Exploiting A $1T Gap In The Market

Decentralized Exchanges (DEXs) have surged in popularity in recent times, now accounting for 20% of the total crypto trading market. As the DEX model has begun to prove itself out, a host of new revenue generation opportunities have emerged beyond the mere trading of tokens.

Some DEXs such as Curve and Balancer offer a range of incentives to attract and retain Liquidity Providers (LPs), who are the people that provide liquidity to their liquidity pools. Tailored solutions have then emerged to help LPs maximize the income that they receive from these incentives. For example, both Convex (for Curve) and Aura (for Balancer) allow LPs to aggregate governance power, thereby directing liquidity incentives to their liquidity pools and so creating a powerful flywheel effect that optimizes their yields.

The biggest DEX of all however is Uniswap v3, which commands a 40% market share, with over $1T in cumulative volume. This dwarfs the volumes of both Curve and Balancer combined.

However, until recently, there was no equivalent mechanism for LPs to harvest incentives on Uniswap v3 as Uniswap opted against a liquidity incentives-based model.

This all changed however with the introduction of Bunni, which allows LPs to earn its native LIT tokens for providing liquidity to Uniswap v3 pools. This opens up an opportunity for a solution that provides liquidity aggregation and incentives optimization for Uniswap v3, similar to the kind that is offered by Convex (for Curve) and Aura (for Balancer). Only, because Uniswap v3 is a much bigger market, the opportunity here is much bigger. Yet, currently this opportunity remains uncaptured, meaning there is currently a $1T gap in the market.

It is this gap in the market that Codex seeks to fill. Codex will capitalize on the opportunities offered by Bunni’s to deliver an advanced governance aggregation, liquidity and incentives layer for Uniswap v3.

Here’s how it will work…

How Codex Applies A Proven Model To Deliver An Advanced Governance, Liquidity And Incentives Layer For Uniswap V3

To understand how Codex’s advanced governance aggregation, liquidity and incentives layer for Uniswap v3 will function, first it is necessary to know a little bit about how Bunni works.

Bunni’s incentive structure for Uniswap v3 is centered around their Uniswap wrapper, which translates Uniswap v3 liquidity positions into fungible ERC-20 tokens. LPs can then earn Bunni’s native oLIT token, which can be locked into veLIT governance tokens. Holding veLIT tokens allows users to vote on governance proposals and influence gauge weights and rewards in ways that boost their yields.

Codex capitalizes on this model by creating a mechanism for stakers and LPs to boost the revenue they generate from Bunni incentives by applying market-proven governance and liquidity aggregation strategies. It acts as a governance aggregator and secures liquidity through cdxLIT, a tokenized, liquid representation of locked LIT. This approach provides LIT stakers with a share of boosted LIT incentives, trading fees, and CDX rewards, optimizing their staking incentive. It enables liquidity providers to generate profits, claim boosted LIT without locking up LIT themselves, and receive CDX rewards, with zero deposit and withdrawal fees.

So, not only does Codex’s solution address an unmet need in a $1T market, but it does it by applying a model to Uniswap v3 that has already been shown to work on other DEXs by the like of Convex (on Curve) and Aura (on Balancer).

Up Next: Codex Incentive Boosting Mechanisms & Token Utility

It is a rare situation in the highly competitive DeFi landscape that a trillion-dollar gap in the market emerges that can be solved by proven strategies yet remains unaddressed. Codex has identified such a gap by being amongst the first protocol to provide an advanced governance aggregation, liquidity and incentives layer for Uniswap v3.

In our next article, we’ll dive deeper into the specific Boosting Mechanisms that Codex uses to achieve this and take a look at how its native tokens - cdxLIT, CDX and veCDX - work.

Until then, make sure you are following us on Twitter at @Codex_fi.