The zerozero Decentralized Exchange
This whitepaper is an introduction to the zerozero DEX, a marketplace for creator tokens built through the zerozero ecosystem. The zerozero DAO along with the basic structure of markets on the zerozero DEX and Creator tokens issued by the zerozero DAO.
Part 1 - P00LS, Creator tokens and Liquidity
The zerozero ecosystem is the protocol for creator social tokens. In today’s world, attention rivals capital as the ultimate resource, with artists, musicians, athletes, actors, influencers and brands creating and sharing content with their community.
The zerozero ecosystem hosts tokens for culturally relevant and forward thinking creators looking to leverage the power of cryptocurrency and build their presence in the Web3 world. Through the zerozero ecosystem, creators and brands launch their token, distribute it to their communities, and list it on the zerozero decentralized exchange (DEX), where it can be earned and traded on Ethereum. Social tokens are the currency of your favorite creator, and the key to their universe.
Every creator will have their own currency for their ecosystem and denominate all of the value they bring to their community in this currency.
The creators of tomorrow will use Web3 technologies to connect and engage with their audiences. At the core of these technologies are social tokens, a.k.a creator tokens. Creator tokens are a key into your favorite musician, artist, or brand communities. These tokens, unlike NFTs, are fungible and act as the currencies to entire ecosystems of a creator’s content and value. Creator ecosystems revolve around their communities. This can be the community of a musician, artist, athlete, actor, influencer, brand….the list goes on.
Social tokens allow your favorite artist, musician, influencer or brand to benefit directly from the value they generate for their community while rewarding those that participate within it. In the Web3 world, these tokens allow creators to redirect value away from the middle men that profit from their work today, and back to the creators and their communities. Creator tokens make culture an asset for the first time.
Why liquidity is important
Creator tokens first must serve as an efficient medium of exchange for both the creator and their community. Liquidity is the key here. Liquidity is the ability to buy and sell quickly and efficiently at a low cost. Liquidity makes markets efficient by limiting the natural frictions inherent to a marketplace.
In liquid markets, supply and demand alone dictate the price discovery of a token. Volatility is limited, and anyone is able to trade in and out of tokens with low price impact. A liquid market for creator tokens empowers communities to gain unprecedented access to creators by monetizing their engagement. Creators, in turn, are able to monetize the power of their communities more directly than before.
In short, a liquid market ensures that every creator community can access the creator’s ecosystem.
Liquidity for Creator tokens
Liquidity is all the more important for creator tokens. Much like fiat currencies are the currencies of countries and unions, creator tokens are the currencies of creator ecosystems. Ecosystem currencies are not speculative assets, they are the epicenter of everything creators do, meaning that their price must be stable and their market must be efficient. Creators and their communities stand to benefit from the ecosystem by increasing both the utility brought by the creator and the engagement brought by the community.
Community driven, long term liquidity
All liquidity is not created equal. Decentralized finance has seen large inflows of liquidity since its advent, not all of which led to successful protocols. Good liquidity is sticky: it is stable in the long term and does not go away easily. In order to build this kind of liquidity, a few solutions exist.
Market makers on centralized exchanges — with the proper pricing plan and inventory — can create healthy long-term liquidity on a traditional order book. This solution is viable but usually expensive and in large part reserved for assets with larger market capitalizations.
In decentralized finance, protocols incentivize users to provide liquidity to an automated market making protocol through liquidity mining incentives: locking up liquidity-provider tokens for an attractive yield. While this solution helps to build and maintain liquidity, it is imperfect as a sole solution in that it temporarily attracts yield-seeking speculators to the project. This artificially creates liquidity that can only be maintained while the mining incentive remains active, and is not bested by another protocol.
Innovations in the DeFi space have pioneered the concept of protocol-owned liquidity (POL) to limit the ability for liquidity to flee to higher yielding protocols too quickly. Owning liquidity to secure it in a pool is a significant innovation and POL has its place in DeFi. That being said, it is also imperfect as a sole solution and the mechanism has proven to be highly volatile (see OHM).
We want the best of every world for creator tokens, so we built the zerozero Decentralized Exchange to incorporate the best of many solutions for creator token liquidity.
Part 2 - The zerozero DEX
The zerozero DEX
The zerozero Decentralized Exchange, or zerozero DEX, is the largest marketplace for creator tokens and the creative equity of all creators. The zerozero DEX is governed by the DAO of $00 holders.
The zerozero DEX brings protocol-owned liquidity to every creator token on day one through an initial auction process. This step establishes long-lasting liquidity and creates a first successful trading venue for all creator tokens, allowing for efficient purely supply-demand based price discovery. The initial liquidity set up to build the pool will be owned by a treasury governed by the DAO of $00 holders. From a protocol perspective, this allows for long-term liquidity for every creator pool as well as a share in the zerozero DAO ecosystem for every holder of $00.
The zerozero DEX will allow anyone to buy and sell creator tokens, join creator communities and access the value of creators and their communities.
The zerozero DEX will be an automated market-maker forked from the Uniswap V2 infrastructure, the gold standard for automated market making in DeFi. Creator tokens in the form of ERC-20 tokens will be listed on the zerozero DEX to be paired with the 00 tokens.
The DAO of $00 token holders will vote to list creator tokens on the zerozero DEX and host an auction for a token. After token minting, an initial auction on zerozero DEX will allow the creator to raise liquidity for their pool. Once funds are raised, the zerozero DAO will create the market for the creator token on the zerozero DEX, allowing anyone to buy or sell creator tokens and benefit from various DeFi incentives available.
Below is a diagram for the process of launching a creator token. We use $CREA as a proxy for the ticker of the creator token.
Once a creator chooses to create a token, P00LS will help the creator build their community by letting fans earn tokens through engagement and distributing tokens to core community members. Once a strong community is built, the token can be minted and airdropped to token holders. Finally, the auction will create a marketplace for a creator’s token.
Once the token is listed on the zerozero DEX, the price for a creator token will be determined directly by the liquidity in its pool through the constant product formula. If x is the supply of creator token ($CREA) in the pool and y is the supply of the paired token ($00) in the pool, the price of the creator token in $00 is given as the quotient of y and x. The converse is also true, the price of $00 in creator token is given as the quotient of x and y.
For a given supply of the creator token and 00$, the price of a creator token is given by the above function.
These liquidity pools will allow anyone to swap in and out of any creator token to join their tokenized communities and gain access to creator value. The zerozero DEX has been designed to attract long lasting and increasing amounts of liquidity.
Staking on the zerozero DEX
DeFi mechanisms on the zerozero DEX are simple and serve to build a highly liquid and efficient exchange. DeFi incentives for creator tokens will be voted on and controlled by the DAO of the specific creator, not by the zerozero DAO.
Staking incentives will be made available for creator tokens on the zerozero DEX through a proposal and vote on the specific creator DAO. The resources needed for these staking incentives will be taken from the treasuries of the respective creator’s DAO. The yield received for staking Creator tokens will be proportional to the amount of time staked. Anyone staking creator token can unstake their tokens at any time.
Creator tokens will be minted on the Ethereum Blockchain as ERC-20 tokens. The general distribution framework for creators distributes their token over a 5 year period to their community with multiple allocations.
Only 10% of the token is allocated to the creator as standard practice.
Note: Creators may choose to alter the allocation and distribution framework of their token. Specifics will be detailed in the creator specific whitepaper.
Creators will receive 10% of the total supply of their token, vested linearly over 5 years from the issuance date.
A 30% allocation is dedicated directly for the community of the creator. Community members will be able to earn, rather than buy, creator tokens. Today, this is done on the P00LS Launchpad through incentives designed by the creator. In the future, dozens if not hundreds of earning mechanisms in the physical and virtual world will be developed for fans to earn tokens. This is one of the largest allocation of tokens to ensure the most engaged community members receive the most tokens.
A 45% allocation dedicated to the treasury of their decentralized organization. This treasury is governed by the members of the creator’s DAO. Any DeFi incentives for the creator token will be voted on by the creator’s DAO.
A 10% allocation is used to create the initial liquidity pool on the zerozero DEX for the creator.
A 5% allocation is used to incentivize key companies in the creator’s ecosystem that will help grow the token.
Please note that these allocations may change from creator to creator.
Creator Launch Process
Creators and their token will follow a similar process.
1 - Creator Launches on P00LS
Creators first allow their community to earn their token off-chain on P00LS. The token is distributed to tokenholders as their most engaged community members through airdrops. Earning is a key component of creator token and continues throughout the life of the token.
2 - Community & Utility building
Through education and token airdrops, creators build their community of tokenholders and provide utility to the token. Community members are also encouraged to provide token utility by integrating the token in all composable protocols.
3 - CREA Token lists on zerozero DEX
Using funds raised in 00$ during the Token Minting process, the zerozero DAO will create a liquidity pool for the token using ~10% of the creator’s supply. This initial liquidity will belong to the zerozero DAO; the DAO of holders of the 00 token.
4 - $CREA is the creator’s ecosystem currency
$CREA is slowly integrated into everything the creator is doing, becoming the creator’s true currency.
Auction Process Description
Every creator token will have an auction to raise initial liquidity for the creator’s liquidity pool. A small portion of supply is dedicated to the auction process for every creator. Auction participants will bid any amount of the 00 token and receive a pro-rata of $CREA based on the 00$ they supplied. The $00 raised will be used to create a liquidity pool with another portion of creator token supply. The initial liquidity in the form of LP tokens will be owned by the zerzeroDAO; the DAO of 00$ token holders. The auctions of the first creators to launch their token with P00LS will be seeded with $00 token liquidity.
Initial Liquidity Process
PART 3 - ECONOMICS, ECOSYSTEM AND INTEGRATIONS
The value of creator tokens is linked directly and solely to supply and demand.
The four main stakeholders of the zerozero Decentralized Exchange are the zerozero DAO, creators, their communities (users) and liquidity providers.
The zerozero DAO is the community surrounding the zerozero ecosystem, it is the community of all 00 token holders. This includes all zerozero community members, creators of social tokens, all holders of creator tokens, the P00LS team, as well as investors of P00LS.
Creators are the main actors of this whole ecosystem. Their communities and creation is what makes the zerozero ecosystem the centerpoint of culture, creativity, and talent. The zerozero DEX allows creators to make their token liquid.
Communities of creators are important stakeholders that both participate in the creator’s liquidity and depend on the DEX’s functioning and liquidity to efficiently swap in and out of creator tokens.
Liquidity Providers and traders on the zerozero DEX are vital stakeholders of the zerozero DEX that provide long-term liquidity for creator pairs. Liquidity providers allow creator tokens to be currencies of an artist’s creative ecosystem, and users of the DEX are able to buy and sell creator tokens efficiently.
The zerozero DAO owns the LP tokens generated from the creation of the initial liquidity pool of the creator launch process. This corresponds to 5% of the supply of all creator tokens as well as the 00 funds matched to this initial supply. Members of the zerozero DAO can vote on what to do with these LP tokens and the 00 funds.
Trading fees on the zerozero DEX are 50 (0.5%) basis points for transaction on every creator pair ($CREA/$00).
25 basis points (50% of fees) go to liquidity providers on the creator pair.
20 basis points (40% of fees) go to the respective creator.
5 basis points (10% of fees) go to the members of the zerozero DAO.
Trading fees are meant to reward all stakeholders of the zerozero DEX including any members of the zerozero ecosystem through the 00 token. Creators can choose to receive less trading fees if they wish to incentivize stakeholders differently.
Creators issue their creator tokens through the zerozero ecosystem with the help of P00LS and tokenize their community. There are multiple tools to do this.
The P00LS Launchpad allows creators to distribute their tokens to their communities by allowing their community to earn tokens through different incentives set out by creator’s themselves. This is the first step to tokenizing a creator’s core community.
The zerozero DEX is the largest marketplace for creator tokens. The zerozero DEX is where anyone can buy or sell creator tokens to join a community or regulate prices. Here, community members can join their favorite creator’s community directly or gain greater access by buying creator tokens directly. This second step allows creator tokens to be liquid currencies of the creator’s ecosystem.
Holders of creator tokens will unlock specific access and experiences based on the number of creator tokens they are able to accumulate. Rewards in creator tokens are the result of engagement with the creator, redefining value in access instead of dollars.
Through these three tools, creators are able to create their currency, distribute it to their community, provide a liquid market, and bring value to the currency.
Web3 Potential Integrations
Web3 is an expansive system and the beauty of open-source technology is the ability for network effects and protocol composability to create value for all of its participants. Creator tokens are an integral part of Web3, and P00LS will always look to increase the number of partnerships with other Web3 protocols to add additional utility and use-cases to creator tokens.
P00LS partners with the largest centralized exchanges like Coinbase, Binance, and others to list creator tokens. This will allow for increased adoption of creator tokens as the communities of creators begin to tokenize. Social tokens and creator tokens have the potential to bring millions, if not billions of people to cryptocurrency and Web3. Regulated centralized exchanges with large user bases will play an important role in that process.
Payment providers are key to allowing creator tokens to become the ecosystem currencies they are set out to be. Creators will begin to link events, content, merchandise, and more to their own token. Much like we think of a certain amount of dollars today as enough purchasing power to buy a stick of gum, we will think of creator tokens tomorrow as enough purchasing power to attend the creator’s live event. Traditional payment providers such as Paypal, along with more crypto-focused payment providers currently being built like tokenbase Commerce or MoonPay, will allow creators to denominate access in creator token.
Using creator tokens, creators will be able to token-gate access to exclusive content in the physical and virtual world. Using Web3 tools such as unlock protocol or collab.land, any creator can token-gate, membership, ticketing, NFTs and any exclusive access types. Musicians will give concert tickets to their token-holders, athletes will give autographed copies of their jerseys to token holders, and brands will grant exclusive discounts. Creators and brands will be able to receive and build engagement in their community in an unprecedented way.
As soon as creator tokens are minted as ERC-20 tokens and tradeable on the zerozero DEX, they are composable with the largest decentralized finance ecosystem in the world and have thousands of possible use cases. Like any ERC-20 token on Ethereum, creator token loans backed by stablecoins can be made on protocols like aave or compound finance, creator token derivatives can be traded on protocols like dydx, creator token portfolios can be built on protocols like tokensets, multi-creator token liquidity pools can be made on protocols like balancer, and more. Creator tokens will always be integrated into the DeFi ecosystem as ERC-20s and benefit from increased financialization in the space.
Creator tokens can be easily integrated to pre-existing creator NFTs and even help to supercharge access and exclusivity to new NFTs. Creators can denominate their NFTs and their minting price in $CREA, token gate their NFTs to their most engaged community members, drop tokens to their NFT holders, or give special token holder status to holders of both creator tokens and NFTs. Creator tokens and NFTs can and should co-exist to build every creator’s Web3 strategy.
Polling and Voting
Creator tokens will allow members of creator communities and the zerozero DAO to vote on creator token related topics. Platforms such as Snapshot allow for completely decentralized proposals and token-weighted voting for any creator community with a token. Proposals can be made directly to and from the creator allowing the community of token holders to vote on the community-preferred outcome.
All things come together in the metaverse. Creator tokens will be the currencies of creators both in the physical and virtual reality. Creator NFTs on sandbox, creator wearables, their virtual events, and more will be bought in creator tokens in the metaverse. P00LS enables creators to enter the metaverse and expand their ecosystem to virtual realities through their token.