Savvy tokenomics are primarily designed to incentivize long-term protocol health and growth. Tokenomics plays a vital role in decentralized entities by coordinating behavior, rewarding value contribution, and facilitating exchange.
Savvy DeFi uses two tokens to provide utility and manage governance:
- SVY — ERC-20 utility token of the protocol
- veSVY — ERC-20 non-transferable governance token that accumulates through SVY staking.
SVY is used for DAO membership and governance, protocol access, and incentivizing liquidity providers.
veSVY is used for governance and to access boosted rewards for using the protocol. Any SVY holder can stake SVY to accumulate vote-escrow SVY in exchange. The longer SVY is staked, the greater the veSVY earn rate. Upon unstaking SVY, the corresponding balance of veSVY is reduced to zero, which encourages long-term staking. Holders can accumulate a veSVY balance up to 100x the balance of staked SVY.
There will only ever be 10,000,000 SVY in circulation. 21.5% of the token supply is allocated to the protocol launch, while the remaining 78.5% will vest over a 6-year schedule.
Savvy DeFi will bootstrap liquidity through a fair launch to distribute a portion of tokens to community stakeholders. This means there are no private or pre-seed token sales. There are two phases to the Fair Launch: a Liquidity Generation Event (LGE) and a Liquidity Bootstrapping Pool (LBP). For the launch, 21.5% of the total SVY tokens are allocated as a mixture of SVY and vesting SVY.
During the 10-day Liquidity Generation Event, participants provide seed liquidity to the protocol in exchange for vesting SVY tokens. All LGE participants utilize the same pricing framework ensuring equitable SVY allocations for liquidity provided. A total of 1,550,000 vesting SVY (15.5%) are allocated for the LGE.
During the 3-day Liquidity Bootstrapping Pool, 600,000 SVY (6%) tokens will trade in an open Liquidity Pool to discover the initial market price for the SVY token. The LBP utilizes a battle-tested contract developed by Balancer to enable SVY market swaps while protecting smaller participants against “whales” and bots.
Community Governance (DAO)
The Savvy Community will govern the protocol as a Decentralized Autonomous Organization (DAO) that will receive an initial SVY allocation to participate in voting and support ongoing protocol development. The total DAO allocation is 1,300,000 SVY (13%). Also, 200,000 SVY (2%) are reserved for ecosystem development.
Liquidity Provider Incentives
To ensure deep liquidity in Savvy liquidity pools, 3,750,000 SVY (37.5%) are allocated to incentivize liquidity providers. These SVY emissions occur on a monthly basis and are subject to DAO governance. Using a gauge voting mechanism, veSVY holders vote monthly on how to allocate emissions to liquidity pools on Savvy, enabling the protocol to adapt to changing market conditions over time.
The team will receive an initial allocation of SVY that will vest according to a linear 6-year schedule. This allocation is designed to cover ongoing protocol development. The total team allocation is 1,000,000 in vesting SVY (10%).
A long-term objective is a fully autonomous and immutable protocol, which will be achieved through a sustainable funding model. Savvy DeFi will employ a dedicated team to support the product, documentation, community, and ecosystem. As the protocol evolves, the Savvy DeFi team will consider introducing more immutability or DAO components where appropriate.
1,000,000 SVY (10%) are reserved for treasury operations to benefit the protocol. This allocation will be used in several productive ways, including engaging partners in the ecosystem through grants.
The total supply of SVY is 10,000,000 which will be released over a 6-year schedule.
Protocol Utilization Incentives
To facilitate the adoption of Savvy’s unique Line of Credit model, the protocol provides incentives in proportion to the amount of credit obtained, ultimately aligning the financial interests of borrowers, liquidity providers, and the protocol. Additionally, to encourage SVY holders to maintain the SVY position, veSVY produced by staking SVY is also incentivized.
The Savvy protocol generates revenue in multiple ways: protocol-owned liquidity, harvested yield profits, and third-party rewards.
The protocol will control a portion of SVY tokens by seeding liquidity and through SVY token accumulation. Protocol-owned Liquidity (PoL) enables the protocol to obtain swap fees, which will be directed back to the protocol itself. SVY token accumulation from protocol proceeds create buy pressure for the SVY token while further growing Protocol-owned Liquidity.
Harvested Yield Profits
Savvy retains 10% of the total yield earned across all user deposits.
Savvy POL earns rewards, including third-party governance tokens via incentivized third-party integrations.
There are 3 types of rewards on Savvy DeFi: liquidity incentives, swap fees, and boosted utilization.
Each month, SVY will be distributed to liquidity pool stakers. The amount of SVY distributed towards every pool is initially allocated according to the importance of each pool – but will eventually be allocated according to DAO voting operations. The SVY claimable by stakers is allocated according to the USD value equivalent of the liquidity they provide.
Liquidity pool trading fees are distributed to liquidity providers in pool tokens (e.g., if the pool is svUSDC/USDC, the distributed tokens are svUSDC and USDC).
To encourage early protocol utilization, protocol users will be rewarded for creating a Savvy Line of Credit and for governance participation. The calculation for the boost is proportional to the size of the Line of Credit and the amount of veSVY controlled by the protocol user. If either of these quantities is zero, the boost that may be claimed will be zero. Therefore, users are incentivized to gain exposure to several of the most important Savvy DeFi protocol functions.
To obtain access to a Savvy Line of Credit, protocol users must hold SVY. This requirement ensures that all protocol users are also participants in the protocol and may choose to participate in governance. Aligning utilization with stakeholders encourages decisions to be made that consider how the protocol is used.
Altogether, these tokenomics are designed to create a sustainable economic model for the protocol. There are 2 tokens – SVY and veSVY – that each play a unique and vital role in the long-term sustainability of the Savvy protocol. These tokens interact with the protocol in several ways, incentivizing healthy behaviors for the protocol’s performance. Protocol health has been aligned with stakeholder motivations to ensure individual decisions are coordinated to achieve positive protocol-level outcomes.