Announcing the 100M ALBT Incentivization Program with Bonq

Nexera
6 min readMay 27, 2022

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As you may have noticed by the excitement on our community channels, AllianceBlock’s decentralized exchange launch with a brand new take on an automated market maker is just around the corner.

Following the successful rollout of the beta version on EnergyWeb’s Volta and Polygon’s Mumbai Testnets, we’ll be continuing with Energy Web Chain’s Mainnet as the first layer one blockchain to support the AllianceBlock DEX officially.

To ensure the success of the DEX and the entire AllianceBlock ecosystem, we must incentivize participation and reach the target Total Value Locked (TVL) in our platform in the early months of its release. The move will also help us extend the DEX’s reach beyond the AllianceBlock and Energy Web communities, accelerating adoption from the broader crypto ecosystem.

We have previously communicated that we aim to use 100M ALBT from the 150M ALBT allocated to Nodes to kickstart a built-in incentivization program for the DEX. Since then, we’ve heard valid concerns from our community members about releasing a large amount of tokens into circulation at such a fragile time for the market overall. After considering the community feedback, we have sought a solution that will address this concern and reinvest this sum to ensure the long-term success of the AllianceBlock DEX.

We are locking the 100M ALBT for the incentivization program into the Bonq, an innovative fintech project providing solutions for self-sovereign finance. Bonq pays out rewards in BEUR, a non-custodial, over-collateralized payment token soft-pegged to the Euro. The collateral value (such as third-party tokens like ALBT and EWT) backing up BEUR is always at least 20% higher than BEUR.

Over-collateralization has proven to be a more robust mechanism for maintaining a stablecoin peg, as demonstrated recently by LUSD, an overcollateralized coin that held its peg during recent market volatility.

The Road to the AllianceBlock’s End-to-End Infrastructure

We have first outlined the initial token allocation plan in our token economics paper. The purpose of the plan was to support the development of the AllianceBlock Protocol. As part of this plan, 150M ALBT were allocated to the Nodes and were never intended to become part of the circulating supply. Since then, our vision has evolved and matured, and we have expanded to capitalize on new opportunities by solving challenges hampering growth in the DeFi sector. From this allocation, we are taking the 100M ALBT for the incentivization program for the DEX.

AllianceBlock’s vision is to provide an end-to-end infrastructure for projects and developers in DeFi. Building a DEX is vital to facilitate growth in the space by delivering solutions that meet the needs of blockchain startups and companies at various stages of their journey. And with the launch of our DEX, we are building on top of what other exchanges have already built and adding a new and bespoke take on the automated market maker algorithm that will reduce the risk of impermanent loss. We will share more about how this works in our following articles, so stay tuned.

The development and release of our DEX in the AllianceBlock ecosystem means that projects and developers can use our ready-to-use solutions or build on top of our technology to kickstart their growth, utilizing a seamless, interoperable and integrated infrastructure. For example, a blockchain startup can generate their tokens and list them on our DEX for initial liquidity. They can then launch on Fundrs to raise capital, utilize our DeFi Terminal to launch liquidity mining and single-sided staking campaigns to generate and lock liquidity and use our Bridge to support multiple chains. All this while using ALBT directly or in the background.

Once our suite of solutions has been fully launched and implemented, the 50M ALBT left in the Nodes allocation will be more than enough to incentivize the setup of more nodes to support the AllianceBlock ecosystem. Therefore, it makes economic and operational sense to use 100M ALBT from the allocation originally earmarked for Nodes to create an incentivization program to support the growth of the DEX.

How the Bonq Protocol Works

Bonq is a decentralized, non-custodial, over-collateralized lending protocol that allows users to borrow against their digital assets at ZERO recurring cost and at least a 120% collateral ratio. It mints its payment token BEUR — soft pegged to Euro — and gives it away as an interest-free loan to anybody who deposits whitelisted crypto assets as collateral. You can preview their whitepaper here.

The core value proposition of Bonq is that anyone can borrow against their assets and receive BEUR without paying any recurring interest rate. BNQ is the protocol’s utility token, used to access the platform, whitelist tokens, receive cashback and exercise governance. It also accrues all the fees generated by the platform.

“ The bonq protocol could not exist without the ALBT #DEX. We will provide $BEUR to $EWT and $ALBT liquidity and many tools to take advantage of the #yield opportunities that arise from minting and exchanging $BEUR.” Micha Roon · Bonq CTO

Users of the protocol can stake BNQ to receive free or discounted usage of the Bonq platform and use the rewards to decrease the outstanding BEUR loan. BNQ retail stakers are getting a part of the protocol fees as cashback, but they are not backing up the system in any way and are not a part of the price stabilization mechanism.

Bonq utilizing real collateral to maintain its peg is different from how other stablecoins keep their peg. For example, MakerDAO mints more MKR tokens if there is a protocol deficit. At the same time, Terra is maintained by an arbitrage relationship with the utility token LUNA, with no real backing or initial collateral. BNQ staked for cashback is not collateral, so there’s no risk of BNQ liquidation for BNQ cashback stakers.

We’re very excited about this partnership. AllianceBlock is one of our key partners, and AllianceBlock DEX is essential for launching Bonq on the EnergyWeb Chain. This rewards program is exactly why Bonq was built — to allow token holders access the liquidity of their assets without selling them, at zero recurring interest. — Delia Sabau · CEO, Bonq

How ALBT Would Be Used

Depositing ALBT into Bonq would allow us to keep the 100M ALBT locked and not released into circulation. We will then use ALBT as collateral to mint BEUR, which we will provide as incentives for the program. We will start with a very high collateral ratio and utilize only a small amount of the tokens for the initial BEUR supply. We will discuss further the specific allocation and schedule of ALBT utilization in a separate blog article.

The main risk involved is being liquidated. If this happens, the entire collateral of ALBT will be released into circulation and we may lose up to 20% of the tokens. This risk is mitigated by accessing Bonq premium bots, such as liquidation bots and trove optimization bots, which will monitor the level of the collateral and pro-actively adjust the level of collateralization to avoid closing the loans before certain milestones are met.

We will be sharing more information about the mechanics of the incentivization program, including more details on how we determine the percentage allocations of ALBT that we will use to mint BEUR. Bonq will have a limited beta launch in Q3 2022, and ALBT will be accepted as collateral from the beginning.

Next Steps

As we get closer to the release, we will be sharing more information about the staged launch of the AllianceBlock DEX, our short-term roadmap, including features we prioritize once we release and a guide on how to use the DEX.

We also invite our community to join our Telegram group and send in your questions and clarifications there. We value the feedback that we receive from you, so make sure to include #WenDEX in the messages so that we’d be able to filter all questions and prepare an FAQ alongside the launch.

About AllianceBlock

AllianceBlock is bridging the gap between decentralized finance and traditional finance, by remedying issues that exist in both spheres and linking them more closely together. They see the future of finance as an integrated system in which the best of both worlds can work together to increase capital flows and technological innovation.

Building this future by bridging traditional finance with compliant, data-driven access to new decentralized markets, DeFi projects and ecosystem-scaling tools such as funding and interoperability. As such, they are building a next-generation financial infrastructure that aims to provide regulated financial entities around the world with the tools they need to seamlessly access the DeFi space.

You can also find us on:

Telegram · Twitter · Instagram · Website · LinkedIn · YouTube · Medium

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Nexera
Nexera

Written by Nexera

Nexera is empowering the future of finance with cutting-edge open-source innovation.

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