<aside> 💡 This page summarises the key tokens in the Alluo ecosystem and what they mean

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<aside> ↖️ Main menu

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Tokenomics

🤩 Rewards for Alluo lockers

As discussed in previous “the tokens” section, vlAlluo token holders (i.e. those that have locked the Alluo tokens) will receive the difference between the APY given to depositors and that which is realised from the assets in the pools.

For example, if the realised APY on the stablecoin assets deposited is 15% and the advertised APY in the mobile app is 8%, vlAlluo holders earn the difference (7%) in Alluo tokens.

Lockers actually have the potential to earn even more, as this spread is also multiplied by the ratio of deposits and the value of Alluo tokens locked. So, if we have $1m worth of locked Alluo and $5m of TVL, the spread will be multiplied by 5 ($5m / $1m)!

This means that in this scenario the vlAlluo holders would receive 35% APR worth of Alluo tokens (5 * 7%) without the need for us to issue new tokens (unlike high emission protocols which rely on minting new tokens).

🚰  Protocol liquidity

When users lock Alluo, they are locking a share of a 80–20 Alluo****Eth Balancer Liquidity Pool. In return, the alluoLocker smart contract records their share of vlAlluo which is equal to the value of the Alluo****Eth Balancer LP share they have locked.

So what this means is when vlAlluo holders receive their staking rewards, instead of receiving vlAlluo back to their wallets, their vlAlluo balance is added to the Balancer LP and their share held in the alluoLocker smart contract.

This system is aligned with our 3 goals:

  1. Sustainability: because the vlAlluo pool is the only one getting Alluo rewards, we don’t have to incentivise 2 separate pools (ie one for users locking their tokens and one for users providing their liquidity).
  2. Alignment with the protocol: only the users locking receive the rewards for providing the liquidity.
  3. Resistant to black swan events: because the tokens are locked for at least a week with a cooling off period 3 of days this means that liquidity cannot disappear overnight when we need it.

This cooling off period of 3 days is particularly helpful to manage governance attacks. Once the locking period has elapsed, a user requesting their tokens back will need to wait 3 days before being able to withdraw them. During this time, the DAO could hold a vote to slash tokens for a particular user or sets of users who had acted maliciously.

🔐 Protocol Backstop