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Author: Admin | 2025-04-28
The holy grail for any crypto project is crafting a self-sustaining liquidity flywheel. Yet, most projects fail to achieve this elusive goal. Why? Because the conventional logic behind crypto flywheels is often flawed.Why Most Flywheels FailHere’s the typical flywheel narrative:Projects create yield in their native token.High yields attract significant Total Value Locked (TVL).Increased TVL boosts the token’s price.A higher token price amplifies rewards, further increasing yields.This attracts even more TVL.While this might sound promising, the mechanism cuts both ways. When token demand falters or sell pressure mounts from rewards, the cycle reverses, resulting in a downward spiral. Moreover, the core assumption — that higher TVL directly drives token valuation — often doesn’t hold. New capital must continually flow into the ecosystem to sustain the flywheel, while constant sell pressure from token rewards erodes its effectiveness.The deeper issue, however, lies elsewhere: the valuation of the token relative to TVL is often far too high. In most cases, high TVL does not translate into meaningful protocol revenue, making the token’s valuation unsustainable.The TWIN Finance DifferenceAt TWIN Finance, we’ve designed a liquidity flywheel with a crucial advantage: a strong, direct relationship between TVL and protocol revenue.Our protocol earns yield on the collateral users provide to mint “Twin Assets.” This ensures that high TVL generates substantial revenue, creating a foundation for a sustainable flywheel. But the question remains:How do we convert stablecoin yields into attractive returns for liquidity providers (LPs) in our TWIN Asset pools?Turning Stablecoin Yields into Attractive LP YieldsIf all Twin Assets were paired exclusively with our native stablecoin, TwinHoney, in LP pools, we could theoretically pass collateral yields directly to LPs. However, while the risk profile of providing liquidity for both long and short Twin Assets resembles stablecoin farming, this alone would not attract sufficient TVL. Here’s how we amplify yields
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