Solving the Problem of Arweave PST Liquidity: Big Changes Ahead
Arweave doesn’t just have DAOs, it has profit-sharing communities (PSCs). While DAOs typically align around shared visions and goals, PSCs align around the profit generated by their native profit-sharing tokens (PSTs).
PSCs exist around a concrete product, not just a vision. Their PSTs are a direct representation of the profit a product generates; holding them is a way to buy both governance and future yield.
PSTs are essential to Arweave – many of the top ecosystem apps and their users thrive on them – but they have been plagued by the problem of liquidity for some time.
Verto, the only way to swap PSTs like $ARDRIVE and $DLT, has until now relied on a trading post architecture, matching buy and sell orders without a shared pool of liquidity to back up the swaps. Plus, PSTs are Arweave-native.
This causes issues from both the demand and liquidity side, too – if it’s not on Uniswap/SushiSwap, the barrier to entry may be too high for many.
PSCs like KYVE and Sarcophagus already use different chains for their governance and node reward tokens – tokens on chains like Ethereum or Moonriver – since the markets are more liquid.
“Liquidity is currently a barrier for the mass adoption of PSTs. Although the upcoming Verto DEX release will have a big impact on the PSTs trade-ability, the liquidity will remain a temporary issue due to the relatively small finance-ecosystem of Arweave’s PSTs.” – Darwin, founder of DecentLand.
We believe that PSTs deserve to be a first class web3 citizen. After all, they represent a stake in the frontier of permaweb innovation. The question is – how can we get from where we are to where we need to be?
Solutions to the PST liquidity problem
Verto’s transition to a pure smart contract backend unlocks exciting possibilities
Early Sunday morning last week, the Verto team announced that the first ever SmartWeave-based asset exchange was now in the testing phase.
The reason this represents such a huge leap is that PSTs can now be custodied by contracts, not just wallets. Verto’s previous network of node operators had been obsoleted by a new kind of smart contract that could itself receive, hold and distribute tokens, using the Foreign Call Protocol (FCP).
The first ever SmartWeave-based asset exchange contract is in testing :)))
This contract takes SmartWeave to the next level, and we are PUMPED.
How, why, and upcoming plans👇
— Tate Berenbaum 🐘 (@TateBerenbaum) November 14, 2021
To support the new contract, Verto is now implementing a full test suite and API. As we understand it, the ability for a SmartWeave contract to custody tokens is the first successful step towards Verto being able to incorporate automated market maker-like features.
The team estimates that in the next 3-6 months, Verto Exchange will evolve to provide liquidity mining for PSTs. What this means is that ArDrive token holders can earn yield by adding tokens to Verto.
By moving past an order book system and instead incentivizing liquidity for the good of the protocol, PSTs will be more accessible – and profitable – than ever.
However, Verto getting set up to provide more liquidity on the Arweave network itself is not the only big news…
everFinance test a bridge for PSTs on Ethereum
First PST token (@vertoexchange 's VRT) on #arweave successfully minted to #everPay test environment.
expect more PST token cross-chain to everpay –> ethereum.
mint ar tx: https://t.co/Mwplo6D93l…
cc @FinanceEver @ArweaveTeam pic.twitter.com/cklS5oaOdc
— Sandy 🐘 (@SandyA911) November 1, 2021
The team at everFinance is testing a proof-of-concept to bridge Arweave-native PSTs to ETH. This would make any PST able to be traded on major DEXs like Uniswap.
With PSTs being tradable on the Ethereum network, going from holding ETH to interacting with – or taking profit from – an Arweave-based dapp will be even easier.
ERC20 tokens make it more attractive for investors seeking a guarantee that there will be enough liquidity to cash out on their investment.
Thanks to everFinance, here’s a preview of Wrapped VRT on Etherscan:
Above is a test transaction from the everPay cross-chain, proving that Verto’s VRT PST can be bridged as an asset on Ethereum.
We’re starting to see a solution take shape
The Verto Exchange is coming back online shortly, running on all-new innovations which expand SmartWeave’s features to make it possible to build DEXs on Arweave. The FCP Verto designed in the process will enable them to offer gasless Arweave yield farming and automated trades based on incentivized liquidity pools – this unlocks defi native to Arweave.
On the Ethereum side, everFinance’s PST/ETH bridge will ensure these PSTs are available to other chains, too, broadening their appeal and utility.
These are just the first steps in what we’re sure will be a long series of continued improvements which will bring PSTs to a wider audience, increasing liquidity, utility and value.