Introducing The Cycle Protocol
The Cycle Protocol is a community owned yield optimizer launching on the Avalanche C-Chain in early May 2021.
Following widely used patterns, The Cycle Protocol will employ a collection of vaults that auto-compound rewards from liquidity mining programs on the Avalanche C-Chain. Participants will be able to move in and out of vaults using AVAX or LP tokens, providing a pain-free, streamlined experience.
Usually upon entering a vault, participants will be minted some amount of shares that will equate to an ever growing amount of the deposit token. The strategy is responsible for producing this growth by regularly compounding rewards into the principle deposit.
The Cycle Protocol takes this a step further by attaching its own liquidity mining program to each vault. Instead of minting the vault shares to the depositor, the shares will be depositing into a rewards contract on behalf of that depositor. Participants will begin earning the CYCLE token as soon as they enter a vault.
What is the CYCLE token?
The CYCLE token is the reward and governance token of The Cycle Protocol. It will be responsible for updating key values that will determine the health and direction of the protocol, including the inflationary policy of the token, inclusion of new vaults and the weight of distribution to each vault.
The two most important values to govern are the reinvest fee and the scaling factor,
The reinvest fee (along with a small caller fee) will be the only fee applied when reinvesting rewards. This fee will be aggregated and periodically swapped to CYCLE tokens, to then be processed for rewards.
These tokens are processed through the Cycle token contract and scaled according to the scaling factor value. The resulting amount of CYCLE tokens from this scaling will be distributed as rewards to all the vault-connected reward contracts. It will be possible for the community to determine whether the CYCLE token will have a deflationary or inflationary policy. A scaling factor below 1 would scale down the distribution and produce a deflationary policy. Above 1 would do the opposite, scaling up the distribution and providing a reward boost through an inflationary policy.
These two values will be at the heart of directing the health and success of the protocol. All CYCLE token holders will be able to participate in frequent adjustment of these values.
Beyond these two values, the community will have input in determining the weight of distribution to each vault-connected reward contract as well as the core reward contract, where rewards will be allocated for depositing CYCLE/AVAX LP.
Token Distribution
The CYCLE token will have an initially minted supply of 300,000. Distribution follows,
90% Liquidity mining program
5% Team
4% Airdrop
1% Initial liquidity
Tokens for the liquidity mining program were minted into the Cycle token contract and will be released according to a distribution function. As mentioned above, tokens can only be released by processing CYCLE tokens into the contract. The initial distribution function will linearly adjust the scaling factor from 6 to 3 during this process. It’s important to note that during the initial distribution, the scaling factor will not be updatable but instead be determined by the distribution function, which determines the current value based on the remaining supply in the contract.
Post distribution governance and protocol direction
Once the initially minted supply is fully in circulation, the scaling factor can be adjusted by the community. Depending on the range of opportunities that present themselves on the platform and the conditions of the space overall, the community may feel it is appropriate to pursue an inflationary or deflationary approach. This decision will obviously have an impact on the rate of reward distribution so some balance and subtle insight will be required.
Vaults will be commissioned and decommissioned over time. The Cycle Protocol can adapt to any and all Defi opportunities on the C-Chain, pursuing promising and secure options.
More information can be found in the Gitbook guide and any questions can be answered by dropping into the Discord.
