The Incentive Play: Bootstrapping liquidity in Pontoon network
The DeFi revolution owes its success to the concept of liquidity pools, a strict divergence from the centralised order book system of matching trade orders. Liquidity pools made it extremely easy for trustless on-chain trading without counterparty risks like is present in most centralised exchange trading. The primacy of liquidity pools means the automatic importance of those who willingly contribute (stake) their assets in the pools for the efficient operation of activities like trading, swaps, lending or even on-chain insurance.
Technically, contributors to any pool are called Liquidity Providers or LPs for short. At the core of a DeFi protocol like Pontoon is the One-click liquidity mirroring across ETH, BSC, HECO Chain, xDAI, POLYGON, OPTIMISM with incentivised Relayer Network and Liquidity Mining for Liquidity Providers across the chains. Meaning that we make it easy for LPs to bridge and unlock their assets across different chains, signalling the ease of interoperability which has been a hot burner topic in the blockchain space for quite some time now.
So how exactly does Pontoon encourage Stakers to play their pivotal role in creating pools on its network? The answer is incentives. We incentivise stakers to provide liquidity and in the process mine $TOON token, the native token powering Pontoon network. In our previous blog on liquidity mirroring as an efficient way of bridging assets across blockchain networks, we demonstrated how easier an approach it is for Stakers to work for a “greater good” i.e. supply their assets for pool staking across the different blockchains supported by Pontoon network and earn attractive APY in TOON tokens. A DeFi user let’s say a person who wants to interact with Aave’s lending protocol on Polygon needs his assets on Polygon. Instead of going through a PoS bridge which takes at least four hours for the asset bridging or through the Plasma bridge which takes even more time; a minimum of seven days, he could simply bridge his asset using Pontoon interface which works with a cross-chain relayer network and immediately unlock the same value in the asset on Polygon going about his normal business without much of a hassle. But this hypothetical scenario would have only been possible because LPs participating in pool staking on Pontoon were incentivised to do so through incentives like farming TOON as well as enjoying network fees from trades facilitated on the network.
The power of incentives in DeFi cannot be underestimated. DeFi summer of 2020 was sparked off at least due to the Compound Finance liquidity mining approach that attracted insane liquidity to its lending protocol which later became a common practice among new protocols during the height of the yield farming mania.
About Pontoon Protocol
Pontoon offers users One-click liquidity mirroring across ETH, BSC, HECO Chain, xDAI, POLYGON, OPTIMISM with incentivised Relayer Network and Liquidity Mining for Liquidity Providers across the chains. We solve the prevalent fragmented liquidity problems across chains employing a decentralised and trustless approach.