Every innovation in decentralized finance (DeFi) is evaluated by its potential for sustainability and growth. KIVOT, with its unique approach to eternal liquidity, is designed to achieve precisely that through an intelligently designed fee mechanism within its Eternal Pool. Understanding this mechanism is crucial for grasping KIVOT’s long-term value and potential.
Recap of KIVOT Fundamentals and the Eternal Pool:
KIVOT operates with an Eternal Pool consisting of KIVOT tokens and USDC (a stablecoin pegged to the US dollar). The crucial point here is that all 10,000 KIVOT tokens were injected into this pool from Day 1, and the associated LP tokens were burned forever. This ensures that KIVOT’s core liquidity is immutable and indestructible – it cannot be withdrawn or “rug pulled.”
The price of KIVOT (PK) within the Eternal Pool is a direct ratio between the total amount of USDC in the pool (LUSDC) and the fixed number of KIVOT tokens (N = 10,000):PK=NLUSDC
From this formula, it’s clear that for KIVOT’s price to grow, the amount of USDC (LUSDC) in the Eternal Pool must increase, as N is a constant. This is precisely where the fee mechanism comes into play.
The Actual Fee Mechanism (0.3%):
KIVOT’s Eternal Pool collects a fixed fee of 0.3% for every transaction (swap) made through it. The key point, as you correctly identified, is that the fee is paid in the asset that is received by the trader in that specific transaction.
Let’s analyze the two main scenarios, based on the transaction data:
- KIVOT Purchase Scenario (USDC -> KIVOT):
- What happens: An investor sends USDC into the Eternal Pool to buy KIVOT tokens.
- Fee payment: The 0.3% fee is deducted from the KIVOT tokens that the investor receives. This means the investor receives slightly less KIVOT than they would without the fee.
- Impact on the pool:
- USDC Inflow: When the investor sends USDC, this directly increases the total amount of USDC (LUSDC) in the Eternal Pool. This is the most crucial factor for KIVOT’s price growth.
- Effect on KIVOT in the pool: The fee, paid in KIVOT, means that fewer KIVOT tokens leave the pool than would if there were no fee or if the fee were in USDC. This helps maintain the KIVOT balance within the pool, which is essential for its liquidity and stability.
- Long-term effect: The primary effect is the increase in LUSDC, which directly drives up KIVOT’s price (PK=NLUSDC).
- KIVOT Sale Scenario (KIVOT -> USDC):
- What happens: An investor sends KIVOT tokens into the Eternal Pool to sell them for USDC.
- Fee payment: The 0.3% fee is deducted from the USDC that the investor receives. This means the investor receives slightly less USDC than they would without the fee.
- Impact on the pool:
- KIVOT Inflow: When the investor sends KIVOT, this directly increases the total amount of KIVOT tokens in the Eternal Pool.
- Effect on USDC in the pool: When KIVOT is sold, USDC is withdrawn from the pool. However, because the fee is collected in USDC, this means that a portion of the USDC that would have left the pool, remains in it. This directly mitigates the decrease in LUSDC during sales.
- Long-term effect: This mechanism is extremely important for KIVOT’s price resilience during selling pressure. It ensures that even as investors withdraw USDC, a portion of it is retained as a fee, which reduces the rate of LUSDC decline and keeps the price more stable.
How This Mechanism Ensures KIVOT’s Long-Term Price Growth:
- Consistent USDC Inflow on Buys: Every purchase of KIVOT, regardless of the fee’s asset, results in a net inflow of USDC into the Eternal Pool. This is the primary and most powerful driver for increasing LUSDC and, consequently, KIVOT’s price.
- USDC Retention on Sells: This is the crucial innovation. When KIVOT is sold, the fee being collected in USDC means that USDC liquidity is depleted at a slower rate than it would be if the fee were in KIVOT. This directly minimizes the negative impact of sales on LUSDC and makes KIVOT’s price much more resistant to downturns.
- Optimizing Asset Ratio: By collecting fees in the asset being received, the protocol effectively balances the ratio between KIVOT and USDC within the pool. This ensures the pool always has enough of both assets to service trades efficiently, reducing slippage and attracting more volume. More volume means more fees, leading to even greater growth.
- Self-Sustaining Value Accumulation Mechanism:
- Every transaction, regardless of direction, contributes to the accumulation of USDC within the Eternal Pool (either directly upon purchase or by mitigating outflow upon sale).
- Since the number of KIVOT tokens is fixed, this leads to a continuous increase in the USDC backing per KIVOT token.
Conclusion:
KIVOT’s fee mechanism, where the fee is collected in the received asset, is an ingenious solution for long-term growth and stability. It ensures that:
- USDC liquidity in the Eternal Pool continuously grows from trading activity.
- The negative impact of sales is mitigated, by retaining USDC within the pool.
- KIVOT’s price is backed by a growing base of stable assets (USDC), not just speculative demand.
This transforms KIVOT into a unique financial primitive that not only provides eternal liquidity but also has a built-in, autonomous mechanism for organic and sustainable value growth, directly fueled by market efficiency.
