With crypto heading in the direction of cross- and multichain availability, trading your tokens on CEXs—with the exception of on-boarding FIAT—is looking more and more like riding a carriage instead of the taking the car. It will still get you where you want to go, but it’s old, slow and expensive. That’s why it is increasingly important to have a multitude of solid reliable DEXs to trade tokens across multiple blockchains. While there are existing massive DEXs like Uniswap and Sushiswap, these DEXs are older with a lot of downsides such as unbearable gas fees, front running bots or MEV.
What is Mangata X?
Mangata X is a Decentralized Exchange Parachain that optimizes for capital efficiency, while being 80% community owned. It will have advanced trading tools to cater to the needs of experienced traders. Besides the common tokens it will list a number of experimental tokens which are hard to come by on other exchanges.
A common occurrence on DEXs are bots that front-run trades so that they can book the spread for themselves. Additionally, that trader often times pay high gas fees when trading — looking at you Ethereum — yet with the features Mangata X will introduce, this problem will be relegated to the past. Trading at Mangata X will cost no gas fees and only a small amount of general fees of around 0,3% of the trade.
Besides that, Mangata X will introduce the Themis protocol, a mechanism to stop bots from frontrunning your trade and make the platform way more cost efficient to trade compared to other platforms. The Themis protocol will also prevent Miner Extractable Value (MEV) on the consensus layer.
Besides the aforementioned transaction cost users face when trading on a DEX, another significant problem for DEXs are liquidity problems. A DEX is only as valuable as the liquidity it has for its pairs. Currently with Proof of Stake as the main block generation mechanism for DEXs, native tokens will get locked and can’t be used for providing liquidity via LP tokens. Mangata X will improve this existing structure with the introduction of Proof of Liquidity. This means that users are not staking the native tokens of the protocol, but instead stake their LP tokens which will give the normal benefits of staking native tokens but in this case the protocol can use it to provide liquidity. With a functionality like this, Proof of Liquidity has a decisive advantage over Proof of Stake: the more people stake, the more liquid the protocol becomes, instead of becoming increasingly illiquid.
The introduction of Proof of Liquidity will introduce a very appealing mechanic. Instead of deciding between Staking rewards or LP rewards investors will earn both at the same time. They will increase their token count through the natural staking mechanism while actually earning rewards for providing liquidity on the exchange. Before the introduction of Proof of Liquidity for stakeable tokens, investors needed to evaluate what the right decision was and if potential inflation will eat into their LP provision rewards.
To counter the risk of liquidity leaving the pool, Mangata X will offer time incentivized liquidity mining where participants get a greater yield if they lock their tokens for a longer time period. This will have a positive effect on the token price. Additionally, Mangata X will introduce DEX-owned liquidity, which will help with keeping liquidity pools stable.
A problem a lot of DEXs are facing is heavy dilution, which occurs because of bad tokenomic design combined with a high emission schedule without any mechanism to counter this. What results out of this is high inflation and a steadily declining token price, without any way to recoup the degradation of the token price for investors. Mangata X tries to fix that problem by setting a hard cap on token supply. While a hard cap may be a good measurement against rampant inflation it will introduce the unpleasant effect of diminishing incentives for liquidity provision to the DEX. If not managed right, liquidity will leave the protocol in search for better opportunities. Mangata X will try to prevent this problem with algorithmic buys, which then gets burned to continuously add some deflationary pressure.
This is an interesting approach, because the protocol will decrease its own earnings for the greater good of the protocol. This could turn out to be a healthy long-term approach for the protocol to have good yield for LP providers while controlling the emissions.
Tokenomics & Crowdloan Rating
Let me introduce this segment by saying that the crowdloan rewards for Mangata X from a token ownership perspective are nothing short of amazing. The rewards per KSM even dwarf community favored projects like Picasso. This reward structure combined with a huge allocation to liquidity mining / provision / staking catapults Mangata X to the top of the crowdloan rating.
Mangata X is offering a total of 140.000.000 $MGX for investors who lock their Kusama in favor of Mangata X . Mangata X will limit the crowdloan with a hardcap of 14000 $KSM. With this hardcap in place the rewards come down to a mathemathical minimum reward of 6250 $MGX per contributed $KSM plus bonuses. In reality you probably can expect 8000 $MGX when using the referal bonus. These are the best rewards from a “project token ownership per $KSM contributed” perspective when compared to any crowdloan offered so far.
To get such great crowdloan rewards, Mangata X has taken advantage of the declining costs per KSM for Parachain slots. Mangata X set a rather low hardcap of 14000 KSM for their crowdloan, which stops any reward dilution if this hardcap is hit.
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This is the overall token Distribution after 5 years when Mangata will reach its hardcap. For my analysis I am looking at the tokenomics of each project after 1 year.
The tokenomics of Mangata look really splendid as well. With a score of 61,41 in the tokenomics rating, it scores the 4th place overall after taking first by a mile in the crowdloan rating. As you can see in the graphic below this is way above the median rating which sits at a sad -7,17. It seems that beneficial tokenomics are a scarce good.
I want to put emphasis on the 40% allocation after one year for liquidity provision and staking once more. This already big allocation grows to 67,5% after 4 years. This will give investors a fruitful opportunity to grow or earn from their already existing Mangata X stack. Additionally, it will decrease the sell pressure, because tokens will get locked to be put to work. This extra yield can have an alluring effect on people from the outside who will want to buy in if the yield is attractive enough. This obviously increases buy pressure from people joining the project.
Numbers, Speculation & Moonmath
Let’s talk numbers. What does this mean if someone invests into the crowdloan while using the 5% referal code I provided earlier?
Right now, with the market turning sour, the average crowdloan performance sits at a rough estimation of around $100m USD. If Mangata would reach that average performance it will return a whooping 8,4x on the initial investment.
Note: With the vesting schedule all projects are going for this is not fully available immediately.
Let’s have a look at some moon math. The average crowdloan performance at its ATH sits at around $550m USD. If Mangata would reach that it will return 39x on the invested amount.
Because of these great rewards, investors will get the value of their locked KSM at around $8m–$9m back. This should be quite an easy target to reach.
Another thing to keep in mind is the huge allocation to validation and LP rewards. You immediately can put your MGX to work with the Proof of Liquidity concept and grow your stack.
Thoughts & Summary
Mangata X looks like the inevitable evolution of a DEX, without notoriously high gas fees, front running bots and MEV. What is shown so far is an ambitious team with a solid idea. The rewards and tokenomics from Mangata are nothing short of amazing. It stands to see if Mangata X will get enough market share to become relevant, but if they do traders can rejoice.
I think it’s safe to say that the risk/reward ratio is heavily imbalanced in favor of reward for this crowdloan. In my view it would be foolish to not have at least a small allocation into the Mangata X crowdloan. When the market turns green again, the Mangata X crowdloan will likely yield big rewards for its participants.
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