Archimedes: Syracusia Upgrade — Phase 0
With Phase 0 of the Syracusia Upgrade, Archimedes began the journey to V2 and a multi-chain future. In total, this massive upgrade consists of four distinct phases, which we’ve numbered 0–3. Each phase brings with it new features and opportunities, such as: new leveraged yield assets (including ETH LSDs), UI updates, L2s (Arbitrum), new partnerships and platforms to build on top of, and more! In this blog post, we’ll delve into Phase 0 of the Syracusia Upgrade, which marks the beginning of this transformative journey for Archimedes.
Phase 0: Setting the Foundation
To become a pillar of Defi requires first having a strong foundation. Phase 0 of the Syracusia Upgrade serves as just that, a foundation. Developed with lessons learned from v1 in mind, it is a precursor to the larger enhancements coming to the Archimedes ecosystem. With the establishment of this phase, Archimedes is positioned to be a frontrunner for one of DeFi hottest narratives this Summer, Ethereum LSDs (liquid staking derivatives) and LSDFi.
There are two key components of Phase 0 development: ARCH token staking, and veARCH governance. The ve in veARCH stands for “voter escrow”, a term and tokenomics mechanic developed by Curve Finance. As the name suggests, with veARCH, users gain the ability to vote, however, they must stake and lock ARCH tokens as an LP in order to do so.
ARCH Token Staking — The 80/20 Pool
For Phase 0 of the Syracusia Upgrade, everything revolves around ARCH token staking and governance, which means that everything revolves around the new 80/20 — ARCH/wETH pool on Balancer (a top 20 DeFi protocol by TVL).
Archimedes’ 80/20 ARCH pool allows users to provide liquidity by depositing any of the following tokens: ARCH, ETH, or wETH in return for LP tokens. When a user adds liquidity to this pool, Balancer splits the deposited asset into 80% ARCH and 20% wETH.
Using an 80/20 pool for ARCH token staking has a few benefits that single sided staking and 50/50 LPs don’t quite match up to.
- Increased ARCH token liquidity
- Low impermanent loss (IL)
- Exposure to ETH
Single sided staking doesn’t benefit the protocol and insteads results in the protocol needing to create more incentives for users to provide liquidity on top of single asset staking incentives. As for why we didn’t go with a 50/50 pool, we find that it’s far more capital efficient to use an 80/20 pool if you’re bullish on an asset. This makes the 80/20 much closer to what it’s like to just hold ARCH tokens, while also getting the added benefits of being an LP, which is perfect for our ARCH token staking solution.
ARCH token’s 80/20 LPs can choose one of two current options to earn a yield: stake their LP on Balancer for trading fees and $Bal rewards, or lock their LP on Archimedes for veARCH, ARCH token emissions, and soon other incentives.
veARCH & Governance: Empowering LPs
Phase 0 introduced veARCH to the Archimedes ecosystem, furthering the utility of the ARCH token, and ushering in a new era of DAO governance & rewards distribution.
To obtain veARCH, users must supply liquidity to the ARCH/wETH — 80/20 pool on Balancer, and then lock their LP tokens on Archimedes. The amount of veARCH a user receives is based on the duration of the lock and the number of LP tokens locked. Bigger, longer locks, equal more veARCH, which will decay over the course of a user’s lock period.
Users that hold veARCH can take part in Archimedes governance, or simply sit back and enjoy the benefits that come along with locking their 80/20 ARCH LP.
Benefits of veARCH
Holding veARCH grants LPs various benefits within the Archimedes ecosystem. For starters, veARCH holders receive ARCH token emissions. Perfect for anyone that’s already bullish on ARCH. This incentivizes long-term commitment and participation in the protocol’s growth by having these bullish users provided liquidity. veARCH rewards can be claimed after epochs, from the dashboard on Archimedes.
Additionally, veARCH holders gain voting power to participate in the governance of the Archimedes DAO. They can vote on proposals (via Snapshot) that impact the protocol, including changes to protocol fees, reward distribution, asset strategies and more.
It is crucial to note that LP tokens should not be locked on the Balancer UI but specifically on the Archimedes site to receive veARCH and ARCH rewards.
What To Expect Next?
Phase 0 of the Syracusia Upgrade marks an important milestone for Archimedes. By introducing the 80/20 pool and veARCH, the protocol enhances liquidity provision and empowers LPs with governance rights and rewards. Phase 0 also sets the stage for subsequent phases, where Archimedes will continue to introduce new features, expand asset offerings, and optimize yield opportunities for LPs by way of some of DeFi’s hottest narratives.
Phase 1 is where Archimedes’ new yield strategies get their sea legs. This phase is all about the development of what we call “Guarded” or “Protected” pools. Guarded Pools have built in mechanisms that protect user funds by withdrawing them from a pool if it meets conditions that make the pool “unhealthy”, and jumping back in if these conditions change. This is especially useful for liquidity pairs of LSD tokens.
Protected liquidity pools, leveraged LSD liquidity pools, and omnipools — with and without leverage. The G(r)eeks at Archimedes are building something for everyone. Stay tuned for the upcoming information about our transition to phases 1 and 2 of the Syracusia Upgrade.
To learn more about Archimedes visit the official website https://archimedesfi.com/, join Discord and follow on Twitter.
Originally published at https://medium.com on June 9, 2023.
