Henlo beras, and welcome to Goldilocks DAO – a DAO dedicated to building novel defi infrastructure for Berachain. In this article, we’ll introduce the first of our creations, Goldiswap, the innovative new AMM model that governs the behaviour of the Goldilocks governance token, LOCKS. Here, we’ll describe how Goldiswap

(i) Allows users to borrow a significant portion of the liquidity of their tokens at any time without interest payments, risk of liquidation, price impact or relying on third parties.

(ii) Creates an up only floor price for all tokens that trade on the AMM.

What’s the Problem?

Traditional automated market makers (AMM’s) operate with a single liquidity pool and calculate the price of the paired assets as a function of how much of each asset is in the pool. This model allows for a natural price discovery mechanism – price increases as more of an asset is taken out of the pool by buyers, and decreases as more of an asset is put back into the pool by sellers. Effectively, the price of an asset increases as the amount of liquidity backing each token in the pool increases over time. But the only way to access any of this liquidity is for a holder to sell their tokens, which impacts price, incurs slippage and forces the holder to surrender their stake in the project. The only alternative for holders who want to access the liquidity of their tokens without losing their position is to use a third party lending platform which exposes them to punitive interest rates, additional smart contract risk and the ever present risk of liquidation.

How Goldiswap Solves This

Unlike traditional constant product AMM’s, Goldiswap allows users to access a significant portion of the liquidity of their tokens at any time, without surrendering their position, impacting price, paying interest, risking liquidation or using a third party. Furthermore, like traditional AMM’s (and unlike some other projects that have tried to achieve similar objectives), Goldiswap allows for real and natural price discovery in a manner that mimics traditional AMM’s. Here’s how.

Instead of using a single liquidity pool to determine the price of a token, Goldiswap uses two. To illustrate, we’ll use the example of LOCKS (the Goldilocks governance token), whose liquidity is denominated entirely in HONEY (Berachain’s native fully collateralised stablecoin). To determine the market price of LOCKS, Goldiswap uses two liquidity pools, the price supporting liquidity pool (PSL) and the floor supporting liquidity pool (FSL). The FSL supports what we call the `floor price’ of LOCKS – this is a minimum amount of HONEY that is guaranteed to back every LOCKS token forever – the floor price, unlike the market price can never decrease. At any time, a holder of LOCKS can borrow the current floor price of their tokens for as long as they want, with no risk of liquidation and no interest payments. This also facilitates a simple mechanism for leverage trading LOCKS without risking liquidation or paying exorbitant funding rates. This is possible because the floor price can literally never go down, since a user can never take out more than their proportional share of the FSL (e.g. if you sell 10% of all LOCKS tokens in existence, you will take out exactly 10% of the FSL).

When a user buys a LOCKS token through Goldiswap, they pay whatever the current floor price is into the FSL, plus whatever the current market premium is into the PSL. When they sell, they receive the current floor price (from the FSL) plus the market premium (from the PSL). The market premium is determined by Goldiswap’s price function, which ensures that the market price of LOCKS will never drop below the floor price, but also allows the market price to respond to buying pressure and enter price discovery in a natural manner that mimics traditional constant product style AMM’s.

So, LOCKS has a minimum floor price that can never decrease and that users can always borrow against without fear of liquidation, and a market price that is always greater than the floor price,which responds naturally to market behaviour. This is where things get really interesting. Goldiswap also includes mechanisms that allow the floor price to increase over time when the market premium is sufficiently high. Specifically, Goldiswap has a `target ratio’ T such that whenever the PSL/FSL ratio hits T, a small portion of the PSL is transferred to the FSL, thereby permanently increasing the floor price (without significantly impacting the market price). When this happens, T is increased, and the PSL/FSL ratio needs to increase again even further in order to trigger another `floor raise’. If the PSL/FSL ratio gets stuck below T for an extended period of time, then T will begin to decrease gradually until it drops below PSL/FSL. This mechanism ensures that when the market premium is high, Goldiswap will continuously increase the floor price without significantly impacting the market price, thereby increasing the amount of liquidity available to be borrowed by long term holders. This means that long term holders can benefit from periods of price discovery without selling their positions or impacting price. Additionally, there is a 5% sell tax that all gets automatically redirected to the FSL and PSL, thereby supporting liquidity and raising the floor price.

Finally, Goldiswap also includes a built in staking mechanism that allows users to earn staking rewards even whilst borrowing again the floor price of their tokens. In the case of LOCKS, the staking rewards are PORRIDGE tokens, which function as a call option to buy LOCKS at the current floor price.

TLDR:

Floor price that only goes up, unliquidatable interest free yield bearing loans against the floor price of your tokens, instantly access part of your tokens’ liquidity at any time without impacting price, all within an AMM that supports true price discovery. Beras in control.

Henlo beras, and welcome to Goldilocks DAO – a DAO dedicated to building novel defi infrastructure for Berachain. In this article, we’ll introduce the first of our creations, Goldiswap, the innovative new AMM model that governs the behaviour of the Goldilocks governance token, LOCKS. Here, we’ll describe how Goldiswap

(i) Allows users to borrow a significant portion of the liquidity of their tokens at any time without interest payments, risk of liquidation, price impact or relying on third parties.

(ii) Creates an up only floor price for all tokens that trade on the AMM.

What’s the Problem?

Traditional automated market makers (AMM’s) operate with a single liquidity pool and calculate the price of the paired assets as a function of how much of each asset is in the pool. This model allows for a natural price discovery mechanism – price increases as more of an asset is taken out of the pool by buyers, and decreases as more of an asset is put back into the pool by sellers. Effectively, the price of an asset increases as the amount of liquidity backing each token in the pool increases over time. But the only way to access any of this liquidity is for a holder to sell their tokens, which impacts price, incurs slippage and forces the holder to surrender their stake in the project. The only alternative for holders who want to access the liquidity of their tokens without losing their position is to use a third party lending platform which exposes them to punitive interest rates, additional smart contract risk and the ever present risk of liquidation.

How Goldiswap Solves This

Unlike traditional constant product AMM’s, Goldiswap allows users to access a significant portion of the liquidity of their tokens at any time, without surrendering their position, impacting price, paying interest, risking liquidation or using a third party. Furthermore, like traditional AMM’s (and unlike some other projects that have tried to achieve similar objectives), Goldiswap allows for real and natural price discovery in a manner that mimics traditional AMM’s. Here’s how.

Instead of using a single liquidity pool to determine the price of a token, Goldiswap uses two. To illustrate, we’ll use the example of LOCKS (the Goldilocks governance token), whose liquidity is denominated entirely in HONEY (Berachain’s native fully collateralised stablecoin). To determine the market price of LOCKS, Goldiswap uses two liquidity pools, the price supporting liquidity pool (PSL) and the floor supporting liquidity pool (FSL). The FSL supports what we call the `floor price’ of LOCKS – this is a minimum amount of HONEY that is guaranteed to back every LOCKS token forever – the floor price, unlike the market price can never decrease. At any time, a holder of LOCKS can borrow the current floor price of their tokens for as long as they want, with no risk of liquidation and no interest payments. This also facilitates a simple mechanism for leverage trading LOCKS without risking liquidation or paying exorbitant funding rates. This is possible because the floor price can literally never go down, since a user can never take out more than their proportional share of the FSL (e.g. if you sell 10% of all LOCKS tokens in existence, you will take out exactly 10% of the FSL).

When a user buys a LOCKS token through Goldiswap, they pay whatever the current floor price is into the FSL, plus whatever the current market premium is into the PSL. When they sell, they receive the current floor price (from the FSL) plus the market premium (from the PSL). The market premium is determined by Goldiswap’s price function, which ensures that the market price of LOCKS will never drop below the floor price, but also allows the market price to respond to buying pressure and enter price discovery in a natural manner that mimics traditional constant product style AMM’s.

So, LOCKS has a minimum floor price that can never decrease and that users can always borrow against without fear of liquidation, and a market price that is always greater than the floor price,which responds naturally to market behaviour. This is where things get really interesting. Goldiswap also includes mechanisms that allow the floor price to increase over time when the market premium is sufficiently high. Specifically, Goldiswap has a `target ratio’ T such that whenever the PSL/FSL ratio hits T, a small portion of the PSL is transferred to the FSL, thereby permanently increasing the floor price (without significantly impacting the market price). When this happens, T is increased, and the PSL/FSL ratio needs to increase again even further in order to trigger another `floor raise’. If the PSL/FSL ratio gets stuck below T for an extended period of time, then T will begin to decrease gradually until it drops below PSL/FSL. This mechanism ensures that when the market premium is high, Goldiswap will continuously increase the floor price without significantly impacting the market price, thereby increasing the amount of liquidity available to be borrowed by long term holders. This means that long term holders can benefit from periods of price discovery without selling their positions or impacting price. Additionally, there is a 5% sell tax that all gets automatically redirected to the FSL and PSL, thereby supporting liquidity and raising the floor price.

Finally, Goldiswap also includes a built in staking mechanism that allows users to earn staking rewards even whilst borrowing again the floor price of their tokens. In the case of LOCKS, the staking rewards are PORRIDGE tokens, which function as a call option to buy LOCKS at the current floor price.

TLDR:

Floor price that only goes up, unliquidatable interest free yield bearing loans against the floor price of your tokens, instantly access part of your tokens’ liquidity at any time without impacting price, all within an AMM that supports true price discovery. Beras in control.