Baseline is an automated tokenomics engine for ERC20 tokens. By utilizing a dynamic supply model and a basic market making strategy, Baseline gives new ERC20s persistent on-chain liquidity and non-liquidatable leverage right out of the box.
When a Baseline token is deployed, it automatically seeds initial liquidity into a Uniswap V3 pool. At launch, 100% of token supply is kept on-chain by the protocol and used to protect their value forever.
Baseline Value (BLV)
Baseline guarantees ERC20s an intrinsic "baseline value" (BLV) by reserving enough liquidity in the pool to buy back their entire supply. Put simply, the BLV is the price which the last token can be sold into the pool.
This is possible because the protocol owns the initial supply; teams cannot issue tokens to themselves or investors ahead of time. Instead, each newly issued Baseline token must be purchased directly from the pool, allowing the protocol to accumulate liquidity
The token launch process, as it currently exists, is problematic and often leads to unfavorable market conditions for investors. Issues arise when teams pre-determine token supply and distribution curves prior to launching, doing so without any feedback or understanding of the market. This practice can create skewed distributions that place buyers at a significant disadvantage. Additionally, teams often arbitrarily set the initial price for token liquidity, leading to inflated and unsustainable market capitalizations without the necessary underlying liquidity to support them long term. Upon launching the token market, projects usually incur significant costs in emissions or operational expenses to incentivize third-party liquidity providers (LPs) or market-making firms to maintain liquidity for the token. The cumulative effect of these practices is that for many tokens in the cryptocurrency market, prices continually fall and investors are exposed to an array of hidden market risks and disadvantages.
A critical component of Baseline is the application of dynamic tax rates on transactions.The protocol applies a small fee to every transaction, including buys, sells, and transfers. The size of the fee is determined by the market activity, increasing during periods of heightened activity and decreasing when the market is calm. This mechanism discourages rapid trading and reduces the likelihood of price manipulation, as participants must consider the cost of taxes before executing trades.
Staking incentives form a crucial part of Baseline's design, providing an additional layer of incentives for long-term participants. Participants who stake their $BASE tokens not only earn rewards but also gain the ability to influence the protocol's future direction by participating in governance
When participants purchase $BASE tokens from the liquidity pool, a portion of their funds is locked as collateral for a loan, which they can use to purchase more tokens. This loan is overcollateralized, reducing the risk for the protocol and other market participants.