Mangata has completed building a novel consensus mechanism called Proof-of-Liquidity. It builds on Proof-of-Stake but is much more capital-efficient. Instead of staking native tokens, liquidity tokens are used to secure the network, keeping the capital working on the DEX.
This article will recap what Proof-of-Liquidity is and then go into the details of how the rollout will take place in March 2023.
Once again, Mangata delivered.
What is Proof-of-Liquidity?
Proof-of-Liquidity was introduced as a concept by Mangata Finance in 2021 to solve an issue that makes Proof-of-Stake not the best choice for a DEX appchain: capital efficiency.
DEXes need to be as liquid as possible. This means that as much of the native token as possible should keep working in liquidity pools. If those tokens would be staked to secure the network against MEV, it would lead to less liquidity and higher prices for users.
To solve the problem, Mangata introduces Proof-of-Liquidity. Instead of staking native tokens, liquidity tokens are used to secure the network. This ensures that the capital can keep working on the DEX, while at the same time, the LP tokens are used as stake in Proof-of-Liquidity.
Giving Liquidity more Utility: Stake Once, Earn Twice
The immediate insight into Proof-of-Liquidity is, that liquidity now gets access to an additional earnings opportunity. In addition to earning exchange commission and potentially liquidity mining rewards, securing the network is subject to block collation rewards.
Changing the Meta for Node Operators
Proof-of-Stake is a fairly straightforward game for node operators. If they are convinced that running a node to earn the native token of a network is net positive for them, they will engage in node operations.
Proof-of-Liquidity pushes this game to the next level. Since liquidity has a very different risk-reward profile, a new breed of node operators. Node Operators understand how liquidity works and how it reacts to changing market circumstances. It requires long-term planning and keen observation of the ecosystem.
If you think you have what it takes, you are invited to take on the challenge!
Read more in our blog post: Earn a Living — Run Mangata Node
Criteria for Becoming an Eligible Pair
Which pairs should be allowed for Proof-of-Liquidity? This is a discussion we will now have on our Governance forums on Discord to determine the best path forward.
Join the discussion at https://discord.gg/mangata
- Monday, February 27th — MM Call to answer questions
- Friday, March 17th — Council Motion to Whitelist pairs
- Monday, March 20th — Proof-of-Liquidity goes live — Nodes with pairs come online
- After all nodes transitioned (or 4 weeks) — Disable & burn sudo liquidity
Mangata is on a mission to become the #1 DEX on Polkadot, offering traders and liquidity providers the best platform to access unique tokens and earn rewards.
We believe that everyone should have the opportunity to participate in the decentralized economy and benefit from the power of blockchain technology. That’s why we’re creating a user-friendly platform that makes it easy for users to trade, provide liquidity, and earn from multiple passive income streams through double staking rewards, even if they’re new to crypto.
Mangata will offer access to the widest array of Polkadot tokens, better prices for traders by mitigating MEV, and the ability to trade without gas.
At Mangata, we’re dedicated to building a fair and transparent platform that puts the needs of users first, offering the lowest fees for traders and the highest rewards for stakers. We’re committed to continuously improving our platform and offering new features that provide even more value to our users.
Join us on our mission to become the #1 DEX on Polkadot and unlock the full potential of the decentralized economy.