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The Path to Flash v3 | Perpetual Liquidity + FlashBurn + Layer 2

By June 22, 2021June 23rd, 2021No Comments

Article Breakdown

  • Flashstake v3 Overview
  • Five Primary Upgrades
  • v3 Token Allocation
  • $150,000 KPI Unlock
  • Roles, Phases, and Budget
  • Flash Council Transition
  • Apply for Position

Note: As Flashstake is permissionless, the v2 iteration of the protocol will continue to exist and live on Ethereum for as long as people want to use it.

TLDR

Blockzero Labs is pushing forward to build Flashstake v3 — an upgrade to the current Flashstake protocol. V3 will include five primary updates:

  1. Perpetual Liquidity Locks
  2. Layer 2 Gas Optimization
  3. FlashBurn Trading Fees
  4. Flexible Token Governance
  5. Partnership Integrations

July 31st

A single snapshot will be taken on July 31st at 18:00 UTC. This is not the token distribution date — simply the date of the snapshot.

Current $FLASH (both v1 and v2) holders will be airdropped $FLASH v3 at a 1:1 ratio based on their holdings. This includes v1 and v2 tokens that are held in a wallet, staked, or providing liquidity on the Dapp/Uniswap.

V3 tokens will be fully unlocked. No migration needed.

Additionally, 1M $FLASH v3 owned by the Blockzero Vortex will be given to $XIO holders and earned over the course of three months. The start date to begin earning $FLASH v3 as an $XIO holder is set for July 31st.

In total, this proposal is being subsidized by a $175,000 grant from Blockzero. If the Flashstake v3 protocol is able to hit certain predetermined KPIs by March 31st, 2022 — Blockzero would offer an additional $150,000 grant to be used for the continuous development and growth of the project.

Flashstake v3 Overview

Flashstake v3 will be a time-based DeFi protocol that allows anyone to earn an instant upfront yield on their crypto. Users can do this by:

  • Converting ERC tokens into flashTokens
  • Staking the flashToken for a predetermined amount of time
  • Receiving instant upfront yield on the stake paid out in $FLASH

User Flashstaking Flow

Here is an example of the proposed Flashstaking experience for v3 users.

  1. User converts LINK to flashLINK — an LP token with 50% LINK and 50% FLASH
  2. FlashLINK is an ERC token with inherent flashstaking abilities
  3. User stakes flashLINK for 100 days and immediately receives 50 $FLASH

The user then has the option to either:

  • Swap the 50 $FLASH for any other asset they want (ETH, DAI, LINK, etc)
  • Pair the 50 $FLASH with another asset and Flashstake again (flashETH, flashDAI, flashLINK, etc)
  • Hold the 50 $FLASH in their wallet

At any point, the user can unstake their flashLINK. If a user unstakes their flashLINK before their entire stake duration is completed, a portion of their flashLINK will be retained by the protocol as a fee.

The usage of this fee will be decided by governance over time. A few examples of what could be done with these fees include:

  • Keep it in Vortex
  • Burn the underlying FLASH
  • Sell the LINK for FLASH

The above flow is the protocol process, however, additional ways to customize and optimize the user experience can be made over time.

Five Primary Upgrades

There are five primary upgrades Flashstake v3 would offer.

1) Perpetual Liquidity Locks

In v2, it has been an uphill battle to increase and retain liquidity.

While various liquidity mining campaigns have been proposed and performed, these issues have created a revolving door of refilling liquidity and inflating the $FLASH token in the process.

There are two primary reasons we have run into these issues:

  • Split Liquidity Focus: In the current token model, liquidity is separated into two different protocols: Flashstake v2 and Uniswap. This creates a constant battle between the two protocols competing over liquidity.
  • Inverse Economic Incentives: When individuals stake in v2, arbitrageurs are incentivized to buy $FLASH through the Flashstake protocol & sell it on Uniswap. This means, with each stake, Uniswap liquidity (relative to USD) decreases. This has created an unfortunate inverse relationship between stake volume & liquidity.

In v3, these issues are resolved in two primary ways:

  1. Concentrated Liquidity: Flashstake will have its own internal AMM (FlashSwap) and will no longer be dependent on Uniswap. Stakers will now be able to fully buy and sell $FLASH directly through the protocol using an internal FlashSwap system.
  2. Guaranteed Liquidity: All participating Flashstakers will simultaneously be liquidity providers. This means flashstaking is not possible without a proportional amount of additional liquidity added to the protocol.

In short, this means $FLASH tokens cannot be inflated or minted unless there is an even greater amount of liquidity provided to the protocol. As long as there are people flashstaking, the amount of locked liquidity in the protocol is perpetually increasing.

Note: Another traditional benefit of increased liquidity is better price stability as it takes much larger buys/sells to move the price.

2) Layer-2 Gas Optimization

In v2, gas fees of $50 to $500 aren’t uncommon when trying to perform a flashstake. If you also consider the amount of gas it takes to acquire $FLASH, approve the token, and unstake the original tokens — this has made it nearly impossible for many flashstakers to justify participation.

In v3, we are proposing to launch the Flashstake v3 protocol natively and exclusively on a Layer 2 or sidechain. This means, 100% of Flashstaking activity will happen without having to pay the normal amount of L1 fees.

The two current top options for this are Arbitrum and Polygon. Some estimates include 100x savings on gas fees using these scaling solutions.

3) FlashBurn Trading Fees

In v2, the only time $FLASH tokens are burned is when individuals unstake early by removing the tokens before their pre-committed stake time has completed.

In v3, as the protocol has a built-in AMM to both buy and sell tokens, $FLASH tokens are burned each and every time someone makes a swap.

For example, if the FlashBurn fee is set to 1% and a user wanted to swap their newly acquired ETH for DAI, the transaction would look like this:

  • $100,000 of ETH is swapped for $100,000 of FLASH (FLASH/ETH)
  • $1000 of FLASH would be burned
  • $99,000 FLASH would be swapped for $99,000 DAI (FLASH/DAI)
  • $990 of FLASH would be burned

To find out if Flashstake v3 will be a deflationary or inflationary currency, the formula is simple:

If the trading fees on the Flashstake v3 protocol are greater than the amount of flashstaking rewards, the protocol will be deflationary. The opposite is also true.

In this model, Flashstake v3 no longer relies on inflationary rewards to generate yield for users. The Flashstake v3 protocol generates yield the same way Uniswap does: trading fees.

The two major differences between the Flashstake v3 AMM and current AMMs are:

  • Upfront Fixed Yield: Flashstake v3 LPs get guaranteed upfront yield with a pre-determined APY and don’t have to guess or estimate their potential fees.
  • Loyal Liquidity: Since liquidity is locked in Flashstake v3 unlike traditional AMMs, the Flashstake v3 protocol has a natural defense mechanism to vampire attacks or unloyal LPs.

4) Flexible Token Governance

When we originally created v2, our goal was to be as algorithmically set as possible. This means formulas are set solely by the activity of the protocol.

While this has offered some decentralization to the protocol, it has at times handcuffed our ability to adjust the interest rates as needed to fit the changing demands and needs of the project.

One analogy to understanding the advantages of flexible protocol governance over algorithmically set governance is understanding MakerDAO.

MakerDAO has a stability fee that is controlled by MKR holders. When they want to encourage borrowing, they decrease the stability fee.

In v3, we are proposing two parameters of the protocol to be controlled by flexible token governance: FPY + FBF

Flash Percentage Yield (FPY)

The current v2 FPY (Flash Percentage Yield) dictates how many $FLASH tokens are minted. It is determined by a formula that decreases/increases as more/fewer tokens are staked.

One current problem with this is, if we want to decrease inflation or increase activity, we are unable to do so.

If we allow the FPY to be adjusted by $FLASH token governance, we would have more flexibility and freedom to adjust as needed while providing more control to $FLASH token holders.

For example, if we wanted to increase liquidity in certain pairs (i.e. FLASH/ETH), we could vote to increase the FPY for that specific LP. For example:

  • flashETH = 15% APY
  • flashLINK = 10% APY
  • flashUNI = 7.5% APY

Note: It would be easier for v3 to exist on multiple chains if the FPY was controlled by governance instead of needing an oracle to provide total supply vs staked across all chains.

FlashBurn Fee (FBF)

In addition to the FPY, another parameter we are proposing to be controlled by flexible token governance is the newly implemented FlashBurn Fee — similar to Uniswap’s 0.3% fee.

The FlashBurn Fee is what percentage of $FLASH tokens are burned when a user swaps tokens in both directions.

If token holders believe Flashstake v3 inflation is too high, they can vote to increase the FlashBurn Fee, thus increasing the amount of $FLASH burned per swap.

If token holders want to increase the activity of the protocol, they can vote to decrease the FlashBurn Fee, thus increasing the motivation to flashstake or to swap.

Note: Control for this will start through the Blockzero Council Multisig wallet with an intention to transition to more distributed governance over time. Any changes to the FPY or FPF would have to go through a cool-down phase where all Flashstronauts can see changes many days before they are implemented.

5) Partnership Integrations

The original idea to increase the number of potential partners integrating and utilizing the Flashstake protocol was through the use of UFOs (Upfront Flashstake Offerings).

With UFOs, projects can add liquidity to the protocol, get introduced to our Flashstaking community, and earn some nice LP fees in the process.

While UFOs are still a viable way to grow the Flashstake v2 protocol, the number of human resources and communication it has taken to facilitate these partnerships has been much higher than anticipated.

In v3, the value proposition of partner integrations moves away from fundraising and focuses on providing projects with more utility and locked liquidity for their native tokens.

With Flashstake v3, projects can give their token magical flashstaking abilities if their holders pair it with $FLASH. For example:

  • Pair $ABC + $FLASH = flashABC
  • User can Flashstake flashABC

Rather than having to get the approval and support of project founders to perform a UFO, we can now go directly to token holders to drive demand for Flashstake integrations.

Token Allocations

When we transitioned from v1 to v2, we require everyone to manually migrate their tokens. The intended purpose of this was to protect LPs who still had active liquidity positions in the protocol from IL.

However, for v3, we are proposing a simple 1:1 airdrop of tokens to all v1 and v2 holders, with $XIO holders also earning 1M $FLASH.

v1 + v2 Holders

A snapshot will be taken on July 31st at 18:00 UTC, 2021 of all v1 and v2 holders, LPs, and stakers. For example:

  • User A has 15,000 v1 tokens staked at the time of a snapshot. They would be airdropped 15,000 v3 tokens.
  • User B has 20,000 v2 tokens staked and 20,000 tokens in their wallet. They would be airdropped 40,000 v3 tokens
  • User C has 10,000 FLASH paired with 1 ETH in Uniswap. They would be airdropped 10,000 v3 tokens.

This snapshot would give LPs a full month and a half to remove their liquidity and receive 100% of the potential v3 with zero chance for impermanent loss.

$XIO Holders

Since Blockzero holds $FLASH v2 in our Vortex, we will also be receiving a proportional amount of $FLASH v3 tokens.

To include Blockzero Citizens in this process, we will be allocating 1M of our $FLASH v3 tokens to $XIO holders. The remaining tokens will stay in the Vortex.

To participate, hold $XIO from July 31st to October 31st. There will be daily snapshots taken and $FLASH v3 will be given proportionally to $XIO holders.

For Example:

  • User A holds 100 $XIO for 15 Days = 1500 Points
  • User B holds 200 $XIO for 20 Days = 4000 Points
  • User C holds 50 $XIO for 50 Days = 2500 Points

User Points / Total Points = User Percentage

  • User A = 18.75% = 187,500 $FLASH v3
  • User B = 50% = 500,000 $FLASH v3
  • User C = 31.25% = 312,500 $FLASH v3

XLP Multiplier

Users who have XIO in the XLP will receive a 4x multiplier on their holdings.

  • User A holds 1 ETH/1000 XIO for 10 days = 40,000 Points

Flashstake v3 KPIs Unlocks

From the beginning, we have stated the goal of Blockzero Labs is to build as many cool and experimental protocols as possible. Then, based on the success or failure of these creations, we would add additional resources as needed.

The obstacle this model has created is the extremely subjective and unclear nature of what “success” looks like, what resources Blockzero is capable of providing, and how long after a protocol is launched can we continue to subsidize its development.

To set proper expectations, Blockzero is setting the following KPI Unlocks in place. If the Flashstake community and Blockzero Citizens are able to rally together and hit these goals, more resources will be provided by Blockzero over time.

Primary KPI: Total Vortex Fees

The entire business model of Blockzero revolves around how much yield we generate through the Vortex. If we are creating protocols that don’t generate yield, Blockzero is simply not sustainable.

To align both sides and offer the Flashstake project the opportunity for continued long-term growth, Blockzero is offering an additional $150,000 in liquid tokens (from the Vortex) to the Flashstake project if the protocol is able to generate $250,000 in total liquid Vortex Fees for Blockzero before March 31st, 2022.

A formula to estimate Vortex Fees:

Average Stake Duration * Average Stake Quantity * Total Number of Stakes * Price of $FLASH * FPY * FPY Match

Depending on the FPY Match we set and the price of $FLASH, here are a few examples of what various protocol activities could look like.

Example One: $256,849

  • 15% FPY Match
  • 25% FPY
  • 2500 Stakes
  • Average Stake Duration: 100 Days
  • Average Stake Quantity: 10,000
  • Flash Price: $1
  • Total Vortex Fees: $256,849

Example Two: $642,123

  • 5% FPY Match
  • 25% FPY
  • 10,000 Stakes
  • Average Stake Duration: 150 Days
  • Average Stake Quantity: 25,000
  • Flash Price: $0.5
  • Total Vortex Fees: $642,123

Example Three: $1,926,369

  • 10% FPY Match
  • 25% FPY
  • 250 Stakes
  • Average Stake Duration: 300 Days
  • Average Stake Quantity: 50,000
  • Flash Price: $7.50
  • Total Vortex Fees: $1,926,369

Roles, Phases, and Budget

With each new era of Blockzero, we are consistently trying to bring more transparency and efficiency to our development process. Below are the primary roles we are looking to fill along with a breakdown of a $175,000 go-to-market budget.

To ensure the project has the proper resources to succeed, the development will not start until all roles are filled.

$25k for Project Lead

Responsible for all participants and processes involved in the v3 development from beginning to end.

  • Recruitment/organization of v3 Leads and participants
  • Leads weekly Group Meetings
  • Leads weekly one-on-ones with each lead
  • Weekly updates to the community

$25k for Solidity Lead

  • v3 Token Contract
  • v3 Protocol Contract
  • v3 Layer 2 Deployment
  • Manage the end-to-end audit process
  • Two meetings/week (min)
  • Deliver all smart contracts related to making v3 a reality

$25k for Security Audit

It is difficult to estimate how much the security audit will cost. Any budget not used here will be returned to the Vortex.

$15k for Front-end Lead

  • v3 Dapp Integrations
  • v3 L2 Integration
  • Updated Flashstats site
  • Two meetings per week (minimum)
  • Deliver working front-end with all associated smart contracts for v3

$15k for Marketing Lead

  • Go-to-market strategy
  • Content creation
  • Growth campaigns

$15k for Ad + Video Explainer Budget

A $15k budget will be allocated for ad spend on social advertising and/or explainer videos.

$10k for 10 Explorers

A group of 10 individuals are eligible to earn $1000 to be active v3 ambassadors with a primary role to support project leads and consistently offer marketing/growth assistance as needed.

  • Mandatory 1 group meeting a week

$10k for Designer

Flashstake designs are already completed and would need updating rather than start from scratch.

  • Update website
  • Provide Dapp UI/UX
  • Two meetings/week (minimum)

$5k for Partnership

  • Recruit list of v3 “Launch Partners”
  • Manage Partner communication and relationships
  • Two meetings/week (minimum)
  • Responsible for all listings including CMC, coingecko, DefiPulse, etc

$25k for Reserves

Things come up. We want to be prepared. Any funds not used here will be returned to the Blockzero Vortex at the end of the development.

Budget Summary

In total, there are $170,000 funds allocated in the following three buckets + reserve:

  • Operations: $35,000 (Project Lead + Explorers)
  • Development: $75,000 (Solidity + Front-end + Designer + Security)
  • Marketing: $35,000 (Marketing + AdSpend + Partnerships)
  • Reserves: $25,000

Flash Payment Schedule

To align participants with the development timeline, the above individuals will receive 50% of their compensation on a bi-monthly basis and 50% based on the completion of four primary phases.

  • Phase One (12.5%): Functional Frontend UI/UX
  • Phase Two (12.5%): Testnet Competition
  • Phase Three (12.5%): Launch to Mainnet
  • Phase Four (12.5%): Flash Council Transition

Flash Options

As an additional incentive for those who help build Flashstake v3, we are offering the following 1.5M Flash Options from the Vortex as bonuses.

  • 750k $FLASH to all participants, proportional to their budget earnings, if we hit mainnet before September 30th, 2021. Every week after the project misses this deadline will see a 187,500 $FLASH reduction in potential bonuses.
  • 750k $FLASH to all participants, proportional to their budget earnings, if the project reaches 100M TVL in 2021.

Flash Council Transition

If there was one thing we could go back in time and change about the last six months would be reiterating the expectations of Blockzero’s long-term involvement with clear, binary, and objective expectations.

To this point, Flashstake has been 100% subsidized by Blockzero for over a year now. This means every single expense and resource provided has been 100% covered by the work of Blockzero.

Although we have high expectations and excitement for Flashstake, for Blockzero to be a sustainable project itself, we must set clear boundaries of how much we are going to support each project, what resources we are willing to subsidize, and how long we plan to do this.

If any existing Blockzero Council members wish to join the Flash Council after this point in time, they will have to be voted in like anybody else and prove that they are committed to ensuring Flash’s long-term growth and success as a protocol.

To ensure a smooth transition, the following three steps will be made:

1) Nominations

Blockzero will look for and nominate standout individuals to nominate to the Flash Council. At this time, the two nominated Flash Council individuals representing the project are Pedrox.ETH and David Baker.

2) Treasury

The Flash Council will receive v3 treasury tokens and has full discretion on how these assets are utilized.

3) Funding

If the Flashstake protocol is able to hit our Primary KPIs by March 31st, 2022, an additional $150,000 in liquid tokens from the Vortex will be released for continuous development and growth.

To provide clear expectations: Blockzero’s funding, resources, subsidies, and grants will stop after the transition to the Flash Council and will only continue if the project hits the Primary KPIs. For now, this Primary KPI is set at $250,000 in liquid Vortex Fees.

While it is our goal with the above expectations to create the foundation for a long-term sustainable protocol, we would like to mention that this transition does not deny Blockzero from participating and supporting the project through our own free will.

If community members of the Flashstake protocol would like the long-term and continuous support of Blockzero, the first step is creating a culture that we all actually want to work in.

Positivity, respect, and appreciation can go a long way.

We will soon be releasing the Blockzero Codex — a code of ethics and moral expectations that all Citizens and Flashtronauts must acknowledge to participate in our social communities. The refusal to follow these expectations will result in a removal from the chats.

Flash Forward

We learned a lot with v2. We are sure to learn a lot with v3.

Each time we build, we learn a little more along the way. Blockzero and the protocols we create will always be in a constant state of exploration and experimentation.

Blockzero will continue to follow our curiosity for the creation and challenging ourselves to build better protocols.

While it has been a wild ride to this point in time, we are extremely excited to continue pushing the boundaries of what’s possible in the future of the decentralized world.

Since building V3 is utilizing Blockzero funds, voting for this proposal will open up on June 25th through our official Governance page.

Apply for Position

As soon as we fill up all the positions, we will be off to the races with the above development process. If you believe you may be a good fit for one of these positions or would like to follow along for the ride, please fill out this form and join our discord channel.