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Simply Explained

Simply Explained: Liquidity Incentive Token (LIT)

Updated: Jul 25, 2024
Published: May 22, 2023
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Liquidity Incentive Token (LIT): Launched in October 2022, Bunni is an innovative protocol built by Timeless Finance. 

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Bunni aims to maximise liquidity on Uniswap v3 and enable other projects to incentivise their token liquidity. 

LIT is the incentive token at the core of Bunni. 

Let’s dive in!

What is Bunni? 

Bunni is a liquidity engine for Uniswap, where users provide liquidity and earn rewards in LIT. The protocol aims to solve the DEX (decentralised exchange) liquidity problem. 

On its website, it states that “unincentivized liquidity is hard. Most liquidity providers lose money. Swap fees are usually not enough to offset the Impermanent Loss. This makes it hard to bootstrap liquidity for an asset without token incentives.”

On the other hand, “incentivized liquidity is unsustainable. Many projects utilize token incentives to rent liquidity for protocol assets, but naive incentive schemes are unsustainable. The liquidity attracted is mercenary, meaning it will evaporate as soon as the incentives run out.”

Bunni aims to offer “deep, efficient, long-term liquidity. Powered by LIT tokenomics.” 

What is LIT?

LIT or Liquidity Incentive Token, is an ERC-20 token (a standard for creating and issuing smart contracts on the Ethereum blockchain) that’s the backbone of Bunni. 

Bunni incentivises liquidity using LIT and an improved system of vetokenomics.

‘ve’ stands for ‘vote escrowed’ and is a method of locking up tokens, removing them from circulating supply and making sure holders can’t sell them. Bunni’s vetokenomics improvements are designed to de-incentivise farming and dumping of tokens and encourage long-term liquidity provision. 

Liquidity providers (LPs) must both provide liquidity and lock up their LIT (converting it to veLIT) to receive token rewards. The more liquidity they provide, the more veLIT they must hold to maximise their rewards.

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Tokenomics

The total supply is 1 billion LIT. It is distributed as follows: 
  • 72% to community 
  • 25% to team (25% vested over 4 years)
  • 3% to investors
Disclaimer: Not financial nor investment advice. Any capital-related decisions you make are your full responsibility.

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