This page dives deeper into how the tokenomics of Alluo works
85% of those 95m tokens are currently held in smart contracts.
As discussed in the previous “the tokens” section, vlAlluo token holders (i.e. those that have locked the Alluo tokens) will receive the difference between the APY given to depositors and that which is realised from the assets in the pools.
For example, if the realised APY on the stablecoin assets deposited is 15% and the advertised APY in the mobile app is 8%, vlAlluo holders earn the difference (7%) in CVX/ETH LP tokens.
How it works is as follows:
- The protocol revenue (spread between the advertised yield and the amount paid to depositors) is converted into CVX
- This CVX is converted to CVX/ETH LP tokens and added to the CVX/ETH Curve Pool
- These CVX/ETH Curve LPs are staked on Convex for more CRV and CVX rewards (over 25%)
- Fortnightly the protocol revenue cycle above is re-run AND the CVX/ETH pool CRV & CVX rewards are harvested, converted to CVX/ETH LP tokens and re-staked in the CVX/ETH pool
- $ALLUO lockers maintain a share of these rewards relative to the amount of $ALLUO they have staked
This means that by locking you will get passive income in CVX/ETH and that the longer you lock, the more those rewards will continue to compound. Moreover, as a good partner to Convex we continue to accrue more and more CVX tokens instead of simply selling them once they are farmed.
Locking Alluo tokens also plays a role in backstopping the protocol against black swan events which would impact the mobile app users negatively. These black swan events come in two main forms:
- 1.Smart contract exploits: If the protocol suffers an exploit where there are unexpected losses of funds beyond a level agreed by the DAO, vlAlluo holders will be asked to compensate for the losses, this is akin to the Aave Safety Module. We will introduce a backstop feature where vlAlluo holders insure losses beyond a certain threshold (for example for losses more than 10%) and with a cap (for example not beyond 20%). This threshold is configurable per asset, and is controlled by the DAO.
- 2.Governance attacks: There is a theoretical risk that a protocol could exploit Alluo for short term gains by buying large amounts of Alluo tokens, locking them and using their vlAlluo votes to direct liquidity to their own protocol in a way that resulted in losses for Alluo depositors.However, in such an event, the DAO could decide to slash the addresses involved in this attack. Having the vlAlluo tokens locked in the smart contract itself rather than sent back to the users wallet is important here, since it negates the possibility for the attacker to sell their vlAlluo on a secondary market once the votes have passed.
Initially, we launched the liquidity for the $ALLUO token on Balancer because of its ability to handle uneven pools (e.g. 80–20 ALLUO-ETH pool) instead of the historical 50–50 pioneered by Uniswap.
The ability to have an uneven pool minimising impermanent loss was particularly important because historically, $ALLUO lockers were automatically locking their tokens inside an 80–20 ALLUO-ETH pool.
Given that locking now simply locks the token away without providing liquidity, this has become less important. So a decision was taken that only the Alluo DAO treasury would provide liquidity for the ALLUO-ETH pair.
Of course, that doesn’t mean that others cannot go and add liquidity side by side with the treasury but we haven't provided incentives to that pool just yet.
To do so, you simply navigate to Uniswap. When clicking on "Select token", if $ALLUO isn't initially found, simply add $ALLUO’s ethereum address: 0x1E5193ccC53f25638Aa22a940af899B692e10B09 in the search bar and then click on Alluo.
You are now ready to buy or sell $ALLUO for $ETH, $USDC or any other coin that is listed on Uniswap.