Guides and Reviews22 February 2022

What is Locke Protocol - review


Locke is a universal platform that allows you to distribute tokens using its protocol. By platform, we mean a market made up of many two-sided markets, each with a protocol or DAO on one side and individual market participants on the other. Locke implements streaming auctions, an efficient and fair pricing mechanism that can be seen as a special case of TWAMM.

How do streaming auctions work?

The basic structure of a streaming auction is as follows >>>

– Market participants are free to move their deposit tokens in and out of the auction pool.

– As with many DeFi reward programs, each participant receives a proportional share of the reward tokens.

– Each deposit increases the current exchange rate. Each output reduces it.

– Pool deposits are blocked linearly over time. Blocked deposits cannot be withdrawn.

– The average exchange rate each market participant receives depends on the timing of their deposits and withdrawals.

– Each member receives TWAP for the time spent in the pool.

Why are streaming auctions better for users?

Locke, will say no to gaswars! 

In closed pools and other "fcfs" systems, gaswar is commonplace. Locke is designed to avoid this unhealthy dynamic.

With Locke, you avoid retroactive dilution:

Locke does not have a retroactive dilution effect. For example, if there is only one contributor in the first half of the auction, that participant will earn all the tokens allocated to the pool for that first half, even if billions of dollars enter the pool in the second half of the auction. The price that the first user receives will only change in the future.

With Locke, you don't need to measure market time:

There is nothing wrong with being the first bidder in a streaming auction. Inexperienced users participating in the auction are guaranteed to get an average result.

With Locke, you get a guaranteed distribution:

Because the streaming auctions are proportional, anyone who wants to participate will have a chance to do so.

What are the use cases for Locke?

– Fair distribution of NFT mint passes

– Liquidity mining with a fixed duration

– DAO treasury diversification

How do Locke “receipt” tokens work?

In addition to being a great tool for determining fair exchange rates, the streaming auction mechanism can be used to determine fair returns. This is done by issuing “receipt” tokens that can be exchanged for the underlying deposit token upon expiration.

These receipt tokens can be thought of as bonds, users will be able to sell their receipt tokens, use them as collateral for loans, or provide liquidity to AMM to earn trading commissions.

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