Liquidity Program (5%)

In order for investors to buy Questfall Token (QFT) or for miners to cash out their earnings by selling their QFTs without significant price impact, sufficient liquidity is required.

However, with the mining approach, it is impossible to build liquidity before token issuance begins. Furthermore, there is no fair mechanism for attracting liquidity until the initial circulating supply is formed and the market is saturated.

Therefore, the usual solution of rewarding users for keeping their capital in the liquidity pool to cover impermanent losses will not be fair in the first few years of mining.

We took a different approach - the Liquidity Program in Questfall assumes that users will be rewarded for adding liquidity to the official Uniswap QFT-USDC and burning the LP tokens they receive. This way, the liquidity is locked into the pool forever and is not owned by anyone.

For short, we will use the term liquidity burning to refer to the addition of liquidity followed by the burning of LP ownership. This approach was first introduced by the Core project.

Users will receive 5% of the weekly QFT issuance according to their share of the burnt liquidity during the week. This way, if users provide too little liquidity during the week, the reward will not only compensate the cost, but also bring profits, creating and arbitrage opportunity. In other words, on average, liquidity will increase each week by the total value of 5% of that week's QFT issuance.

For example, if the price of a QFT is $10 and the weekly issuance is 30,000 QFTs, the total reward to Liquidity Program participants will be $15,000 and should be approximately equal to the liquidity burned, which may seem too small.

However, over the course of a year, assuming the price of QFT and issuance remain the same, the total increase in liquidity will be $780,000. And if the QFT price doubles, the dollar estimate of liquidity growth will also double.

To further increase the rate at which liquidity grows, there will be an additional reward to incentivize the burning of liquidity - Gems that allow users to increase the rarity tier of clothing RPG items.

Obviously, users will increase their chances of getting more rare Gems by maximizing their total share of burnt liquidity over the course of the week.

However, the amount of liquidity burned is not the only parameter that affects the distribution of Gem rewards. See the Gems article to learn more.

In this way, the more activity in the system, the higher the demand for Gems, the more their price will rise in the secondary market, and the faster liquidity will grow, since the Liquidity Program is the only way to release Gems into circulation.

Therefore, depending on the price of Gems on the secondary market, users will be adding significantly more liquidity than the weekly QFT reward.

In our estimation, orders of magnitude more.

As a result, the Liquidity Program encourages the infinite organic growth of liquidity through an endless stream of weekly rewards, eliminating any possibility of manipulation or rug-pulling by anyone, including the Team.