Creating the world’s most liquid Ethereum exchange.
We are pleased to announce the launch of our Nectar Market Maker Program — an initiative designed to reward loyal traders with Nectar tokens and pave the way for the long term decentralisation of the Ethfinex platform.
The Ethfinex Market Maker Program will begin on 13th February at 12pm UTC.
50% of trading fees from Ethfinex will be pledged to token holders
The Nectar token is put together with the objective of incentivising traders who add liquidity to Ethfinex. Nectar will facilitate the creation of the most liquid, community-owned Ethereum exchange, putting the control back in the hands of those who own it — its users.
There will not be a Nectar ICO. It is not intended to raise funds. Instead, Nectar will be distributed to users on a 30 day basis, rewarding market makers with a share of collected trading fees. 50% of trading fees are pledged to token holders who can earn Nectar in proportion to their monthly trading volume.
“The more you trade, the more you earn”.
The purpose of Nectar is to ensure that Ethfinex users benefit directly from the value they create whilst gradually accumulating a stake in the long term direction, governance and success of the platform. Having a network of users that own the exchange will incentivise owners to remain loyal users, in turn benefitting all users through maintaining liquidity and tightening the spreads between buy and sell prices.
Decentralising an exchange, in its purest form, means decentralising its ownership structure and this is where Nectar comes into play. Ethfinex will be a hybrid decentralised exchange, and the tokens can be earned by users trading in both a centralised and trust-less fashion.
To start earning Nectar tokens, users will need to visit Ethfinex and register for the market maker scheme. Upon successful registration, users will be able to see their estimated NEC balance for the first 30 days. At the end of each 30 day period, Nectar will be issued and registered users will be credited with their share of tokens, earned in proportion to the trading volume conducted as a market maker throughout each period.
Traders can take on the role of market maker through adding liquidity to the Ethfinex order books, offering to buy or sell (as opposed to taking the offers of others) achieved primarily through the use of limit orders.
Earned Nectar can be traded immediately or withdrawn to an external Ethereum address after 30 days. After the first 30 days have passed, users will have freedom to trade, redeem or withdraw as they see fit. Fees earned from all tokens on Ethfinex will be converted to ETH and pledged into the Nectar smart contract.
To minimise impacts on secondary token markets and minimise potential profits/losses to token holders we will look to convert and pledge fees collected in other currencies to Ethereum within 48 hours of collection. The exact mechanism for doing so will require some level of manual management.
Nectar tokens (NEC) will be made available for trading as of day one, tradable against ETH and USD pairs on Ethfinex. Available tokens come from an initial creation of 1 billion Nectar tokens, owned by Ethfinex. Of these tokens, half have been distributed while the other half are locked up and may be used for a variety of activities such as new employee or user incentivisation schemes. Our supply of Nectar will not grow over time and our ownership percentage of Ethfinex will therefore gradually decrease as a result.
Ethfinex will take efforts to enforce against any users who attempt to wash-trade to generate additional tokens.
Basic Nectar functionality
The fundamental purpose of the Nectar token is to incentivise and reward market makers for contributing liquidity to Ethfinex.
As makers and takers trade across Ethfinex, 50% of all fees will be collected and transferred to the Nectar smart contract.
Following every 30 day cycle, Nectar tokens will be distributed to market makers in proportion to total trading volume conducted within said period.
A redeem mechanism will allow Nectar holders to claim fee rewards in exchange for tokens. A market maker holding 5% of Nectar issued in a certain period would be entitled to 5% of the fees collected by the Nectar smart contract.
Alternatively, Nectar holders can choose to sell Nectar on a secondary market made available by Ethfinex or accumulate/hold tokens for a stake in the future of Ethfinex.
Ethfinex will retain an initial supply of Nectar which will not grow over time; Over time, as volume grows, the ownership structure of Ethfinex will gradually spread to allow for distributed governance.
Nectar Development Vision: The future of Ethfinex
As previously mentioned, Nectar will act as the central component of the long term decentralisation of platform governance.
Of the first major planned upgrades for Nectar will be the ability to vote on exchange listing decisions and provide input on basic governance functionality (the election of advisory representations/board members, parameters of redemption mechanism and more) as and when on-chain governance becomes feasible.
Further along on the roadmap is the integration of Nectar as a staking token for a scalable and entirely decentralised Ethereum exchange, allowing users to earn Nectar through remote trading and linking to other sources of decentralised liquidity. At this point Nectar will transition to its own native chain (Honeycomb) and will likely undergo a serious transition with regards to economic model and fee schedule.
Future upgrades are largely dependent on the development and success of a number of associated projects, including Plasma, Polkadot, Cosmos/Tendermint and Aragon. We are proud members of the Aragon Working Group, with whom we are working to further areas of on-chain voting and governance functionality, and will continue to explore development within these areas.