The shared native token serves as both a utility and governance token within the Navi Protocol ecosystem. Token holders can use the token to access various benefits such as fee discounts, staking rewards, and voting rights.
Utility & Governance
Staking: Users can stake the native token to receive rewards in the form of trading fees from the perpetuals exchange and interest income from the lending platform. The rewards distribution is proportional to the amount of native tokens staked, incentivizing long-term commitment to the ecosystem.
Governance: Token holders can participate in the governance of the Navi Protocol by voting on proposals and updates. The governance process is decentralized, ensuring that the platform's development and future direction are driven by its users.
Fee Collection and Distribution: The Navi Protocol collects fees from both the perpetuals exchange and the borrowing and lending platform. A portion of these fees is allocated to stakers, while the remaining fees are distributed to the platform's treasury and other purposes as defined by the platform's design.
In the Navi Protocol ecosystem, the shared native token plays a significant role in incentivizing liquidity provision and aligning user interests. An important aspect of this system is token emissions directed towards liquidity providers (LPs) of a particular asset. The mechanism ensures that LPs are rewarded for their contribution to the platform, which in turn encourages more users to participate in the ecosystem.
Here' we'll outline the mechanics by which token holders and stakers can benefit from the usage of the token in both the Perpetual DEX and Borrowing and Lending products.
Token Staking, Locking & Gauges, and Fee Discounts
Single-sided staking of the token allows users to receive emissions coming from protocol fees (borrowing and trading), as well as take part in the decision-making of how emissions are directed across the protocol
Borrowing and Lending
The Navi Protocol introduces the concept of vote-escrowed tokens (veNAVI) to enhance the emission allocation mechanism. When users stake their native tokens, they receive veNAVI tokens that grant them voting power to determine the emission distribution for various assets in the liquidity pools. The amount of veNAVI received is proportional to the amount of NAVI tokens locked, as well as the duration of the time period for which those tokens are locked.
These veNAVI tokens can be used to vote on "gauges," which are essentially smart contracts that manage the emission rates for each liquidity pool or asset. When users cast their votes using veNAVI tokens on a specific gauge, they influence the allocation of token emissions to that asset or pool. The more veNAVI tokens a gauge has, the higher the emission rate for that particular asset.
This vote-escrowed token mechanism allows users to express their preference for certain assets or liquidity pools while also being rewarded with token emissions for staking their native tokens. The system encourages users to provide liquidity for in-demand assets and ensures fair rewards distribution.
As more users stake the native token and vote for a specific asset or pool using their veNAVI tokens, the emission rate for that particular asset increases. This creates a dynamic system where LPs of popular or in-demand assets receive higher rewards in the form of native tokens, encouraging more users to provide liquidity for those assets.
Token Utility: Fee Discounts
Another benefit for When users stake the native token, they unlock tiered fee discounts on trades within the perpetuals DEX. The more tokens a user stakes, the greater the fee discount they receive, incentivizing users to stake more tokens and actively participate in trading activities.