The QiSwap platform is a Decentralized Exchange deployed on the Qtum blockchain. It is essentially a set of smart contracts that exist as automated market makers in the crypto economy. These contracts are based on Uniswap. Because the overall crypto market fluctuates in price, and arbitrage opportunities arise; QiSwap’s liquidity pools are relevant simply because they exist. This document’s purpose is to explain how the Qi token affects the operation of the platform.
This article is the first in a series that will discuss the role of the Qi token. It’s not written to be the final version and could change at any time. As always, it’s best to download this document in order to track changes.
The total value locked in decentralized finance liquidity pools has grown at an amazing rate since mid 2020. As of late January 2021, 25 billion+ USD is actively providing liquidity or being lent without the usage of a central bank or authority. The notion that financial products can be offered in a censorship resistant manner and controlled by no entity is a technological marvel. The fact that centuries of fiscal practices can be disrupted with a few lines of code proves that we live in interesting times. The outcome will be predictable, obsolete laws and business interests will attempt to scare the public away from DeFi. In the not so distant future, it will be a common financial product being offered by the same offenders, only re-packaged with their name on it. We’ve seen this before in other industries like the music and film industry. They wasted a few years trying to stop copyright infringement, before realizing that they could do well in the streaming business.
Most DeFi projects worth talking about are deployed on Ethereum. The good news is that this blockchain is actually decentralized, the bad news is it’s costly due to high usage. Since 2017, Qtum’s main network has made use of the Ethereum Virtual Machine on top of a UTXO blockchain. Discussing the technical capabilities of Qtum in order to point out why it’s a natural fit for DeFi can best be summed up in these two articles:
Qiswap is Built on a Solid Foundation: | by QiSwap | Jan, 2021 | Medium
Why Qtum is Better for Building DeFi | by Qtum | Qtum
Another factor to note, as of right now, the Qtum blockchain is only a few weeks away from a hardfork, which will bring all sorts of changes that enhance its DeFi abilities. Most notably, 32 second block times in a truly decentralized manner. This means actual decentralization, anyone can validate transactions regardless of who they vote for and they don’t need to own any Qtum tokens. They only require an internet connection, a device, and the Qtum software compiled. Typically you see projects sacrifice true decentralization to achieve functionality for marketing purposes. For more information on this topic, please see this 3 part series on the upcoming Qtum hard fork:
Since we want to incentivize organic growth of the ecosystem by conducting a fair launch, there is no pre-sale or ICO of the Qi tokens. All of the tokens will be distributed directly to the community and other stakeholders that contribute to the QiSwap ecosystem during the early stages of the project. With the large allocation towards QiSwap Liquidity providers, we aim towards incentivizing the continuous usage of the QiSwap platform. We reserve the right to do a sale at a later time, but we are not considering it at this moment.
The Qi token will be distributed to liquidity providers who fund select QiSwap launch pools. They will then be able to stake their Qi tokens for more Qi tokens in a staking pools. There will likely be higher rewards paid out to early adopters as a way to attract and maintain liquidity for QiSwap.
Emission of the Qi governance token is planned to take 4 years. Once that target is achieved, we plan on adding a small amount of inflation annually, about 3% of the 1 billion total supply. This is to make up for tokens that are lost or forgotten, but there will also be a developer fee rate of 25% paid to the team to maintain and improve the project. Please note this 25% developer fee will not be implemented for 4+ years, and will only be implemented once the 1 billion tokens have been emitted to the community.
Around September 2020, the leading DeFi platform Uniswap announced a governance token. The original article can be found on their blog:
To quote their blog directly, they state:
“Uniswap is now particularly well positioned for community-led growth, development, and self-sustainability. The introduction of UNI (ERC-20) serves this purpose, enabling shared community ownership and a vibrant, diverse, and dedicated governance system, which will actively guide the protocol towards the future.”
They go on to issue a guide on how to actually use the decentralized governance embedded into their ecosystem here:
To quote from their article directly:
“UNI is a tradable asset and functions like most other standard ERC20 tokens, except it has a deeper power as a voting mechanism. In order for UNI to be used as a vote, the owner must first go through the delegation process. Delegating UNI binds the voting power of your tokens to an address so it may be used to vote. This address could be yourself, or a trusted party who you believe will vote in the best interest of Uniswap Governance.”
It’s interesting to note that the Qtum blockchain has had something kind of similar since mid-2017 called the Decentralized Governance Protocol. This set of smart contracts allows users to vote to change certain parameters of the blockchain in order to solve scalability issues amongst other things. The DGP is planned to be the base foundation for the upcoming Qi governance portal. It’s only logical, since Qtum had this for almost 4 years running on their main network so we can assume it to be stable.
For information regarding the Qtum DGP, please see this article:
Here’s a quick excerpt that summarizes the DGP:
“The way the DGP works is relatively straightforward. First, a governing party for the DGP makes a proposal to change a parameter. Afterward, all the governing parties for the DGP can vote on the proposal, and if it receives enough approval votes, then the parameter change proposal becomes active. The proposal data is then placed in a standardized format and a particular storage space so that the blockchain software can easily access it without needing to execute the DGP contract directly.”
Another big player in the ecosystem is SushiSwap, which also has a governance token. Here’s the article and a quick snippet:
The SushiSwap Project 🍣🍣🍣. An evolution of Uniswap with SUSHI… | by Sushiswap | SushiSwap.org | Medium
There’s a lot to be said about SushiSwap’s governance token, so here are 2 paragraphs pulled directly from their article:
“With SushiSwap, one can also provide some liquidity into a pool and earn rewards in the form of SUSHI tokens. However, unlike Uniswap, those SUSHI tokens will also entitle you to continue to earn a portion of the protocol’s fee, accumulated in SUSHI, even if you decide to no longer participate in the liquidity provision. As an early adopter to help provider liquidity, you become a significant stakeholder of the protocol.”
“We are aware that many of us are existing liquidity providers in Uniswap pools. With that, we have designed the token distribution mechanics to make it as easy as possible for the existing Uniswap liquidity providers to start migrating to our protocol!”
Based on these articles, it appears that Uniswap’s intention is to create a self-governing DeFi environment that stays decentralized, neutral, and trustless. It’s a very “crypto” attitude that many find appealing. Their article goes into detail how the UNI tokens will be distributed and why, which is a fascinating read, and will likely become a hot debate topic as the price of UNI increases.
SushiSwap’s SUSHI token seems to focus on growth. Their debut article discussed in detail how they would attempt to attract liquidity from Uniswap and then convert a small portion (0.05%) of the trading fee to raise the price of SUSHI. Their emission schedule keeps 10% of all newly minted SUSHI to remunerate their developers. The direction of SushiSwap with their MIRIN plans were published in January 2021, which shows an ambitious team who are in this to win.
See this article about SushiSwap V3:
Sushi Protocol v3 Proposal: MIRIN | by LevX | SushiSwap | LevX Blog | Jan, 2021 | Medium
The Qi Governance Token:
With the successful audit of QiSwap’s core contracts, we can now focus on the main platform launch and the governance token “Qi”. We’re in a situation similar to Sushi was in mid-2020 where we are trying to deploy creative features that will attract liquidity away from other platforms and onto ours. The Qtum blockchain alone is a feature, it doesn’t need duct tape solutions to make it work. The technical foundation is solid, and has been since their 2017 main network launch. The most obvious obstacle is the fact that we’re not deployed on the same blockchain as most tokens being traded.
For a better understanding of why Qtum is the best blockchain platform for DeFi, see this article we published earlier:
Qiswap is Built on a Solid Foundation:
For Blockchain enthusiasts that have been involved in the greater crypto community a while, we’ve experienced the…
SushiSwap’s mentality of perpetual aggression towards liquidity migration and business development works well, and the various ideas they have proposed are solid. Because of this, the Qi governance token will implement many of the SUSHI token’s use cases, along with a few of our own. Let’s talk about some Qi functionality.
Planned SUSHI Functionality Adopted by QiSwap:
Please keep in mind none of this functionality will exist in QiSwap version 1, and is planned for version 2. It may not materialize depending on development resources.
Liquidity providers will be rewarded 0.25% of the fee charged for swaps, with 0.05% of the fee used to increase the price of the Qi governance token.
Users who provide liquidity in selected pools will earn Qi tokens. The initial pools listed will generate Qi, and new supported pools will be voted on by Qi token holders. Rewards will be amplified by a factor of 10x for the first 40,000 blocks. This is assuming the Qtum blockchain will fork to 32 second blocks.
Community Qi holders can vote to change the ratio in which select pools stake the governance token by delegate voting.
Qi governance token holders can be rewarded more Qi for holding the token even if they withdraw their liquidity from the pools. This will require depositing their tokens into the staking pool.
After the 4 year distribution of Qi tokens is complete (When 1 billion tokens are in circulation), inflation will start at a rate of 3% per year. This means after 4 years there will be 30 million Qi tokens minted per year. The QiSwap team will then receive 25% of these tokens to maintain the codebase after the 1 billion tokens have been minted.
Any and all Sushi Improvement Proposals implemented that provide value to their ecosystem will be ported into QiSwap. Please see their article above that discusses the Sushi Protocol V3 Proposal.
QiSwap v1 Unique Features:
QiSwap will launch similar to Uniswap version 1, which are simple liquidity pools. Please keep in mind as well that some of these features are planned and may not materialize quickly or at all.
Keep in mind that we do not want to pre-announce functionality from the development roadmap, so we are trimming this section down and will expand this later. We expect the development roadmap to be published shortly after this document is released, so this section may become replaced.
Nitro Pools: Certain liquidity pools will have functionality that allows entities to airdrop tokens into the pool. As the QiSwap team develops the ecosystem and tries to attract liquidity, users who have provided liquidity may find themselves entitled to elevated rewards above the standard 0.25% trading fee and Qi governance tokens. For example, the “Qtum Beets” liquidity pool is funded by Qtum and the Qi native token. If you provide liquidity for this pool, you will receive your weighted share of the 0.25% trading fee, but there will also be a weighted share of Qtum that is airdropped to your deposit address. The rewards for this will come from the 1 million Qtum being staked to further secure the blockchain, in order to facilitate a secure DeFi environment.
Default Qtum Blockchain Features: The ability to operate multiple virtual machines on a single blockchain is perhaps the most undervalued feature of Qtum. The two articles linked above go into depth about why Qtum trumps Ethereum for DeFi, and doesn’t sacrifice decentralization.
We understand there’s a lot to unpack here. This long article requires multiple other documents to be read in order to understand what’s going on. The idea here is to develop a clone of Uniswap version 1 and get that released ASAP with some enhanced functionality on the Qtum blockchain. There is a lot of new ideas coming out of SushiSwap that we are watching. Some readers may have noticed an absence of PancakeSwap (or other Binance Smart Chain) DeFi projects being mentioned. This doesn’t mean we are not watching them, we just didn’t want to turn this document into a research project.
Once our minimum viable product has been released, we will begin to work on implementing SushiSwap-like pools along with Uniswap-like governance. We have a few ideas of our own which we will publish on our roadmap once the work has been half complete. We don’t want to be in a position where we have a great idea and another project beats us to the deployment phase. The entire project revolves around our governance token, which is why this article got so long.