Introduction

An Introduction From the Team

Before working on Coffee DEX, we were a team of dedicated builders with vast experience in DeFi. When Solidly launched, we observed both its promise and inherent flaws. We realized that Solidly could not disappear without leaving a dent in the AMM field. Scroll, due to its maturity, widespread adoption, and support from various stakeholders, would be an ideal location to launch an enhanced version.

We envision Coffee DEX as being the native liquidity layer of Scroll, enabling value creation by opening the gates for new protocols that wish to solve the cold start liquidity problem, as well as for established protocols looking for a long-term solution to reduce costs and incentivize their liquidity. Coffee DEX is a public good owned by protocols and users, with both contributing to its status as the leading AMM. We believe that in a decentralized and open-source economy, a collaborative strategy is essential to outrun the competition and establish your product as a market leader.

The Foundations of Coffee DEX

Inefficiencies in Liquidity Incentives Allocation

With the rise of liquidity mining programs and UNI V2 based DEXs, DeFi has seen considerable growth over the past 2 years. However, current liquidity incentives are quasi-stationary, creating inefficiencies as these incentives often end up in pools with low utilization rates. The gauge voting system brought a novel way to redirect incentives, aligning the interests of token holders and liquidity providers.

Stationary Incentives

Liquidity mining has propelled DeFi to new heights by providing token-based incentives to attract specific behaviors, like providing liquidity on a DEX or collateral on a money market. This process requires constant iteration and analysis from teams, naturally putting barriers to entry for smaller protocols looking to bootstrap liquidity.

Gauge Voting System

On Coffee DEX, farming incentives are determined via gauge weight votes, a model inspired by Curve Finance's "vote-escrowed" model. Emissions a gauge will receive are proportionate to the share of the total votes at the end of a given epoch. Coffee DEX's Gauge Weight Voting mechanism consists of a Bribing Marketplace where protocols can deposit bribes to acquire votes in favor of their gauges.

The Solidly Concept

Solidly is an AMM that offers low-cost, near-zero slippage transactions. Coffee DEX aims to resolve the basic shortcomings of Solidly by adding its own innovations, like a marketplace for emissions, an emission schedule, and a lowered impact of the anti-dilution mechanism.

Coffee DEX as an Improvement

Coffee DEX has reworked the Solidly codebase to function as intended, allowing voters to properly compensate liquidity providers for impermanent loss, while aligning with the core objectives of the protocol—namely increasing fee generation.

Improvements include:

• Fixed the marketplace for emissions

• Fixed the emission schedule

• Lowered the impact of the anti-dilution mechanism

• Improved the initial distribution

• A referral system

• Coffee DEX NFT (coffeeNFT) minters as co-founders and holders as the core community

• A long list of committed launch partners

• A dedicated core team working on improvements