
- A fraction of the fees collected will be distributed each hour to prevent abuse.
- Of the CHEX going to the CHEX lenders, the fraction distributed to the lenders is equal to the amount of CHEX in the pool relative to the total supply of CHEX + 10%
- The remaining CHEX is burned to discourage centralizing the CHEX token distribution.
If the DAPP market is low on liquidity, then the Smart Matching contract will convert CHEX to DAPP. That DAPP will be allocated as an incentive to the DAPP leasing market to encourage more lenders to add liquidity.
If all the leasing markets have high liquidity, then the Smart Matching contract checks how much CHEX is in the CHEX leasing pool. If there is 100 million CHEX in the leasing pool, and the supply is 1 billion CHEX. That means that 10% of all CHEX tokens are in the leasing pool. We would therefore distribute 20% of the CHEX to the leasing pool as rewards, and burn the remaining 80%.
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