Arbitrum-Based Exchange Chronos Attracts $170M to Yield Pools in a Single Day
Summary of the article:
- Chronos, an Arbitrum-based decentralized exchange, attracted over $170 million onto the platform after it introduced staking.
- Staking is a way of earning yield from digital assets without needing to sell them.
- Liquidity pools on Chronos are paying as much as 2,300% to liquidity providers (LP) in the form of chr tokens.
Background Information:
The (3,3) paradigm was made famous by Ethereum-based Olympus DAO – one of the most prominent projects of the previous crypto bull run. Liquidity providers (LPs) are entities that provide two different tokens to a decentralized exchange’s smart contracts, netting a cut of the fees charged by the exchange on each trade. Holders can restake these tokens to earn additional fees, retain voting power and ensure a liquid marketplace for other projects that may look to borrow capital from Chronos. Such yields are rare in the crypto market, which may explain the sudden rush of capital to Chronos.
Chronos Launch and Impact:
Chronos launched on April 27th and is staking as a primary resource for accruing value to its token to achieve store-of-value status. The price of its native chr token jumped 25% in 24 hours and trades at about $1.30 with market capitalization over $90 million.
“(3,3)” Paradigm Explained:
The “(3,3)” paradigm refers to having three sources for liquidity pool rewards – LP tokens staked in vault contracts; LP tokens deposited directly into exchange contract; and LP tokens used for yield farming reward pools. This allows users who provide liquidity for trading pairs on Chronos DEX access higher returns than traditional exchanges offer through lower fee structures and incentivized staking rewards.
“Yield Farming” Explained:
Yield farming is when users stake their cryptocurrencies into a liquidity pool that earns rewards depending on how much they have staked or deposited within the pool. The amount earned will depend on how much other participants have also contributed within that particular pool but generally speaking it’s considered more profitable than simply holding coins or trading them actively on an exchange due to increased returns offered through yield farming mechanics such as compounding interest rates across multiple pools.