Tokemak (TOKE)

Basics

• Based in:
• Started in / Announced on: 28-5-2021
• Testnet release:
• Mainnet release:
• From their introduction blog:

"Tokemak creates sustainable DeFi liquidity and capital efficient markets through a convenient decentralized market making protocol."

• Is aiming to give DeFi an alternative to liquidity mining schemes.
• From Messari (28-10-2021):

"Liquidity-as-a-Service (LaaS) looks to create the same bridge that cloud-computing formed between Web 1.0 and 2.0. Tokemak's disaggregated market maker design creates low-cost and stable liquidity for the DeFi ecosystem."

Audits & Exploits

• Tokemak's Bug Bounty program rewards participating users with up to 1.5m for the most critical of finds. Program can be found (14-10-2021).
• Scored 56% on DeFi Safety (14-10-2021):

"Activity is over 10 transactions a day on contract Pool.sol, as indicated in the Appendix.

With 13 commits and 1 branch, Tokemak's main contract repository is underdevelopped. There are no software functions documented in the Tokemak documentation. As per the SLOC, there is 7% commenting to code (CtC) [very low]. As there are no software functions documented in the Tokemak documentation, it is impossible for us to evaluate the degree of traceability as to their implementation in the protocol's source code. Tokemak has an average of 85% code coverage in their Quantstamp audit. There are no scripts or test instructions in the Tokemak GitHub repositories. Tokemak has not yet undergone a Formal Verification test. There is no evidence of Tokemak's testnet smart contract usage in any of their documentation.

Tokemak has had two audits deployed before mainnet launches, fixes have been implemented, and the public reports can be found."

Governance

Admin Keys

• From a Prime Rating report (30-5-2022):

"[There] are MultiSig wallets managed by the Tokemak Team. Through these MultiSig wallets liquidity is deployed to various Defi protocols. In the official documentation it is not transparently laid out how they manage the keys, who is responsible, how many signers are needed etc."

• From DeFi Safety (14-10-2021):

"Although an official governance model has yet to be released on Tokemak's end, you can already find some decent information about DAO capabilities.

a) All contracts are clearly labelled as upgradeable - 10% - only the Reactor contracts are clearly labelled as upgradeable for now.

b) The type of ownership is clearly indicated (OnlyOwner / MultiSig / Defined Roles) - 30% - as clear voting roles are already established, and there are MultiSig smart contracts detailed at https://github.com/Tokemak/tokemak-smart-contracts-public.

c) The capabilities for change in the contracts are described - 10% - as only the Reactor contracts have clear and established capabilities for change, and there is additional information as to potential change implementation at the bottom of https://medium.com/tokemak/tokenomics-4b3857badc73.

There is currently no Pause Control or similar functions detailed in the Tokemak documenation."

DAO

• From a Prime Rating report (30-5-2022):

"The governance process since launch has already evolved but there are still some improvements to be implemented. At the launch of the protocol there was no governance process. Everything was decided by the team. Now, if one has staked their TOKE, they can vote on which projects are getting their Reactor. Also, TOKE staked to a Token Reactor can now in “pro mode” decide between a couple of options where liquidity is deployed. Besides these two functions which are arguably important but not extensive, there does not exist a general governance model yet. For example the options of liquidity deployment were given by the team and can not be changed/ supplemented with other options. Although there are plans to implement a governance module, this is not the case right now. The team is currently working on an on chain governance process."

• From their introduction blog (21-5-2021):

"TOKE holders will comprise the Tokemak DAO, which will oversee the accrued protocol controlled assets and grow the allowed whitelist of assets and markets."

Token

Token Allocation

• From a Prime Rating report (30-5-2022):

"Total Supply: 100,000,000 TOKE 30,000,000 TOKE (30%): Reward Emissions 5,000,000 TOKE (5%): Cycle Zero’s DeGenesis Event and CoRE (Collateralization of Reactors Event), the first distribution of TOKE 9,000,000 TOKE (9%): DAO Reserve 16,500,000 TOKE (16.5%): Contributors (12 month cliff +12 month linear vest) 14,000,000 TOKE (14%): Team (12 month cliff +12 month linear vest) 17,000,000 TOKE (17%): Investors (12 month cliff +12 month linear vest) 8,500,000 TOKE (8.5%):DAOs & Market Makers (12 month cliff +12 month linear vest)

The team allocation may be fair with 14% but early investors (17%) and contributors (16,5%) make up an additional 33,5% which is a total of 47,5% which is quite high. Considering the cliff is due in a couple of months there is going to be a huge potential sell pressure of 28 million token which are going to be unlocked with a current circulating supply of roughly 15 million tokens, early buyers are going to be heavily diluted. The vesting period will end in Q3 2023. Overall Tokenomics are rather disappointing since being an early investor only gets one diluted. This can also be seen in the price action of the token."

Utility

• From their introduction blog (21-5-2021):

"TOKE is the native network token that is earned through participation in the protocol. It’s utilized for directing liquidity (more below) and governance."

Coin Distribution

As of 2021-10-31 on etherscan the top 25 holders collectively own 98.99% of the tokens.

- 30% of TOKE tokens are in the smart contract

- 53% in the top 10 wallets

Technology

• Whitepaper can be found here (10-2021).
• Code can be viewed under the GitHub accounts Tokemak and Onther-Tech.

Implementations

• Built on: Ethereum

How it works

• From their introduction blog (21-5-2021):

"Each asset has its own token reactor, where the protocol token, TOKE (toe-kuh), is used to direct liquidity. TOKE can be thought of as tokenized liquidity. When staking to a given asset’s token reactor, TOKE holders control not only where the liquidity gets directed, but also what market receives liquidity, pulling from Tokemak’s reserves of ETH and Stablecoins.

Tokemak is designed to be primarily used by:

1. Liquidity providers and yield farmers: any user can deposit single assets into the network to be utilized as liquidity
2. DAOs: DAOs can harness Tokemak’s liquidity flow in order to strengthen and direct liquidity for their project, offering an alternative to traditional liquidity mining
3. New DeFi projects: New projects will be able to inexpensively stand up their own token reactors and use the Tokemak’s protocol controlled assets to generate healthy liquidity for their project from its inception
4. Market makers: MMs can take advantage of the network’s store of assets in order to direct liquidity across various exchanges
5. Exchanges: exchanges can also leverage TOKE’s utility in order to gain access to deep liquidity to bolster their market depth

Tokemak is the first protocol that allows for increased transparency and democratization of liquidity provision, with the goal of becoming the primary vessel through which liquidity can flow freely and efficiently across networks. A “simple” breakdown of the network roles and functionality:

1. Liquidity Providers (LPs) deposit assets into a token reactor. LPs will earn yield on their single asset deposits in the form of the TOKE. Initially, there will be select whitelisted projects that will have a token reactor in which to deposit (eventually this will be opened up to more projects). These assets will then get deployed as liquidity across various exchanges with various pairs, and mitigated exposure to impermanent loss.
2. TOKE is the native network token that is earned through participation in the protocol. It’s utilized for directing liquidity (more below) and governance. TOKE holders will comprise the Tokemak DAO, which will oversee the accrued protocol controlled assets and grow the allowed whitelist of assets and markets. TOKE also acts to collateralize the network (conceptually similar to AAVE, in this case used for the aforementioned IL mitigation). IL risk is transferred from LPs to LDs via the TOKE staking mechanism. This will be explained in finer detail in an upcoming tokenomics post.
3. Liquidity Directors (LDs) utilize TOKE to control liquidity direction. They stake their TOKE into a given reactor and use that stake as voting power to direct liquidity to an exchange of their choosing. Voting power from TOKE in a given reactor is directly proportional to the amount of TOKE staked and the amount of assets in that specific reactor.
4. Pricers: For any non-AMM exchange (order book or RFQ venue) where a third participant is required to provide real time pricing, Tokemak sources Pricers (normally these would be called ‘market makers’) in order to set the bid/offer prices. More information coming soon on the Pricer network.
5. Cycles: Tokemak operates on a cyclical basis, and a ‘Cycle’ will initially be set to one week (something that a DAO may later vote to change). Mid-Cycle, assets can be deposited and LDs’ votes can be rearranged. Assets are deployed when a new Cycle begins. LPs may also request to withdraw their assets mid-Cycle and may withdraw during the Cycle’s conclusion.
6. t(Assets): When an LP deposits assets into a reactor, they’ll receive a corresponding amount of t(Assets) which is reflective of their claim for the deposited assets. The t(Assets) are then burned upon redemption of their underlying funds. This is conceptually similar to c(Assets) on Compound or a(Assets) on Aave."

Staking

• From a Prime Rating report (30-5-2022):

"Users will have the option to bring assets to the protocol and get ACCToke in return. The other way to get ACC Toke is to lock TOKE for a certain amount of time. ACCToke will be analogous to veCRV in the Curve Tokenomics model where ACCToke has more voting power on liquidity direction and bears rights to revenue shares of the protocol. The goal with this mechanism is to boost protocol owned assets and therefore reach singularity faster (the state where the Tokemak protocol is independent from external asset provision)."

• From their introduction blog (21-5-2021):

"If there is a significant amount of assets deposited into a given reactor, and a minimal amount of TOKE directing that liquidity, the APY will be boosted on the LD side of the reactor, encouraging LDs to stake more TOKE and participate in directing that liquidity. The same logic holds in reverse — if there is a large amount of TOKE staked in a reactor, but a small amount of assets deposited, the LP side of the reactor receives an increased APY to incentivize further asset deposits."

Roadmap

• Can be found here (9-10-2021):

"Summary (tl;dr) Timeline (Subject to Change):

1. October 12th: Stats from C.o.R.E. Shared
2. October 13th: GitBook (first iteration) Release
3. Week of October 18th: tFXS, tALCX, tTCR, tOHM, and tSUSHI pools go live for LP deposits
4. Week of November 1: C.o.R.E.2. Vote for next batch of Reactors goes live
5. Mid-November: Liquidity Direction goes live (vote to exchanges, LD TOKE per Reactor staking)
6. Late November / Early December: Liquidity begins being flowed to exchanges"

Usage

• As of 4-8-2022 it holds $110.7m in TVL.
• From a Prime Rating report (30-5-2022):

"The total number of daily active addresses has consistently decreased since protocol launch from a peak of over 1000 to now between 100-200 whereas the total number of token holders increased over time with soon breaking 5000. The decreasing number of daily active addresses could be due to the fact that users simply don’t need to interact with the protocol every day since it operates in weekly cycles and users aren't able to do much during a cycle. Also, the high Gas costs on Ethereum might force LPs and LDs to accumulate rewards longer and claim them in bigger tranches because otherwise their yield would be diminished."

• Has hit $1B in total value locked (28-10-2021), less than two months after unveiling what it calls “reactors.”

Competition

Other long term liquidity providers are in competition with Tokemak:

• OlympusDAO
• Alchemix

Pros and Cons

Pros

• The seem to be good at marketing. Their twitter account displays unique memes, and their team has developed unique language to describe use of their protocol. For example users are "Pilots", liquidity pools are "reactors".

Team, Funding and Partners

Team

• Full team can be found here.
• Github lists 10 contributing developers. Update (30-5-20220): The whole Team consists of 21 employees according to LinkedIn.
• Much of the development is done by Onther Technology a South Korean Ethereum (ETH) development company.
• 0xMaki; "Today Operation Tokemaki is revealed I'll be transitioning from Seed investor to Chief Strategy Advisor" (24-11-2021).

• From a Prime Rating report (30-5-2022):

"The founder of Tokemak is Carson Cook; he has a master's degree in electrical engineering, physics and a Phd in physics from the University of Wisconsin. After that he worked in the Forex space and at Mckinsey.

John Mattox is the CFO. He did his MBA at Duke University and before becoming CFO at Tokemak he already was CFO at ERC deX"

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