Every protocol in DeFi needs to have a certain amount of liquidity for one reason or another. Whether it's Native tokens like ETH-USDC that give Treasury access to capital markets, Stablecoins like DAI-USDC that ensure stability by minimizing depeg risk, or Pegged assets like ETH-stETH that minimize opportunity cost of converting assets, each has to have a certain amount of liquidity for one reason or another.
However, the current solutions for incentivizing liquidity, such as Pool 2 emissions, Protocol owned liquidity, and Bribing voters in the CRV/CVX system, come with their own tradeoffs and pitfalls. Either they can be costly to maintain and result in unsticky liquidity, costly to bootstrap and only needed occasionally instead of on an ongoing basis, or costly due to incumbents already having a sizable lead, with a limited universe of pool types.
Baso offers an attractive alternative by addressing these core issues and improving on them. The original mechanism of aligning protocol emissions with fees generated, not simply liquidity, is now enhanced. It allows protocols and large stakeholders to become veNFT "voters", using their locked voting power to direct future emissions and collect fees from the pools they voted for.
Tying rewards with Emissions
Baso made thoughtful improvements on the Solidly codebase. For example, tying rewards with emissions: in Baso, voting rewards were claimable before the emissions from that vote were committed. New mechanisms were introduced to address this, ensuring a healthy equilibrium between voters and external bribers, and promoting a fairer distribution of rewards.
Productive Gauges
Moreover, Baso ensures productive gauges. It has mitigated the risk of exploitive voters directing emissions towards unproductive gauges. Measures such as introducing an on-chain governor to whitelist pairs used in gauges and adding an Emergency "Commissaire" that can kill any unproductive gauge have been taken.
Also, Baso has doubled the initial swap fee to ensure that voters have more incentive to direct emissions towards productive liquidity. It's much lower than alternative exchanges and different fees apply to stable and volatile pairs.
Prolonged Emissions Decay
Baso also has a better emission decay policy. It allows the protocol to still be an attractive opportunity for future protocols while rewarding early adopters. Changes include modifying the emissions growth function, removing negative voting and LP emissions "boost" for voters, and adjusting the initial distribution to favor retail, veDAO community, and other sophisticated DeFi ecosystem participants.
White Glove Support
Finally, unlike Solidly's lack of post-launch support, Baso ensures white-glove support for partners and other stakeholders. With a 3% of perpetual emissions directed towards the team multisig, they have sufficient resources to pay contributors and expand the product offering.
