Before we get started, this is not a recommendation or endorsement to buy any token mentioned.
Another week, another new DeFi protocol showing strength on Arbitrum! Camelot is a new “ecosystem-focused and community-driven DEX built on Arbitrum” designed to allow “both builders and users to leverage our custom infrastructure for deep, sustainable, and adaptable liquidity.”
Camelot’s mission is to become the go-to native DEX on Arbitrum, with new and improved flexibility and control tools to bootstrap and sustain their own liquidity. I would compare Camelot’s ambitions on Arbitrum to what we’ve seen Velodrome achieving on Optimism.
Similar to Velodrome, Camelot is based on a dual-liquidity model for LPs, meaning that both volatile (uncorrelated pairs like ETH-FRAX) and stable (correlated pairs like FRAX-DAI) assets can be traded with optimal slippage (see examples below).
Camelot also introduces the concept of dynamic directional swap fees that can be based on market conditions and protocols’ specifics. Here’s how it works!
- Every pair has its own customized fees.
- Additionally, any pair can be set up with different values depending on the swap direction (see examples above for buying or selling fees per LP).
- This is a unique feature allowing anyone to incentivize each LP pair differently, based on the correlation of its assets, the structure of the protocols, or even their own specific needs.
- Imagine a newly launched protocol aiming to stabilize and limit selling pressure by charging higher fees for sell orders with an LP. Or even an automatic adjustment of the fees based on current market volatility.
Another new design introduced by Camelot is the spNFT, creating a new layer of composability based on non-fungible staked positions. When creating a position, the deposited asset is transferred to a contract and a new spNFT is minted. This NFT acts as a transferable deposit receipt and is the only thing allowing a user to withdraw its attached funds, no matter who made the original deposit.
By creating this position, you transform it into a staked position (spNFT), which is akin to staking your positions in familiar yield farms. However, the staked position can also be locked, managed in various ways, yield boosted using xGRAIL, and deposited into a nitro pool for greater rewards.
By default, most incentivized pools/farms are set to receive 80% of rewards in xGRAIL and the remaining 20% in GRAIL. Similar to other newly launched DeFi protocols like Radiant, Camelot has implemented strict vesting incentives to prevent mercenary farmers from dumping their own token for profits. With xGRAIL, users face a minimum vesting duration of 15 days, netting them only 50% GRAIL vs a maximum duration of 180 days, netting them 100% GRAIL output. As xGRAIL vests, 50% is automatically staked in the dividends, earning rewards while the vesting period continues.
Nitro Pools are fixed-duration pools that incentivize another layer of yield rewards for Camelot staked positions. Nitro Pools have characteristics similar to regular yield farming pools such as:
- a specific wrapped LP (or single asset), meaning only spNFTs made from this asset can be deposited
- a reward token and an amount of rewards to…
DeFi Dad is one of the earliest power users of DeFi, having worked with early Ethereum startups going back to 2018, including Zapper.
