A Cardano decentralized exchange has announced a new feature to attract liquidity.
Dubbed “organic APR,” the feature increases token issuances as more liquidity is introduced to the common pool, according to a Twitter thread from the team. It will be introduced in a single pool on December 8th and may be offered in other pools at a later date. The new feature has drawn praise from some Cardano users, but others have expressed dissatisfaction with it.
We have developed something special for you! Organic APR
Introducing Organic APR in one sentence:
The more people contribute to a pool, the higher the APR
Why do we need it? And how would this work? Check out this thread for more information.
— MuesliSwap (@MuesliSwapTeam) December 6, 2022
The team argued that organic APR is necessary because, without it, users would not be incentivized to campaign for the exchange. The MuesliSwap team explained:
“The users [de un exchange sin APR orgánica] they want to provide liquidity to earn rewards. But more liquidity providers means earning less of the issue. Consequently, there is no incentive to spread the word and onboard more users. They will only lower the APR for early adopters.”
Some Cardano users have praised the new feature. For example, one user called it a “cool innovation” and another “ingenious”.
if i understand correctly, instead of releasing from the get go all the emission rate, and in the beginning there are insane aprs but it goes down quickly.
you start slowly, and only release full apr when you reach the liquidity target?
— ADA goldfish (@cardanogoldfish) December 7, 2022
If I understand correctly, instead of releasing all the issuance fee from the beginning, and at the beginning there are crazy rewards but it goes down quickly.
Do you start slow, and only release the full APR when you hit your liquidity target?
But others have criticized the new feature, saying it provides unsustainable returns and will cause inflation.
One reviewer tweeted that the team’s explanation is unclear, asking, “Are you going to make transparent how many tokens are left and how long it will last?” And another user expressed his dissatisfaction bluntly: “Printing fake value through inflationary issuance is all that is wrong with DeFi. This is not the way to go.”
Printing fake value thru inflationary emissions is everything that’s wrong with defi. This isn’t the way forward.
— AltAnon95 (@AltAnon95) December 7, 2022
In their thread, the team defended themselves against accusations of inflationary money printing. He claimed that token issuances will stop once a cap is reached, stating:
“More participation = it sells out faster. But the broadcast is limited. The maximum issuance will never be exceeded and can give a minimum (!) duration for yield farming.”
The team also stated that the APR will not drop drastically once the cap is reached, as by then the volume of trade will have increased, which will bring more fees per transaction.
In recent months, Cardano developers have been trying to make improvements to attract new users. In September, the network implemented a hard fork to increase the speed and stability of transactions. And on November 21, developer Djed announced that it will launch an algorithmic stablecoin on Cardano in early 2023. The stablecoin will be pegged to the US dollar and backed by the network’s native token, ADA.
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