There’s a whole new Joe in town. TraderJoe is the largest DEX (Decentralized Exchange) on the Avalanche blockchain. TraderJoe tokenomics will change via adjustment of the staking mechanism. To do this, TraderJoe will move from one to three separate staking mechanisms. The new staking mechanisms are:
- rJOE
- sJOE
- veJOE
Currently, JOE is staked for xJOE which earns rewards in JOE. The new staking mechanism shuffles Trader Joe Tokenomics, reducing selling pressure on JOE token AND should lead to an increase in the price of JOE.
Overview of DEX and TraderJoe Tokenomics
TraderJoe is the largest DEX by TVL on the Avalanche Blockchain. The total value locked into TraderJoe at the time of this writing is > 1 billion dollars. TraderJoe attracted this amount of capital by being the first DEX on Avalanche. They have maintained it with attractive rewards for providing liquidity. These rewards are paid out in TraderJoe’s native token JOE.
Basic DEX Tokenomics
Let’s take a step back. New DEXes need to attract capital. DEXes do this by providing returns to users who park their capital in said DEXes, providing liquidity. Without the volumes of major players like Uniswap or Curve, new DEXes can only compete by creating a cryptocurrency or native token and distributing their native to liquidity providers as a reward.
DEXes like SushiSwap, TraderJoe and many others often see the value of their native tokens erode. Unless there is a reason for liquidity providers to HODL the native token, they will sell for a stable coin or the underlying smart contract chain. This puts downward pressure on the price of the native token which means that MORE must be paid out to maintain the same rewards! The cycle goes on and on.
Old TraderJoe Tokenomics
Serious DEXes (like TraderJoe) started offering the option of “staking” their native tokens to try and blunt the inflationary effects of token distribution. In this sense, staking means locking up and earning extra rewards (in the native token) and kicking the inflationary pressure down the road. The hope being that as a DEX grows and becomes dominant, fees from its market making activities will be enough to attract capital.
TraderJoe allows people to stake Joe for xJoe which has an APR of ~31% at time of publish.
Everything I’ve written to this point has been a background on DEXes, rewards and yield farming. Now we get to the new tokenomics of TraderJoe.
What’s NEW with TraderJoe?
Trader Joe is creating a modular staking system. This system allows three different types of staking for different types of investors. Each type of staking has its own pool and token. The three types of staking are:
- rJOE
- sJOE
- veJOE
Each staking pool eases inflationary pressure on the JOE token in a different way. Lets look at them now.
rJOE: unlocks the yCombinator of the Avalanche Blockchain
rJOE is an integral part of the Rocket JOE platform. JOE stakers can stake Joe earning rJOE over time. rJOE unlocks the ability of its owner to enter Rocket Joe token launches. TraderJoe is acting as a “Launchpad” for new tokens on the Avalanche network. Burning rJOE allows a JOE staker to invest in new tokens as part of the launch of new protocols.
There is no cap on the amount of rJOE that can be accrued. rJOE is non-transferable and burned when used to access Rocket Joe token launches. rJOE allows stakers to speculate on brand-new token launches, potentially capturing x100 gains on new tokens.
sJOE: the new xJOE
The sJOE token entitles the staker to a part of the revenue generated by TraderJoe. Unlike xJOE, sJOE rewards are paid out in stable coins.
The JOE-xJOE mechanism was borrowed from SushiSwap at the launch of TraderJoe. The JOE-xJOE mechanism creates constant inflation and selling pressure which puts a downward pressure of price of Joe. The transition from xJOE to sJOE will remove some of the selling pressure on the JOE token.
vEJOE: Boost Farming Yields with vEJOE
Finally, JOE can be staked to earn veJOE which boosts the farming yields on selected farms on the TraderJoe platform. veJOE can boost the yields of selected farms by up to 2.5x. veJOE is non-transferable and accrues over time by keeping JOE staked. If any of your staked JOE is unstaked, you lose all veJOE you have accrued and have to start earning your boost back from zero.
Conclusion
TraderJoe is implementing three new staking mechanisms. These changes should improve TraderJoe tokenomics, while continuing to offer value to JOE hodlers and liquidity providers on the TraderJoe platform. I look forward to seeing what effects these changes have on TraderJoe, the largest DEX in the AVAX blockchain.
