Introduction to EMP Money’s Detonator Contract
In this article I will introduce the Detonator contract and give a high level overview of how this contract is used by EMP Money to support the protocol. I strongly believe that the Detonator has been a key reason for the relative success they have enjoyed during the bear market. Without this contract, it may be in the same position as most other Tomb Forks. There are a few of these protocols should improve as the market recovers but I believe EMP Money is ahead of the pack and this is largely due to the Detonator.
Detonator as a Service
The Detonator has been so successful that it has been “forked” for other LP contracts in the ecosystem. The Reactor is the contract where you deposit ESHARE/BNB LP instead EMP/ETH. There is also Detonator as a Service (DaaS) where other protocols can have their preferred LP deposited into a the same contract as the Detonator. At the time of writing there is the Generator (using the SPS/BNB LP for Splinterlands) and the Cultivator (using the xGRO/BNB LP for Growth DeFi). EMP Money earns revenue for providing this avenue for liqudity provision.
Another thing to be aware of (which is a bit controversial in the Defi space) is that the Detonator is closed source so no one can fork it. This is the reason that EMP Money can provide DaaS. If another project wants to fork it, they will need to reverse engineer it. Of course no one would bother doing this but other protocols have come up with similar alternatives. Just to be clear, I won’t debate on this point here nor will I defend/criticise other protocols.
Why Does EMP Offer the Detonator
The Detonator was set up to establish locked liquidity in the EMP/ETH LP. One of the greatest challenges facing any Defi protocol is having stable liquidity. The most common way to build liquidity is through yield farming. This is where you create an LP and then stake it to earn rewards in a native token. Another way to consider this is that the protocol is receiving rented liquidity from investors.
The problem with this approach is that stakers can easily remove liquidity from yield farms and move on to the next thing. Suddenly a whole heap of liquidity being relied upon has disappeared. For a Defi protocol, this is known as having rented liquidity. The Detonator provides some stability by providing the right incentives to encourage investors to lock their liqudiity with a gradual payback. It doesn’t completely solve the rented liquidity problem but it provides a relatively stable liqudity. This is not going to be ideal for everyone so the standard yield farm is also available.
Providing an Incentive For Locked Liquidity
The daily rewards and the 365% ROI are great incentives for investing in the Detonator but this (in my opinion) is not the greatest appeal. There are many other ROI dApps that offer higher daily rewards but the Detonator does not rely on this.
The main appeal of the Detonator is that there are the prizes for large deposits and there is also a lossless lottery. Firstly, there is a daily top depositor prize and a win-it-now button. The win-it-now button allows a user the opportunity to double their initial investment by depositing 2% of the pool balance. It can only be claimed once a day. For many this is a large amount of capital so is not a realistic option.
There is also a daily lottery for people who deposit and compound their LP balance. Each day, an investor can get a ticket for every 0.15 LP deposited (up to a maximum of 50 tickets) and for every 0.15 LP compounded back into the contract (up to a maximum of 50 tickets). Prizes vary based on the top LP depositor on the day. There may be more than one winner if the top deposit is high enough. Because the lottery tickets are received simply for depositing or compounding, this is a lossless lottery.
Measuring The Success of Detonator
Choosing a single metric is difficult. Growth in the pool balance is a good indicator but it does not give the whole story. The Detonator contract balance grew continuously until September but since then, the pool balance has been decreasing. Given the severity of the bear market this is still a strong performance but something to keep an eye on.
Not only that, but the Reactor has been so successful that the team were comfortable enough to remove the incentives for farming the ESHARE/BNB LP. Liquidity for ESHARE is now wholly reliant on the deposit balance in the Reactor.
Final Thoughts
I believe the daily deposit prizes and the lottery have been the key to the success of the Detonator. It does not guarantee the future but I believe EMP Money are in a strong position to take advantage of the recovery from the bear market. I also have confidence that AJ and the team will work out ways to provide the right incentives to keep the pool balance healthy.
In the next article I will go over the mechanics of the Detonator and what you should consider before investing in Detonator. As a sneak peek I will just let you know upfront that if you are starting out with a small amount of capital then you may want to start in the farms. Alternatively there are NFTs that are tied to the Detonator (coming soon) and Reactor that could be a good play. Nonetheless, it is good to understand the role of the Detonator and how you might participate in the future.
Disclaimer: None of what is written in this article constitutes financial advice. Investing in cryptocurrencies, and in particular decentralised finance, is high risk. What I write is not a recommendation to invest in the projects I discuss. I am not aware of your personal circumstances. Only invest what you can afford to lose. Make sure to do your own research rather than relying solely on my content.
Links
EMP Money Homepage: https://emp.money/#/
EMP Money Detonator Link: https://emp.money/#/detonator?ref=0xa7AC3Ea7D8dEC039F459934Cb0d0152a2e2B28f1
Telegram Group: https://t.me/empmoney
Discord: https://discord.gg/9wDDa26Z6e
YouTube: https://youtube.com/playlist?list=PL2ZUX77BqsmWkeOisjYEIeIWs6egmmVBd