The ORCA Governance Token: True Value

Looking for the nitty-gritty stats on our tokenomics? Check out the Tokenomics page on the Orca website.

If you’re looking for the full story on our governance token, read on!

When we launched in February 2021, we resolved that we would release a token once:

  1. We’re able to prove that Orca is generating value.
  2. Releasing a token would accelerate the creation of that value.

That time is now.

In this post, we’ll discuss our philosophy for launching a token, our future vision for the Orca protocol, and our brand-new yield farming program, Aquafarms. Let’s dive in!

True value

Navigating DeFi can feel like a game of Minesweeper. Too often, projects make claims that never come to fruition. At first, high yield farming incentives and the Twitter hype machine may artificially inflate the price of their tokens, fooling uninformed buyers. But once the emissions taper off, these projects inevitably fizzle out, relegating them to the graveyard of forgotten DeFi projects somewhere out in the metaverse.

We believe that there’s a better way: Launch without a token. Build a useful product and a thriving community. And — as we are about to do — retroactively distribute that token to the community, rewarding loyal users and kickstarting the process of decentralization.

In other words, create true value.

Over the past few months, the Orca protocol has facilitated over $400M in trades, refined our beloved swap UX, and airdropped over 11,000 Collectibles to our early users. This is a solid foundation for Orca’s future development.

Meanwhile, the Solana ecosystem has been heating up. With new DEXes popping up left and right, you may be wondering: “What makes Orca different? And how does the token fit into that vision?”

Settle in, and we’ll give you the full story!

Our vision

Orca aims to be the best general-purpose AMM on Solana. By “general-purpose,” we mean that we’ll support all tokens in the Solana ecosystem, not just stablecoins or wrapped assets. And by “best”, we mean the most:

  1. User-friendly
  2. Composable
  3. Capital-efficient

Let’s address these points one at a time, shall we?

User-friendly: From the beginning, our UX has been a reason that users come to Orca (shoutout to our fans on Twitter below!) You love our Fair Price Indicator, Your Tokens panel, and Magic Bar. In the months to come, we’ll continue making the experience even better by supporting more wallets and listing new tokens as soon as they hit the market.

Composable: We recently released the Orca SDK beta, which will make it much easier for projects to use Orca as their swap money lego. Plus, we are already proudly integrated (or have integrations in progress) with Phantom, Step Finance, Sonar, CoinGecko, and DeFi Land, among others!

Capital-efficient: While constant product AMMs are elegant in their simplicity, they aren’t the most capital-efficient. Uniswap v3 has paved the way toward more powerful AMMs, but (as we discussed in episode 1 of our new podcast, OrcaPod!) we believe that there’s much more room for exploration. Post-token launch, we have plans brewing to innovate on the smart contract level to improve the capital-efficiency of our core AMM.

These are lofty goals. The ORCA token will align incentives between developers, liquidity providers, and traders to help us get there.

How a token amplifies value

A purpose-driven fee distribution

For the ORCA token to accurately reflect Orca’s value, it must be linked to trading activity on the actual platform. That link will be the Orca Treasury.

Currently, 0.3% of all trades on constant product pools go to liquidity providers. Once the governance token is issued, we’ll be adjusting the distribution as follows (pools with lower fees, such as our USDC / USDT stable pool, will be adjusted proportionally):

  • 0.25% → Liquidity Providers
  • 0.04% → Orca Treasury
  • 0.01% → Impact Fund

*Note that this distribution is subject to change in the future.

Why this breakdown?

Liquidity Providers 🐳

More liquidity means better rates for traders, which in turn leads to more trading activity, creating a positive flywheel for all players in the Orca ecosystem. However, liquidity providers take on significant opportunity cost by choosing to deposit their liquidity in Orca. Therefore, the majority of trading fees will continue to go to LPs, with the goal of facilitating a healthy AMM ecosystem.

Orca Treasury 💸

The Orca Treasury is a DAO used to support the long-term growth of the Orca protocol. Possible use cases include feature development, token buy-backs, or growth into new markets. Eventually, use of the funds will be governed by ORCA tokenholders.

Orca Impact Fund 💛

We believe it’s important to create value not only within the crypto space, but also the world around us. For that reason, we are proud to announce the Orca Impact Fund, which will donate 0.01% of all trading fees on Orca to real-world charitable causes on a quarterly basis.

Where exactly will the funds go, you ask?

As scuba divers, we were excited to infuse our love for the ocean into the Orca brand. However, we’re also aware that the future of our oceans is at great risk from rising water temperatures. We believe that climate change is the most pressing issue facing our world today. Therefore, our first donation will go toward a cause that both protects marine ecosystems and fights climate change — and we’ll ask you, the Orca community, to pick the recipient. More to come on that later this month!

Accelerating the creation of value

One key purpose of a governance token is to accelerate the creation of value, so projects can compete in a rapidly growing ecosystem. At its best, a governance token is a beautifully meritocratic way to encourage contributors to entrust a protocol with their ideas, talent, and hard-earned liquidity. Crypto is becoming an increasingly integral part of the world’s economy, and we believe that DeFi offers the opportunity to create a more equitable status quo. For that reason, we are targeting the gradual decentralization of Orca on a 3-year timeline.

We’re incredibly grateful for all of you who have contributed to Orca’s growth so far, and we’re excited to share a piece of Orca’s future with you through the token.

Mechanics of a Fair Launch

These days, the term “fair launch” gets thrown around a lot, but each project uses it a little differently. When we say fair launch, we mean:

  1. Transparency about token allocation
  2. An initial distribution that rewards existing users and developers, proportional to value created
  3. Equal opportunity for anyone to purchase or yield farm the ORCA token at the same rates

For a high-level overview of how those principles translate to mechanics, read on!

Initial Distribution

For more detailed metrics and an outline of our target future distribution, refer to the Tokenomics page on the Orca website.

As we mentioned earlier, Orca has seen strong organic growth in both trade volume and total liquidity provided since launch. We’re especially grateful to our early liquidity providers, who chose Orca over immediately realizable yields available elsewhere in the ecosystem. To that end, we’ll be kicking off the token release with the following retroactive distribution:

The total supply of ORCA is 100 million, and the initial circulating supply is 5.25 million. The cutoff date to qualify for the distribution is Aug 2, 00:00 UTC.

  • 4,000,000 to liquidity providers: LPs take on both risk and opportunity cost, and therefore deserve the largest portion of rewards. All wallets that provided liquidity of $100 or more up until the cutoff will receive an airdrop. The amount will be proportional to their average liquidity provided over time in USD (snapshots are taken approximately every 10 minutes), which is visible on our LP Leaderboard at orca.so/stats.
  • 1,000,000 to traders: Traders already benefit from the rates and experience provided by high liquidity, and incur relatively little risk. However, they are nonetheless a core part of the ecosystem, so we’ve allocated the following as a small token of our appreciation 😉:
    ★ 500,000 ORCA, equally divided across all addresses that exchanged a total value between $1,000 USD and $10,000 USD
    ★ 500,000 ORCA, equally divided across all addresses that exchanged a total value of $10,000 USD or more
  • 250,000 to advisors: These tokens were allocated to our advisors, e^{i} ventures, in exchange for sourcing early liquidity for the protocol.

No additional tokens will be available to participate in the Aquafarm program at launch. Team members and future investors will receive ORCA tokens on a 3 year vesting schedule with a 1 year cliff or lockup, and therefore will not be able to participate in the Aquafarm program until 2023. Refer to the Tokenomics page for more details.

Market Making

One tricky part of launching a brand-new token is setting an initial price. How can you determine what is a fair market price before a market exists, you ask?

Make one!

Immediately after the retroactive distribution, and 2 days before the ORCA / SOL and ORCA / USDC pools go live on Orca, e^i ventures (Orca’s advisors and professional market makers) will create an ORCA/USDC market on Serum. After 2 days, we’ll use this price to inform the initial price of our pools on Orca.

Yield Farming (Aquafarms)

Alongside the ORCA token, we’ll be launching Orca’s yield farming program: Aquafarms!

When the token is launched, a set of liquidity pools will become Aquafarms. Currently, liquidity providers in Orca’s pools earn trading fees. In contrast, liquidity providers in Aquafarms will earn both trading fees and ORCA tokens, which will be distributed proportionally according to [the LPs] share of the pool. In the future, we plan to add functionality that will allow other projects to add their own tokens as rewards, as well.

For LPs, the benefit is obvious. But how does yield farming create value for the Orca protocol?

  1. Gradual decentralization (through the distribution of governance tokens to value creators, aka LPs)
  2. Attracting liquidity, which improves rates for swaps

However, not every Aquafarm will emit an equal amount of ORCA tokens. Each Aquafarm will have an emissions weight, which will encourage LPs to direct their liquidity where it is needed most. After Aquafarming begins, the following will be adjusted every two weeks:

  • The menu of Aquafarms (which pools emit tokens)
  • The total amount of tokens emitted per week
  • The emissions weight of each Aquafarm

The initial emissions across all Aquafarms will be approximately 200,000 tokens per week for the first two weeks, with the following weights:

ORCA Pools:

  • ORCA/SOL: 3x
  • ORCA/USDC: 3x

Normal Orca Pairs:

  • SOL/USDC: 1.5x
  • SOL/USDT: 1.5x
  • RAY/SOL: 1x
  • SOL/ETH: 1x
  • ETH/USDC: 1x
  • USDC/USDT [stable]: 1x (…with no deposit/withdrawal fees!)

You may observe that our initial emissions are lower relative to other projects. Many liquidity mining programs start with extremely high emissions, especially for native tokens, and a relatively short emission schedule. This attracts a lot of initial liquidity and trading activity, but that initial boost tends to taper off quickly, leaving the project dry. In contrast, we’ve designed our liquidity mining program to distribute ORCA gradually, allowing the token to support the protocol’s development over the key timeframe of the next several years.

To our loyal traders and LPs: Thank you for all of your support thus far! We’re excited to have on board for our journey to make Orca the best general-purpose AMM on Solana.

Let’s make waves. 🌊

For all the hard facts about the token and launch schedule, check out the Tokenomics page on the Orca website.

The official account of Orca: The DEX for people, not programs. 👋 https://orca.so