BUG Finance improvement on ve(3,3)

The Solidly model is designed to match rewards with long-term commitments. This turns out to be a flawed goal, in the regular ve(3,3) model, everyone who locks their tokens for veTokens gets voting power. This means they get a portion of the fees on the platform, as well as incentives and bribes to ensure they continue to hold their veTokens, since veNFTs can be traded on the secondary market, making the native token less of a demand.

But Bug Finance goes a step further, allowing locked liquidity to obtain token emissions, further stabilizing liquidity. Bug Finance's reimagined ve(3,3) model coordinates the incentives of all participants in the ecosystem. This includes veBUG voters, liquidity providers, traders and protocols. Deep liquidity is incentivized by offering emissions, transaction fees, and bribes to those who stake $BUG LP into veBUG.

For the protocol, the liquidity cost on most ve(3,3) is high. If the bribery is stopped, the token emission of their liquidity pool will be reduced, thus losing liquidity. Bug Finance makes liquidity more sticky by setting the exit mechanism of $BUG LP and ordinary LP. If the liquidity wants to leave, you need to pay the exit fee. This fee will be used for automatic bribery, increase PoL, and provide pledge bonuses, which makes the agreement to build a liquidity pool on BUG Finance more effective in purchasing liquidity.

Not only that, compared to the traditional model, the protocol decided to completely cancel the lock-up period and introduce a unified exit mechanism in all types of staking, including LP Boosted Staking, veBUG, and veBUG unilateral staking. When a user exits, a portion of the exit fee is redistributed to the protocol, and the system ensures that when someone exits, it increases the liquidity the protocol has at the same time, thereby strengthening the protocol, while also increasing the strength of those who voted in the exit pool and re-attracting liquidity Sexual man's rate of return.

Detailed Mechanism

Refactor ve(3,3)

Traditional DEXs mainly face issues such as the income of governance token holders and LP incentives. BUG Finance has reconstructed the ve(3,3) structure in solifly, and transformed the lockers in ve(3,3) into LPs. And solve this problem by setting a unique fee and incentive structure.

1. Give the majority of transaction fees to veBUG voters
2. Incentivize LPs with $BUG token emissions
3. Incentivize deep liquidity by providing $BUG emissions, transaction fees, and exchange rates to stakers who lock $BUG LP
4. Support BUG emissions through transaction revenue and utility

Liquidity Supply

Users can provide liquidity to the Bug Finance pool in exchange for LP tokens. Staking LP tokens on the platform qualifies users for $BUG emission, with a base emission rate determined by the Bug Finance meter and controlled by veBUG voters. To earn veBUG, users must stake liquidity provided in $BUG paired LPs whitelisted by the team or stake $BUG tokens.

Bug Finance also introduced the LP Boosted Staking mechanism to ensure deep liquidity between the BUG pool and ordinary LP. This innovative system allows users to stake regular LP tokens indefinitely while receiving a 2x emission boost. Instead of locking LP tokens for a fixed period of time, an exit penalty is applied that decreases over time until it reaches 0%. The exit penalty is calculated based on the APR of the token staking pool, ensuring users reach the break-even point within 4 weeks.

Staking and Exit Mechanism

In BUG Finance, the lock-up period is completely removed and an exit mechanism is implemented. In the Solidly Fork project, ve positions can be sold through the secondary market, but this is not good for the agreement. The exit mechanism improves this problem by charging exit fees:

• 40% of the exit fee will be used to bribe the exit pool, distributed within 4 weeks to maintain a stable APR.
• 40% of the locked-up bonus allocated to the exit pool, and a 2% bonus in LP and veBUG tokens for users who stake tokens as long as the supply lasts.
• 20% for protocol-owned liquidity, permanently locked in LPs, strengthening the protocol over time.

Such exits increase the liquidity the protocol has, increasing the rate of return for those who vote in the pool, thereby increasing the liquidity providers and incentivizing newcomers to join the pool to earn bonuses. Everyone in the system benefits. The opt-out mechanism works as follows:

• LP Boosted Staking: LP Boosted Staking: Mortgage ordinary LP (no $BUG in the transaction pair) to get 2 times the emission increase. Exit fees are calculated based on the committed pool APR, which decreases over time. as the picture shows

• Stake BUG LP for veBUG: Stake BUG LP (any whitelist LP paired with $BUG, such as BUG/MATIC, BUG/USDC, BUG/fBOMB) to get voting rights. Exit fees increase from 20% to 2.5% in 1 year through double incentives (LP's emissions + bribes and fees). Voting power is dynamic and recalculated weekly based on the amount of $BUG in the LP.
• Unilateral pledge: Get more veBUG by staking $BUG, and get 50% of the voting rights compared with staking BUG LP. There is no direct exit option here, but you do have the option to upgrade your position to a 100% veBUG position. This means that there is an option to add any whitelisted token (e.g. MATIC, USDC, fBOMB) for BUG LP and upgrade the position to a 100% veBUG position that can be exited through the above mechanism.

bribe

Users can obtain veBUG by staking the LP paired with the $BUG selected by the team or by staking $BUG. Owning a veBUG gives you the right to vote on the platform's meter. The meter controls the emissions of the different LPs on Bug Finance. Pools with the most votes get a larger proportion of $BUG emissions during that period.

Bribing on BUG Finance will be more capital efficient due to its unique mechanism design.

First, it achieves sticky liquidity, that is, the liquidity attracted by partners to the Bug LP pair will not leave easily, but will stay longer. This is a significant leap from the standard situation for other protocols where liquidity can only be leased for a week. If liquidity wants to exit, it must pay a certain percentage of exit fees, which can protect the interests of the agreement, partners and veBUG holders.

Second, it strategically distributes exit fees, enabling them to deliver multiple benefits to the protocol. Part of the exit fee is used for automatic bribery to increase the attractiveness of liquidity; part of it is used to enhance the liquidity owned by the protocol and improve the stability of liquidity; part of it is used to provide pledge rewards to motivate liquidity providers. This means that protocols are always effectively buying a portion of the liquidity they attract, since the minimum exit fee is 2.5%, of which 20% is used to boost the liquidity owned by the protocol.

Third, it improves the efficiency of bribery, making it more rewarding for partners to bribe on Bug Finance. Because the partners hold a large number of LPs, they can not only get a share of the profits of Bug Finance, but also get benefits from their own bribes. This creates an environment in which partners can bribe more because they earn more from their bribes and get a portion of the bribes back.

Finally, it facilitates bribe recovery, making bribe recovery easier for partners on Bug Finance. Since their LP holdings increase voting power, they can influence voting results more effectively and earn more rewards from it. This further increases the effectiveness and efficiency of bribery.

Tokenomics

BUG

$BUG is the governance token of Bug Finance. It is mainly released as a reward to stimulate liquidity. To obtain veBUG, you need to pledge $BUG in the whitelist LP pair, such as BUG/USDT. It is also possible to unilaterally pledge $BUG to obtain veBUG, but such voting rights will be less.

veBUG

The ERC-721 governance token in the form of NFT, unlike other ve(3,3), all veBUGs have the same voting rights and will not decrease over time. The voting rights are based on the amount of $BUG in the LP head village , in addition to exiting through the exit mechanism, it can also be increased, split and resold in the secondary market.

BUG NFT

Bug NFTs can be staked to earn a percentage of weekly transaction fees, starting at 20% and gradually dropping to 15% over 4 months.

Summarize

By unifying the roles of LP and ve lockers, BUG Finance increases the incentives for LP to obtain deeper liquidity, and also makes the liquidity more sticky through the exit mechanism, which enhances the bribery efficiency of the agreement on the platform.