An established trading firm, Fractal is seeking to expand into the world of decentralized financing with Tokemak, a project the team refers to as a “decentralized liquidity reactor” for DeFi.
The company announced a $ 4 million round of investment led by Framework Ventures, a well-known DeFi investment fund known for its bets on Synthetix and Chainlink, on Tuesday. Other major funds such as Electric Capital, Coinbase Ventures, North Island Ventures, Delphi Digital and ConsenSys also joined the round.
Funding comes in preparation for the release of Tokemak, scheduled for the end of the second quarter of 2021, where the liquidity network will be implemented on the Ethereum mainnet.
Basically, Tokemak provides a general liquidity aggregator for decentralized exchanges. Carson Cook, founder of Tokemak, explained to Cointelegraph that the project is a “network designed to generate sustainable liquidity for new and established DeFi protocols”.
For the liquidity provider, Tokemak works as a one-way yield platform where they can deposit reserves – for example, Ether (ETH), USD Coin (USDC) and Dai – as well as tokens for the projects using Tokemak. The Tokemak platform will then direct the liquidity to automated market maker pools and other market making capabilities. Key to this concept are TOKE holders, who act as “liquidity directors” and express their preference for where to send liquidity.
The primary need that Tokemak wants to solve is to start up liquidity for new projects. In most cases, they have to put in a significant amount of resources and effort to bolster their token’s market liquidity, including revenue farming incentives. Tokemak allows them to grant liquidity through a one-sided offer – for example, by spending some of their tokens on the Token reactor pools. Tokemak’s liquidity pool could then be automatically routed to the market of their token, although this depends on the wishes of the liquidity directors. TOKE holders may want to boost certain pools over others as the token gives fractional control over Tokemak reserves.
As Cook explained, one class of Tokemak users can take the lead in generating the highest profit for the protocol:
“Market makers have access to Tokemak to increase their trading capital and generate trading returns. Market makers are likely to fill the following roles: Pricers, who offer prices for assets in professional markets such as order book markets, RFQ systems, etc. And liquidity directors, who use TOKE to route liquidity to markets where they can be most efficient with trading capital. “
Tokemak is also expected to be useful to “humble farmers,” Cook said, as TOKE will be distributed through liquidity mining. Stock exchanges can also see the platform as a way to increase their market depth.
The protocol builds on an innovative exchange liquidity aggregator, with a somewhat similar role to Yearn.finance and other yield farming protocols that are constantly looking for the most profitable strategies for users’ assets. Given the importance of TOKE, sensible distribution of the token is probably key to its success.