Governance & AMMs
Community Newsletter #2: September 2021
Although summer is coming to an end and the cold is approaching, September has been a remarkable month for all of us at Increment. We’ve connected with incredible fellows at KERNEL and we’re also proceeding to the final stages in our private investment round. We’re grateful for the feedback and support that we’ve received, whether it’s technical, financial, or legal, and we’re looking forward to building a solution to the current exchange rate challenges in the DeFi market.
Governance
At Kernel Block 4’s fireside chat with Vitalik Buterin, Vitalik shared his thoughts on improving DeGov (Decentralized Governance) within the DeFi and DAO ecosystem. Inspired by that conversation, we spent a chunk of our time in September working on an innovative path towards DeGov for the early stages of the Increment protocol. This alternative framework that we will introduce in the coming days is established by an idea around credit scoring and combines both on-chain and off-chain mechanisms.
At a high level, the tentative development timeline for the Increment protocol is to release a beta testnet by Q1 of 2022 and launch mainnet by Q2. Thus, in the next few months leading up to the mainnet launch, anyone can earn credit scores within the Increment platform economy by contributing to the development of the protocol or community.
Stay tuned, more details on this first phase of governance will be dropping soon.
Automated Market Makers (AMMs)
In the derivatives market, trading with the xy = k constant product formula becomes quite intricate and potentially inefficient. According to our analysis, there are two main challenges that this AMM algorithm brings:
1) Setting the value of k becomes a practice of delicate balance. If k is too low, organic users will incur too much slippage. If k is too high, arbitrageurs won’t have enough capital to execute their strategies.
2) Liquidity is spread out across an infinite price range, so only funds allocated near the market price are being utilized in trades, with the vast majority of funds underutilized or not utilized at all.
That said, we’re excited to share that we’ll be using an alternative AMM that tackles the pain points mentioned above. We will continue to validate this idea with some of the brightest people in Web3, more details on this coming soon.
Increment is a decentralized, algorithmic perpetual swaps protocol building on zkSync 2.0, featuring automatically concentrated liquidity, dynamic fees and parametrizable pools.
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