How LIFE Works

tokenomics

How LIFE works:

Each LIFE token is backed by 1 USD (i.e. USDT, DAI, BUSD, USDC) in the treasury.

We will initially start with USDT as our treasury asset. After launch, we will be adding other stablecoins to balance our treasury. This will include DAI, BUSD, USDC etc.

Tokens cannot be minted or burned by anyone except the protocol.

The protocol only mints or burns in response to price.

LIFE does not rebase. Instead, a new supply is created via direct sales into the market and burned via direct purchases from the market. This way, LIFE remains backed by real assets in the treasury, i.e., USD.

These basically translates to:

When LIFE trades below ↓ 1 USDT, the protocol buys it back and burns LIFE.

When LIFE trades above ↑ 1 USDT, the protocol mints and sells new LIFE.

This is because the treasury must hold 1 USDT and only 1 USDT for each LIFE every time it is bought or sold so it makes a profit. That means the protocol either gets more than 1 USDT for the sale side or spends less than 1 USDT on the purchase side.

The fact that the protocol holds USDT for each token allows us to say with certainty that LIFE will not trade below its intrinsic value in the long term.

Investments can then be made with defined risk because 1 USDT is the guaranteed long-term price floor. And because of this, the protocol can (and will) buy indefinitely below 1 USDT until no sellers remain, even if the supply is reduced to 0. In this example this event would reward those who did not sell immensely because they would end up with a chunk of every token that was burned!

Holding stablecoins to back tokens also creates a yield generation opportunity.

Locking away stablecoins in a vault would then be a waste. Given that the protocol never needs more than a few percent of reserves, even on the largest of down days, means you are free to utilize the rest to plug into yield aggregators and add those proceeds onto profits from buying and selling LIFE.

LIFE’s initial profit distribution

90% to stakers

10% to the DAO (these allocations will be changed, if necessary, as decided by the DAO).

All rewards are paid in LIFE, backed by stablecoins.

This system maintains a stable intrinsic value and reduces the incentive role of appreciation in favor of accumulation. As with real currency, you try to accumulate more dollars and you do not have to wish upon a star that your dollars become worth more. Although both can happen.

Staking and Rebasing

The protocol distributes tokens by sending them to the staking contract without asking for sLIFE back. This increases the ratio of LIFE staked to sLIFE outstanding, and results in a rebase to correct the difference.

For example: there are 500k LIFE staked and 500k sLIFE outstanding. The protocol produced $5k profit for the day, which it uses to mint and back 5k LIFE. It sends those LIFE to the staking contract; there are now 505k LIFE staked and 500k sLIFE outstanding. sLIFE supply needs to increase by 5k, or 1%, to return to balance. So, sLIFE is rebased up by 1%.

The only caveat is that rebases occur retroactively. The end of epoch 100 triggers a rebase of profits from epoch 99. This delay lets you see what you’re missing if you want to unstake or what you’ll get if you want to stake.

Staking is how we distribute profits equitably to participants. Through sLIFE, everyone receives the same percentage profit per epoch. Rebasing also allows us to compound yield with no need to harvest or do anything except hold.

Bonding

Bonding is the process of trading an LP share to the protocol for LIFE. The protocol quotes an amount of LIFE and a vesting period for the trade. It is important to know: when you create your bond, you are giving up your LP share. The protocol compensates you with more LIFE than you’d get on the market, but your exposure becomes entirely to LIFE and no longer to LIFE-USDT LP.

Note that sLIFE is the protocol’s profit accruing token and since bonders earn LIFE (not sLIFE), stakers earn 100% of protocol profits (minus the DAO’s cut).

Why Do I Want to Bond?

Because it allows you to buy LIFE at a lower cost basis. In return for selling your LP, the protocol will sell you LIFE at a discount.

Dynamics of a Bond

The protocol quotes bond prices based on the protocol’s risk-free value (RFV). The Bond Premium is a protocol-governed policy tool that controls the premium charged for bonds. A lower premium means a higher discount and a higher incentive to bond.

Executing Price = RFV / Premium {Premium ≥ 1}

The premium is determined by the total debt of the system and a scaling variable. This ties the price of bonds to the number of bonds outstanding; the fewer bonds outstanding, the lower the premium and the higher the discount.

Premium = 1 + (Debt Ratio * BCV) Debt Ratio = Bonds Outstanding / LIFE Supply

The risk free value of the LP share for the protocol is the point at which the pool is balanced (1 LIFE = 1 USDT). Since the protocol must protect the backing of LIFE, this is the lowest price that it can accept; worst case, it can back every 2 LIFE bonded by 1 USDT and 1 LIFE. Above this equilibrium, there is an excess of USDT. Below this equilibrium, there is an excess of LIFE. Either can be used, and there will always be enough of both.

Risk-Free Value = (LP / Total LP) * 2sqrt(Constant Product)

This means a bonder is (generally) selling their LP for below market value. However, this is canceled out by the protocol bonding LIFE at below market value.

Linear Scale

The exponential increase in the value of bonded LIFE relative to the value of the LP is expected to create increasing demand for bonds the higher price is. This is an extremely favorable dynamic; the higher price goes (and the more the protocol sells in response), the more liquidity there should be.

Bonders can make this trade, despite time risk, because their breakeven point has been reduced. The higher the price is, the greater that padding becomes.

Conclusion

LIFE’s aim is to offer a new class asset token that can be a part of any portfolio. It can be used to hedge risky assets while offering safer and better incentives than stablecoins.