1๏ธโฃDeflationary tokenomics. ABRA/veABRA tokens
The term tokenomics (from a combination of the words โtokenโ and โeconomyโ) describes the economics of a token, the factors influencing the use and price of a token, its creation, distribution, supply and demand, incentive mechanisms and benefits of ownership.
Tokenomics is a key component of the Cadabra Finance project. We have invested a lot of effort into creating a sustainable and, most importantly, deflationary model that we believe will change the entire DeFi industry. We have developed tokenomics that is designed to benefit everyone: platform users and our token holders. Well-thought-out tokenomics is the key to the success of any crypto project. And we did this with full responsibility, also our tokemonic was audited by Blacktokenomics to test and model behavior. Audit results are available here.
Over the past few years, many DeFi projects have used the same tokenomics model: incentivise users to provide liquidity and to buy projectโs tokens by showing high APR numbers, which were supported by the emission of the same tokens. Details may vary, but the main principle remains the same: mint tokens to display APR numbers that look great. But as a result it all comes down to just one thing: the token is going down in price.
We, on the other hand, created a new model of tokenomics, one that breaks this vicious circle and doesnโt rely on the perpetual issuance of new tokens but instead ensures that all rewards are supported by actual Cadabra platform profits.
In other words, we have solved the systematic problems that most current DeFi projects face:
We use real platformโs rewards to buy back ABRA tokens from the market and then give them away as rewards, and do not rely on incentivizing liquidity through the issuance of new tokens.
Our ABRA token mostly has a one-time emission without subsequent issuance of an unlimited number of tokens.
The entire supply of ABRA tokens is released in one go, with the majority of it immediately placed on the open market and available to all market participants.
The entire supply of our tokens was minted only once, with most of it immediately allocated on the open market.
All rewards given by our protocol are backed by real profits.
Now letโs take a closer look at the key aspects of our tokenomics.
ABRA and veABRA tokens
The foundation of the tokenomics of the Cadabra platform is the multichain utility token ABRA. All the main mechanics and functioning of the platform are implemented on ABRA token basis. The token is closely related to strategies (which you can read about in a separate article) and is the main way to deliver profit. In addition to the main token, in tokenomics there is a secondary token veABRA, which is a voting escrow token and allows you to receive additional rewards.
ABRA
ABRA is a multi-chain utility token of the Cadabra platform that uses the Omnichain LayerZero fungible token standard and can be transferred between the following supported networks:
BSC (initial network)
ON Mainnet
Polygon
Ethereum
The list of networks is not limited and will expand as the Cadabra platform develops.
The ABRA token has several main utilitarian functions:
ABRA is a reward token, backed by real assets. Like most DeFi projects, we provide rewards in native tokens. Unlike most, we only distribute real profits from strategies, and do not just distribute newly issued tokens backed by nothing.
ABRA platform brings extra yields. Owners of veABRA tokens get the opportunity to receive a share of the platformโs profits. More details about veABRA, and how to receive rewards using this token, are described in the next section.
ABRA is a store of value. The token represents real assets and is partially backed by strategy liquidity. It has a deflationary design intended to increase in value over time. ABRA also acts as a multichain index.
ABRA is a central and integral part of the referral program. A full description of the Referral Program is in this article.
ABRA is a governance token. Locking ABRA generates veABRA, enabling you to influence the platform growth as part of the DAO. veABRA holders receive a share of collected yields proportional to their veABRA.
ABRA is an assistant and shortcut to manage funds across strategies and chains. You can always exchange ABRA for any strategy token on any blockchain. This allows easy, cheap adjustments to increase yields or alter risk levels.
Token veABRA
veABRA is the second token of the Cadabra platform. The veABRA token is an implementation of the veTokens (vote escrow tokens) concept and has two main functions:
A governance token that allows you to influence the development of the Cadabra platform. veABRA owners have the opportunity to put forward proposals and participate in voting on them.
Distribution of some part of the profitability of the Cadabra platform among veABRA token holders. veABRA holders receive rewards, the amount depends on their share in the total supply of veABRA at the moment: 2.1 Part of the yields from strategies collected as a platform commission (Performance fee) 2.2 Platform Owned Liquidity profit, which you can read more about below.
In order to receive veABRA tokens, you need to lock ABRA tokens โ this is the operation of staking (freezing) your ABRA tokens in a smart contract for a certain period of time, as a result the user receives veABRA tokens and instant one-time rewards, about which you can read more in a separate article.
In other words, when locking an ABRA token, the user receives special veABRA tokens, which are under his control for the entire period of locking the ABRA tokens. At the same time, ABRA tokens continue to belong to the user, and after the locking is completed, they can be disposed of without restrictions.
Locking ABRA tokens is beneficial to all users of the platform, since locking:
creates positive pressure on the ABRA tokens;
provides the opportunity to receive bonuses and rewards, including referral rewards.
The amount of veABRA you receive on locking depends on two factors: the amount of ABRA you are locking and the end date of the lock. Two main rules that are implemented at the smart contracts:
If two users stake the same amount of ABRA tokens, but at different times, and their locking periods end on the same date, they will receive the same amount of veABRA.
The longer the locking period, the more veABRA tokens the user will receive. Quantity of veABRA tokens received grows exponentially as the locking period increases. With each year, the multiplier increases by 1.2 times. As a result, locking for 4 years will bring approximately 2 times more veABRA tokens than staking for 30 days. (1.2*1.2*1.2*1.2 โ 2). The maximum duration of the locking period is 4 years, the minimum duration is 30 days
In other words, the number of veABRA tokens received is affected only by the locking end date and the number of locked ABRA tokens. This is expressed by the formula: ABRA*(AnnualMultiplier^LockingInYears), Where AnnualMultiplier โ constant and equal to 1.2, a LockingInYears is calculated as the difference in years between the locking end date and the constant starting point, in our case it is the moment of creation of the ABRA token.
The ^ sign is a power sign.
For example, letโs take 3 users:
The first user locks 100 ABRA for a year, from 01/10/24 to 01/10/25
The second user locks 100 ABRA for two years, from 01/10/24 to 01/10/26
The third user locks 100 ABRA for 11 months, from 02/10/24 to 01/10/25
In this case, the starting point is 11/27/23, the date the project started and the token was created.
That is, the first and third have the same locking end date, and the second locks at the same time as the first, but for twice as long. Therefore, according to the rules and formula above, the first and third will receive the same number of veABRA tokens, and the second will receive 1.2 times more than the first. It is important to emphasize once again that the locking start date is not taken into account.
Let us carry out a detailed calculation of the number of veABRA tokens received for each of the three users using the formula ABRA*(AnnualMultiplier^LockingInYears). The resulting numbers have been rounded for simplicity:
The first user will receive 100*(1.2ยน.1)=122 veABRA, where LockingInYears=1.1, turns out to be the difference between (01/10/25โ11/27/23), that is, a year and a month and a half, or 1.1 years.
The second user will receive 100*(1.2ยฒ.1)=146 veABAR, where LockingInYears=2.1,turns out to be the difference between (01/10/26โ11/27/23), that is, 2 years and a month and a half, or 2.1 years (one year more than the first).
The third user will receive 100*(1.2ยน.1)=122 veABRA, where LockingInYears=1.1, turns out to be the difference between (01/10/25โ11/27/23), that is, a year and a month and a half, or 1.1 years (same as the first).
Strategy Liquidity pools
To understand how liquidity pools in Cadabra work and what they are for, we need to describe another concept that is extremely widespread in crypto projects โ LP (Liquidity Provider) tokens. Liquidity Provider Tokens are tokens automatically generated by DEX platforms and issued to a liquidity provider once they contribute assets to the liquidity pool. On the Cadabra platform, such LP tokens are called SST (or Strategy Share Token) and are issued to users when depositing funds into a strategy, and are a guarantee that the userโs funds belong to him through a share in the total liquidity of a particular strategy. Thus, the value of all SST tokens of the strategy is equal to the value of its underlying assets (all funds that are managed by the strategy).
There are also strategy pools in the Cadabra platform โ when creating each strategy, its own separate strategy pool is created, which is created based on Uniswap V3 contracts. Such a strategy pool consists of two tokens: the SST token of the corresponding strategy and the ABRA token. This, in particular, means that SST tokens of a specific strategy can be exchanged for ABRA and vice versa.
When designing strategy pools, we wanted to achieve the following main goals:
Provide the ABRA token with real assets and liquidity in every strategy that generates profitability. ABRA is backed by a wide range of assets across all active strategies. We are constantly expanding our range of strategies, networks and underlying protocols. In other words, we can say that ABRA acts as an index of all assets managed by all strategies, but in addition with built-in returns for each strategy.
Add new methods for depositing and withdrawing funds from strategies, as well as moving funds between strategies and blockchain networks. Using the ABRA token, users can perform these actions at any time by buying/selling SST strategy tokens in Uniswap V3 strategy pools. Using the ABRA token reduces the number of actions and, accordingly, the risk of errors, and also allows you to save on gas, since it is a cheaper and easier way to carry out transactions.
Implement deflationary tokenomics. The concept of strategy pools is designed to have a long-term positive impact on the ABRA token through a self-reinforcing effect that we call the deflationary flywheel and which we will discuss in more detail in the next section: a) Since each strategy pool contains SST tokens of a specific strategy, these tokens generate profitability for their holders (as well as for liquidity providers in the strategy), which is then used to buy back ABRA (with subsequent accrual in the form of rewards to holders of ABRA and veABRA tokens), which may have a positive impact on ABRA token. b) Adding more and more SST strategy tokens to the strategy pool leads to an increase in the overall share of profitability attributable to SST tokens in the strategy pool. The greater the liquidity in the strategy pool, the more ABRA tokens are redeemed, and even more liquidity is added to the strategy pool. This creates a self-reinforcing effect that leads to an increase in the liquidity that ABRA tokens provide.
In addition to the strategy pools, there is a separate pool that is not directly associated with any of the strategies: ABRA/USDT, which is the entry point for trading the ABRA token for USDT, and is a connecting link between the all strategy pools.
Deflationary tokenomics
Our intention is to spin up a deflation flywheel, which will increasingly put positive pressure on the ABRA token. The design of our deflationary tokenomics includes mechanics that create a system with positive feedback โ the more liquidity in the strategies and the more ABRA tokens are purchased, the more the deflationary flywheel spins, and the more it accelerates itself, and the more it affects the ABRA tokens.
The main driving force in the deflationary process is POL (Protocol Owned Liquidity), which connects all the elements of tokenomics and works the following way:
The protocol cannot remove or withdraw POL. This limitation is enforced by smart contracts.
The protocol has the ability to redistribute POL between different strategy pools from time to time. This is necessary to reduce the risks of asset portfolio.
All initial ABRA liquidity is distributed through Uniswap V3 pools and is owned by the Cadabra protocol, which is initially limited to managing this liquidity at the contract level, and must subsequently be partially or fully managed through the DAO.
Liquidity increases with every purchase of ABRA tokens, whether through profits from strategies or regular user purchases. a) Strategies on received profit buy ABRA from the protocol for SST strategy tokens, and this liquidity remains in the ownership of the protocol. b) Users buying ABRA for USDT in the ABRA/USDT pool also increase the size of POL due to redistribution between ABRA/USDT and strategy pools (provided by arbitrage mechanisms). c) The swap fee collected on exchanges in the strategy and ABRA/USDT pools is invested in POL or burned.
All the profit that POL liquidity receives is distributed among veABRA token holders.
Sum up, we can describe how tokenomics and the deflationary flywheel work:
At the start of the project, initial liquidity belonging to the protocol is formed.
Users deposit funds in strategies that generate yields and use it to buy back ABRA. As a result, the strategyโs profits increase, the POL size increases, and as a result, the ABRA token may have a positive impact.
The commission for buying and selling ABRA through strategy pools goes into POL and POL is growing. A certain part is used to buy ABRA tokens and burn them.
POL liquidity is distributed among strategies that generate yields and buy back ABRA tokens โ the profit of the strategies grows, the size of POL grows, the ABRA token price can have a positive impact.
Additional incentives for a positive impact on the ABRA token are also:
Buying ABRA token from the market and increasing demand.
Locking ARBA tokens and temporarily reducing the supply of ABRA.
Negative elements are:
Sale of ABRA tokens.
Entering the free market of some portions of ABRA tokens from special pools.
These are standard problems of many tokenomics, but we have implemented some improvements:
The pool intended for the foundation team has a cliff period 3 months after the launch and vesting over 4 years, so they will not be available immediately, but will be unlocked on a fixed schedule.
A pool dedicated to locking rewards and referral rewards has a positive impact on the sustainability of tokenomics. First, it incentivizes users to use the token. Secondly, the reward mechanics are structured in such a way that the number of locked ABRAs must exceed the number of delivered rewards.
The remaining pools are small enough that they may not have a significant impact on ABRA tokens.
Token supply and distribution
Profit and value with ABRA
Invest in Cadabra strategy
Cadabra simplifies DeFi investing so your funds can work harder for you. The platform handles the complexity behind the scenes while you enjoy maximized yields with minimum effort.
One-click investing via a user-friendly interface removes barriers to entry.
Automation handles routine actions like compounding and rebalancing, saving you time.
Sophisticated algorithms increase APY by: a) Aggregating assets across diverse protocols. b) Dynamic rebalancing between yield sources. c) Optimized compounding frequency.
Buy ABRA โ lock into veABRA โ get more ABRA
You can lock your ABRA to get veABRA, acquire governance rights, and receive extra rewards:
One time bonus depending on lock duration.
Share performance fee. Performance fee is taken from all strategiesโ yields and redistributed proportionally.
ABRA accrued by Cadabra Protocol Owned Liquidity. The platform owns some strategy shares and they generate yields as well, the yield is proportionally distributed.
Create a team and lock together โ get ABRA as referral rewards.
Buy ABRA โ hold ABRA โ increase funds
Buying and holding ABRA has long-term potential as the deflationary flywheel starts working:
ABRA accumulates yields from all strategies. Compounding profits are used to buy back ABRA, increasing its demand.
Collected swap fees also buy back and burn ABRA. Supply decreases, value rises.
Bought-out ABRA increases yields from all strategies and accelerates the flywheel. Buying ABRA is like adding funds to strategies.
Buy ABRA โ diversify funds
ABRA represents real assets and is fully backed by strategies liquidity.
ABRA acts as a multichain index. ABRA is paired to all strategies and backed to all their assets via the strategy pools so ABRA can be changed to real assets in every moment.
ABRA simplifies reallocating of your funds across strategies. Just change shares of one strategy to shares of another one via ABRA.
veABRA holders can help to optimize protocol-owned assets. You can participate in reallocating ABRA across the strategy pool to balance risks and profitability.
Links and resources
Strategies page in Cadabra Finance website: https://cadabra.finance
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