Shadow Farms : The Ultimate Maximization Layer of SpiritSwap V2
With the release of SpiritSwap V2, LiquidDriver has finally the opportunity to unveil the Shadow Farms. Initially set to release earlier this year, time was taken instead to weather the greatest storm crypto markets have seen since 2018. Now the long awaited moment for both products to launch is here.
SpiritSwap V2 is a complete overhaul of the platform with new types of pools, improved tokenomics, fresh new UI and more. LiquidDriver is ready to ride that wave with the release of the Shadow Farms — pools that allow users to farm at the maximum boosted rate while accumulating governance power with compounding rewards.
This unique product allows users to get the highest APR out of SpiritSwap V2 through maximum farming rate and maximum SpiritSwap fees autocompouded by our strategies.
Let’s take a deep dive into it
Shadow Farms at a glance
Unlike traditional auto-compounders, Shadow Farms have been designed to align users’ (liquidity providers) and DEXs’ interests to create a symbiotic relationship. Users can benefit from higher yields compared to staking in the original farm, while DEXs benefit from a buying pressure on its governance token.
The core principle of the Shadow Farms is to auto-compound the token generated by the DEX into a single staking pool of the said governance token. In the case of SpiritSwap, users would earn staked $linSpirit ($slinSpirit). Since DEXs have different tokenomics, the Shadow Farms strategy needs to be adapted to each one for best results.
The Shadow Farms documentation is available here.
SpiritSwap and LiquidDriver — a Convex story
SpiritSwap V1 was the first protocol to successfully combine the Curve veTokenomics with the UniV2 tech in the Fantom ecosystem. Then, LiquidDriver quickly released its home-made wrapped version of inSpirit and took the upper hand over every single competitor with a tight 1:1 peg with $SPIRIT. Thanks to strong performance despite tough market conditions, LiquidDriver now controls over 36% of the total inSpirit circulating supply. Moreover, this holding position allows Liquid Driver to farm $SPIRIT at the maximum boosted rate and control $SPIRIT emissions that can eventually generate revenue through spiritswap’s upcoming bribe market.
Thanks to this virtuous relationship, LiquidDriver had notably partnered with Frax Finance and Deus Finance to help them bootstrap their liquidity on Fantom.
The Shadow Farms as catalyst for the ultimate flywheel effect between LiquidDriver V3 and SpiritSwap V2
The SpiritSwap strategy will farm $SPIRIT at the maximum boosted rate and automatically swaps the rewards generated by the SpiritSwap pools into $linSpirit, the LiquidDriver wrapped version of $SPIRIT. The linSpirit tokens are then deposited into the single staking pool, in which the inSpirit fees are earned at a boosted rate. The rewards from the single staking are then compounded, increasing the ratio of $slinSpirit to $linSpirit over time.
In other words, the Shadow Farms are leveraging the inSpirit holding position of LiquidDriver to provide users with the best possible yields out of Shadow Farms, allowing them to benefit from a boost both at the farming level and at the fees level.
The flywheel is in motion. The constant buying pressure applied on $linSpirit fosters more $SPIRIT to be locked as $linSpirit, which in turn strengthens the dominant position of LiquidDriver into the Spirit wars. As a result, LiquidDriver can benefit from a higher maximum farming boost and hence higher yields for the Shadow Farms. The product gains traction, incentivizing users to deposit more of their LP tokens in the SpiritSwap farms, that in turn favours the TVL of the pools, decreases the slippage of each swap, and ultimately increases the fees generated by the platform and hence the overall utility of SpiritSwap.
Moving on to V3, moving cross-chain and relying on emissionless revenue model
Shadow Farms is the first release of LiquidDriver V3. This product doesn’t rely on any emissions to generate competitive APY. The only requirement to implement the Strategy is a DEX or a Money Market whose tokenomics offer yield-bearing tokens capturing fees generated by DEXs.
xLQDR holders, those with the vested version of $LQDR, can access the performance fee applied on the Shadow Farms through the revenue sharing vault of LiquidDriver. In other words, the strategy will generate a sustainable and auto-financed revenue stream for each $LQDR accessible by xLQDR holders. Other “emissionless” strategies will be unveiled during the coming weeks, all with the same underlying idea — strengthen the revenue generated for xLQDR holders.
Creating strong intrinsic value for $LQDR through sustainable earnings is the cornerstone of the pioneered Liquidity-as-a-Service solution included in our LiquidDriver V3.
Given that the utility of this product increases when deployed cross-chain and that the main part of the revenue generated to xLQDR holders no longer solely relies on emissions, what should be the next move for LiquidDriver?