Camelot DEX: A New Liquidity Infrastructure

What is Camelot?

Camelot (website) is a decentralized exchange (DEX) built on Arbitrum, focusing on the ecosystem and community-driven features. The protocol is designed to be highly efficient and customizable, allowing builders and users to leverage infrastructure for deep, sustainable, and adaptable liquidity. Camelot's approach prioritizes composability, moving beyond traditional DEX design to deliver tailored solutions. The objectives of Camelot are to provide the Arbitrum ecosystem with innovative features, support new protocols, offer permissionless tools, have state-of-the-art functionality, apply the real yield narrative, and be as decentralized as possible. Camelot's feature-rich automated market maker (AMM) is based on a dual AMM that supports both volatile (Uniswap) and stable (Curve) swaps. Dynamic directional fees for trading pairs allow customized pool configurations tailored to specific trading pairs. Next-gen yield and incentives are critical for Camelot, introducing a brand-new liquidity approach based on non-fungible staked positions. Yield-bearing positions act as an additional layer on top of the usual LP tokens, improving capital efficiency, offering reusability, handling locks on staked positions, and associated yield boosts.

Permissionless features are crucial to Camelot, allowing protocols to interact directly without any consent or intervention from the team. Nitro Pools offer projects complete control of their incentives and flexible options to build the liquidity needed to thrive. Camelot's dual token system consists of the native liquid GRAIL and its escrowed version xGRAIL, a non-transferable governance token used as farming rewards. Most emissions are distributed in xGRAIL, providing a high level of control on the supply flow in the market. A hard supply cap, carefully crafted emissions, and additional deflationary mechanisms will ensure the long-term sustainability of Camelot's tokenomics. Protocol earnings are partly redistributed to xGRAIL users as real yield and used for buyback and burns to maintain a constant buying pressure on GRAIL.

GRAIL Token

Camelot is community-driven and launched its GRAIL token to offer a transparent and fair opportunity for the community, investors, and partners to purchase GRAIL. The Camelot team has remained committed to building the best product possible before seeking funding, and they are proud to announce that there has been no presale or VC investment. The public sale will offer 15% of the GRAIL supply, with 10% in GRAIL and 5% in xGRAIL, with all purchases settling at the same price based on the total amount deposited. Any unsold tokens will be burned.

The public sale proceeds will ensure deep liquidity from the launch, xGRAIL dividends, and support the team. 50% of the funds raised from the sale will be paired with 7.5% of GRAIL from POL in UNI v2-style liquidity, 30% will be allocated to xGRAIL dividends, and 20% will be used to support the team.

Initially, the auction will start with a fully diluted valuation of $2m, fixing a $ 20-floor price for GRAIL, and will increase after the first $300k has been raised. Once those $300k are reached, the auction will enter a price-discovery phase, where the token price will continuously increase at every purchase. Finally, all participants in the auction will obtain GRAIL at the same price, decided by the ending valuation of the auction. The tokens will be claimable within 24 hours after the sale ends.

It is worth noting that the sale will have a ratio of 65% GRAIL and 35% xGRAIL allocated to participants, meaning that for every $100 allocated to the public sale, $65 GRAIL and $35 xGRAIL will be received.

Camelot AMM

The Camelot AMM is the central component of their ecosystem-driven approach, which was built to provide users with a highly flexible and customizable trading experience. The AMM was also designed to optimize users' trading efficiency while supporting the growth of protocols by adapting to their needs.

To achieve these objectives, the team has developed the Camelot AMM V2, which offers a range of innovative features. One of the critical features of AMM V2 is the dual-liquidity model, which gives users greater control over liquidity management. This model allows users to choose between a standard or a targeted liquidity pool, depending on their trading needs.

Another critical aspect of AMM V2 is the introduction of dynamic directional fees. These fees adapt to changing market conditions and trading patterns to ensure users get the best possible trading experience. This innovative feature helps optimize users' trading efficiency while supporting protocols by assisting them in attracting and retaining users.

In addition to these features, the team introduced a swap referral mechanism for partnering apps. This mechanism is designed to help increase the adoption of the AMM by enabling users to earn rewards for referring others to the platform.

Camelot's staked positions spNFTs

Camelot introduces a new liquidity approach based on non-fungible staked positions, dubbed spNFTs. Every staked position (spNFT) has the following basic information:

• a unique ID
• a deposit LP token
• a deposit LP token amount
• an APY
• optional lock settings (duration, start/end time)
• multipliers information.

Staked positions under the form of spNFTs have a wide range of use. Still, one of their primary initial purposes is to replace classic yield farming mechanisms by receiving Camelot incentives. This is achieved through yield-bearing NFTs, which work similarly to regular DeFi farms from a user perspective. However, instead of allocating rewards to traditional farms, Camelot's Master contract distributes incentives to all staking positions of team-defined selected wrapped LPs.

Once a staked position's LP belongs to those listed pairs, the spNFT generates yield with rewards from the Master, just like staking into a regular farm. This system allows users to earn a yield on their staked positions without complex yield farming strategies.

The advantages of yield-bearing NFTs are numerous. For example, users do not need to worry about the volatility of the crypto market, and they can earn yield without having to deal with the complexity of yield farming. Additionally, Camelot's incentivization system allows for greater flexibility in selecting which LPs to stake, making it more accessible for users with smaller amounts of capital.

However, yield-bearing NFTs also present some challenges. Users must be careful when selecting the staked position and ensure that the LP belongs to the selected pairs. Moreover, as with any DeFi protocol, there is always the risk of bugs or exploits, which could lead to a loss of funds. Therefore, users should be cautious and conduct due diligence before investing in any DeFi project, including Camelot.

spNFTs act as an additional layer of features offering new opportunities and potential extensions. One of the critical features of this layer is the ability to act as a “wrapping layer” on LP tokens. This means that virtually any liquidity or single asset can be locked using spNFTs without any intervention from the Camelot team. In this way, any protocol could take advantage of this stack, whether listed on Camelot or not, and add locks to their liquidity, along with their own incentives layer, using Nitro Pools as an example. Camelot Nitro Pools offer an incredible feature for partners by allowing them to use spNFTs to set parameters for LP rewards. Projects can select specific LPs by specifying requirements like minimum LP amounts, timelocks, or whitelists. For example, a project like JONESDAO can use Nitro pools to incentivize users who lock JONES/ETH for at least six months, have at least $500 in LP, and are whitelisted by the team. The project can then allocate 50,000 JONES to the pool, rewarding loyalty and long-term holders.

Camelot plans to unlock an entire layer to incentivize the long-term liquidity of the project in the future. LP projects can even do zero-interest rate loans, and spNFT positions can serve as collateral for borrowing. Additionally, Camelot can leverage dynamic and directional swaps to charge fees per-pair basis, stabilizing volatility during extreme events. This allows for implementing systems based on the fluctuations of individual currency pairs, a feature usually found at the exchange level. Camelot is highly focused on developing new features and functionality for its partner projects.

One of the most exciting aspects of spNFTs is the ability to create advanced custom strategies through an unlimited number of different staked positions for the same LP, with different amounts, locks settings, or boosts mechanics. This offers users a high degree of flexibility and control over their investments, allowing them to tailor their investment strategies to their needs and preferences.

Moreover, the re-usability and capital efficiency offered by spNFTs are significant advantages for liquidity providers. By owning an actual receipt of their deposits, LPs can re-use their spNFTs to generate even more rewards, maximizing their capital efficiency. Additionally, the system is designed so that it's straightforward to implement for additional usages, such as using spNFTs as collateral for loans, further extending the utility of this innovative technology.

xGRAIL Governance Token

GRAIL is Camelot's native token. xGRAIL is a unique governance token non-transferable and escrowed, meaning it cannot be traded or transferred between users. This attribute ensures that xGRAIL remains secure and is used only for its intended purpose. The token corresponds to staked GRAIL, a separate cryptocurrency that powers the Grail Network.

One of the primary ways to earn xGRAIL is through yield-generating staking positions, which are represented by spNFTs. Users who stake their GRAIL in these positions receive rewards through xGRAIL tokens. Additionally, xGRAIL can also be acquired through direct conversion from GRAIL.

The central use case for xGRAIL is the ability to allocate it to Plugins. Plugins are add-ons that provide additional features and benefits to the Grail Network ecosystem. By staking xGRAIL into the token contract and assigning the deposited amount to a specific plugin, users can unlock a range of benefits, including increased access to network resources, discounted fees, and priority access to new features.

Allocating xGRAIL to Plugins is straightforward and requires users to interact with the Grail Network's smart contract. Once the token is deposited, users can assign the amount to the desired plugin using a simple interface. The agreement will then register the allocation and unlock the corresponding benefits for the user.

Conversion Process

The conversion process between GRAIL and xGRAIL is bidirectional, but the steps required differ depending on the direction of the conversion.

To convert GRAIL into xGRAIL, users can efficiently perform an instant 1:1 conversion. The process is straightforward and does not require any vesting or waiting periods.

However, to redeem xGRAIL for GRAIL, users must go through a vesting process that they can select themselves. The vesting duration can range from 15 days to six months, and the conversion ratio will increase proportionally with the duration of the vesting period. For example, the minimum vesting duration of 15 days will provide a 1:0.5 ratio, while the maximum vesting duration of six months will provide a 1:1 ratio. The token distribution is as follows:

Token Distribution

Genesis

• 15% to the Public Sale, distributed upfront (5% xGRAIL & 10% GRAIL)
• 10% to Protocol Owned Liquidity (7.5% used for initial liquidity, pre-minted in a multi-sig)
• 5% to the Genesis Nitro Pools, distributed linearly over six months as xGRAIL

GRAIL

• 22.5% to Liquidity Mining over the next three years
• 20% to the Core Contributors, vested linearly over three years
• 10% to Partnerships (6-month cliff and two years vesting)
• 8% to Reserves (pre-minted in a multi-sig)
• 5% to the Ecosystem
• 2.5% to the Development Fund, vested linearly over three years
• 2% to Advisors, vested linearly over three years

Conclusion

Camelot is a DEX built on Arbitrum that aims to offer a tailored approach to liquidity provision through a feature-rich AMM, next-gen yield and incentives, permission less access, and long-term sustainability. The protocol is highly efficient, customizable, and community-driven, enabling builders and users to leverage its infrastructure for deep, sustainable, and adaptable liquidity. With a dual token system consisting of the liquid GRAIL and the escrowed xGRAIL, Camelot strives to balance attractive incentives for initial liquidity growth with the long-term health of the protocol. The protocol is designed to provide the Arbitrum ecosystem with innovative features and functionalities, supporting new protocols launching on Arbitrum and enabling projects of all sizes to leverage its protocol in a way that suits their needs.

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