Maintaining generous but sustainable yield farming rewards is critical to attracting liquidity and users to new DeFi projects, and helps to ensure their long-term success.
Ruby.Exchange has allocated 100 million RUBY tokens, or 50% of total supply, to Liquidity Providers (LPs) over five years. While the token emission model has been defined in advance, distribution parameters may be adjusted by the Ruby DAO if required, in response to evolving market and ecosystem conditions — helping to ensure that both LP earnings and project runway are optimized.
Ruby Tokenomics: Fair, Sustainable, Competitive
Good tokenomics balance and align interests between different ecosystem stakeholders, rewarding activity that contributes to the security and profitability of a protocol without compromising its long-term interests. However, few projects manage to achieve such a goal.
Many DeFi initiatives adopt an entirely fixed token emission schedule for liquidity miners. This has the advantage of being transparent and predictable. Unfortunately, though, future TVL and token price cannot be reliably forecast at launch, so APYs for LPs are likely to fluctuate between being very high (leading to unsustainable rates of token issuance and/or high inflation) or too low (meaning the platform cannot compete against more generous programs in the market).
The influx of liquidity into Avalanche last year drove down yields to 1–2% APY, since the reward scheme did not allow for adjustment when conditions changed.
Ruby’s aim is to distribute 100 million RUBY tokens as liquidity rewards over five years, while remaining profitable for yield farmers. Rewards emissions are initially set at 40 million RUBY per year, reducing by a third every subsequent year and by around 69% in the final year:
- Year 1: 40,000,000 RUBY (3,333,333.33 RUBY per month)
- Year 2: 26,666,666.67 RUBY (2,222,222.22 RUBY per month)
- Year 3: 17,777,777.78 RUBY (1,481,481.48 RUBY per month)
- Year 4: 11,851,851.85 RUBY (987,654.32 RUBY per month)
- Year 5: 3,703,703.70 RUBY (306,172.84 RUBY per month)
However, in order to avoid the problems of rewards being too high or too low due to the inflexibility of a fixed model, the Ruby DAO will be able to make periodic adjustments to emissions, which may be informed by multiple factors including the market price of RUBY, the APYs available elsewhere in the DeFi space, and the overall burn rate of the rewards program.
The rewards contract has a built-in time lock, and any updates will require 24 hours to activate, ensuring there is enough time to notify the community and for liquidity providers to react before changes take effect. As more responsibility for governance is handed to the Ruby DAO, the community will vote directly on whether the rewards distribution should be adjusted, and if so, how, as well as other ecosystem decisions.
Ruby Tokenomics At-A-Glance
- Total supply: 200 million RUBY.
- Initial circulating supply: 2.871 million RUBY (1.435%).
- Liquidity mining rewards: 100 million RUBY tokens (50%) over five years.
- USDT/USDC/USDP/Dai StableSwap 4Pool.
- Single-sided RUBY staking.
- 0.3% trading fees distributed to LPs (0.25%), RUBY stakers (0.04%), and burned (0.01%).
- Gemstone NFT user profile identifiers.
- NFT-permissioned rewards
- Trading fee reductions.
- LP yield boosts (coming soon).
- Lower LP early-exit penalties (coming soon).
- Reward parameters progressively to be managed by the Ruby DAO.
Transparent, Dynamic Rewards
Ruby.Exchange has opted for a transparent tokenomic model that offers the opportunity for the DAO to update LP rewards according to changing market conditions and TVL, avoiding the shortcomings of a completely fixed emissions schedule.
Read the Ruby.Exchange Tokenomics Lite Paper for full details of RUBY and gemstone NFT issuance.