8 min read
Mute Switch: The Next Generation of DeFi Platforms Built on zkRollup Technology
The Mute Switch is a powerful and innovative DeFi platform offering users exciting features and benefits. By leveraging zkRollup technology, the platform can provide a fast, low-cost, and highly secure experience. At the same time, its community-driven approach ensures that users have a direct say in the platform's future direction, whether you are a seasoned cryptocurrency investor or are just starting in the world of DeFi.
Mute (website) is a cutting-edge DeFi platform built on zkRollup technology, specifically on zkSync v2 that offers users the opportunity to invest and trade cryptocurrencies, earn yields, and participate in bonds, all on a decentralized, community-driven platform. The platform is designed to provide users with the security and reliability of Ethereum but without the high gas fees typically associated with the network.
One of the key features of The Mute Switch is its use of zkRollup technology, which is a layer 2 scaling solution that allows for high throughput and low latency transactions. By leveraging zkRollup, Mute can offer users a fast and seamless experience, with transactions settling in seconds rather than minutes and at a fraction of the cost of traditional Ethereum transactions.
In addition to using zkRollup technology, Mute is also designed to be community-driven, with users able to participate in governance and decision-making through the platform's token, MUTE. This allows users to have a direct say in the future direction of the platform and helps to ensure that it continues to evolve to meet the changing needs of its users.
One of the main benefits of using Mute is the ability to earn yields through staking and liquidity provision. By staking MUTE tokens, users can earn a share of the platform's transaction fees while providing liquidity to the platform's trading pairs allows users to earn additional rewards. These rewards can be significant, with the platform offering some of the highest yields in the DeFi space.
Another feature of Mute is its bond market, which allows users to participate in various bonds that offer varying levels of risk and reward. Bonds can be purchased using MUTE tokens and provide users with a way to earn a predictable return on their investment over a fixed period.
MUTE is the native token of the Mute Protocol and serves as the gateway to the Mute DAO. This decentralized autonomous organization governs the protocol's development, decision-making, and management. The Mute DAO's decision-making process is based on a locked-based vote system that requires users to hold and lock MUTE tokens to receive dMUTE tokens used for voting.
dMUTE tokens are soul-bound tokens, meaning they are locked to the address that receives them and cannot be transferred. The only way to get dMUTE is by locking your MUTE tokens for a specified period. The lock period can range from 7 to 364 days, with a minimum increment of 7 days. The longer you lock your MUTE tokens, the more dMUTE you receive and the more weight your vote carries in the Mute DAO.
Locking your MUTE tokens longer also provides higher rewards, lower fees, and increased influence over the protocol's decision-making process. When the lock period expires, you can redeem your dMUTE for MUTE tokens or re-lock your dMUTE with different parameters.
One of the benefits of the MUTE token is its ability to provide users with access to exclusive features, such as the Amplifier and Bonding programs. These programs enable users to earn additional revenue by providing liquidity to the protocol and bonding their MUTE tokens to the Mute DAO.
Mute allows users to create pools with LP fees ranging from 0.1% to 10%, providing a flexible and powerful tool for various DeFi projects. Once set upon pair creation, these fees can only be changed through the platform's LP governance system. An LP provider, or delegated provider, with 50%+ vote weight, can change the fee to prevent gaming the system. There is a 0.1% fee on total votes when changing the fee of pools, and this helps to prevent flash loans from changing fee structures without incurring some losses.
The dynamic fee pool w/ governance is a simple yet powerful system that offers a variety of benefits for DeFi and crypto projects. One of the key advantages of this system is that it provides a flexible way to manage LP fees. By allowing LP providers to set fees between 0.1% and 10%, The Mute Switch enables projects to tailor their LP fees to suit their specific needs, whether to incentivize liquidity provision, generate revenue, or strike a balance between the two.
In addition to its flexibility, the dynamic fee pool with a governance system is also designed to be secure and resistant to manipulation. By requiring a 50%+ vote weight to change the fee, the system ensures that any changes are made with the support of a significant portion of LP providers. The 0.1% fee on total votes also helps to prevent flash loans and other forms of manipulation, as it ensures that any changes come with a cost.
Upon pair creation, each LP pool has a fixed fee ranging from 0.1% to 10%, depending on the provider's preference. It's important to note that only one fee can be set at a time, and all LPs must participate within that fee range. This setup ensures consistency in the fees charged for all trades within a specific LP pool.
The LP governance system on Mute Switch allows for the fee of a pool to be changed based on an account that controls more than 50% of the pool votes. These votes are directly correlated to the LP token supply balances. In addition, LP providers can delegate their votes to another provider, allowing parties to lobby for delegates and increasing their pool weight. This feature provides an added layer of flexibility to the governance system, enabling LP providers to influence the decision-making process within the platform.
Mute's design for a single-fee pool has several advantages over a multi-fee pool system. One of the main benefits is that a pool with deeper liquidity will always be more actively traded than its counterparts with lower fees and lower liquidity. By concentrating liquidity within one pool, Mute enables more efficient use of resources. It avoids spreading liquidity too thinly across multiple pools. Additionally, the governance system allows for dynamic fees, providing more flexibility to LP providers and traders and enabling them to respond quickly to changing market conditions.
The Mute Amplifier is a unique protocol that allows LPs to benefit from additional revenue APY and be part of the Mute ecosystem. The Amplifier rewards are fueled by platform revenue and fees generated from the buyback and make a system that the Mute DAO has implemented. The Amplifier program allocates $MUTE to approved projects over a certain period, with a target APY for liquidity providers.
However, it is essential to note that not all liquidity pairs have amplifier pairs. The Mute DAO and team select which pairs will have amplifiers, prioritizing important base liquidity pairs such as ETH/USDC and WBTC/USDC. The amplified pairs are capped, ensuring the base APY is not diluted. They will be updated on the website as they become available.
The APY in an amplifier is variable and is determined by the ratio of the user's snapshotted dMute vote value to the total Mute rewards in the pool. Users can own dMute votes by owning dMute directly and having ownership over its delegation or by having other dMute owners delegate their vote share to them. The amplifier only considers the number of “votes” owned, not the amount of dMute owned, allowing third-party LPs to bribe dMute owners.
For example, if a user provides $50k worth of LP on an ETH/USDC pair with an amplifier with a 5% base APY and 15% max APY and owns 40,000 dMute votes (either owned or delegated), the Amplified APY would be 10%. To own the max Amplified APY, the user must own the same amount of Mute rewards in the pool as they do dMute votes.
It is important to note that a user's dMute votes/holdings carry over to all amplifiers. If a user provides LP to two amplifiers, their dMute balance is not split, and they will receive a 10% APY on both. This is designed to encourage participation in the pools and to make the process more accessible to users. Overall
Bonding in the Mute protocol is a process by which LP tokens of MUTE-ETH pairs can be exchanged for MUTE tokens with a specified vesting period. Essentially, bonding allows users to sell their LP tokens to the Mute DAO in exchange for MUTE tokens at a discounted rate. In contrast, the Mute DAO acquires ownership of more protocol liquidity.
It's important to note that when you purchase a bond, you sell your LP share/tokens, and your exposure shifts entirely to MUTE tokens. This is because the Mute DAO compensates bondholders with more MUTE tokens than they would receive on the market, allowing them to purchase MUTE at a lower cost basis.
The number of MUTE tokens and the vesting period is specified when the Mute DAO offers a bond. Bonds are sold on a first-come, first-served basis, and the ROI on a bond starts at 0% and increases slowly until it is purchased. Once purchased, the cycle is reset with a new bond, and dMute is immediately paid out to the bondholder. The dMute tokens are issued with a 7-day time lock, after which they can be redeemed for MUTE tokens directly or re-locked with different parameters.
The primary benefit of bonding is that it increases the amount of protocol-owned liquidity, which increases revenue toward the treasury and long-term liquidity for the Mute protocol. In addition, as more LP tokens are exchanged for MUTE tokens, the Mute DAO acquires more control over the liquidity of the protocol, which can help stabilize the price and improve the ecosystem's overall health.
It's important to note that bonding is not without risks. By selling their LP tokens, bondholders lose their exposure to the underlying asset, which may not be ideal for some investors. Additionally, the vesting period can limit the liquidity of the MUTE tokens received, which may not be suitable for short-term traders. Despite these potential drawbacks, bonding is a valuable tool for LP token holders who want to increase their exposure to MUTE tokens and support the growth of the Mute ecosystem.
In conclusion, Mute is a decentralized and community-driven platform that aims to provide low-cost trading and liquidity services for cryptocurrency traders. It offers a range of products such as the Mute Swap, Amplifier, Bonds, MUTE, and dMUTE tokens, all designed to benefit its users through liquidity incentives, yield farming, and long-term value creation. The platform strongly focuses on community governance. Users must lock their MUTE tokens to participate in the Mute DAO and receive soul-bound tokens, dMUTE, that grant voting rights.
Overall, Mute offers a unique and innovative approach to decentralized finance that could potentially attract a lot of interest from the crypto community. Its focus on low fees, liquidity incentives, and community governance could attract users seeking alternatives to centralized exchanges. However, Mute is subject to market risks and volatility, like all decentralized finance platforms. Users should exercise caution and research before investing in any of its products.
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