Project: Camelot
Category: Decentralized Exchange (Spot)
Webpage: https://app.camelot.exchange/
Audit: https://paladinsec.co/projects/camelot/
Overview
Camelot is a custom built decentralized exchange on Arbitrum. Their goal is to partner with and incubate Arbitrum native projects through their DEX and launch pad features. Camelot differs from traditional DEXes through their unique offerings – Nitro pools and spNFT’s. Nitro pools allow protocols to create custom requirements for liquidity providers to earn emissions. This enables them to target and reward a specific set of users. Additionally, protocols may define structured trading fees within their pools, such as dynamic directional fees. spNFT’s are wrapped liquidity tokens that grant more options to liquidity providers. It allows them to set lock durations for the liquidity, or utilize Camelot’s plug-in features for a multiplier on their yield. Camelot also fosters and supports new protocols launching on Arbitrum through their fair sale launch pad. They assist new projects by offering guidance on how to structure a fair launch based on their unique goals, enabling them to obtain liquidity and token listing seamlessly. The tokenomics of GRAIL and the design of spNFTs offer users and liquidity providers the ability to obtain ‘real yield’ in a sustainable long term way.
Features
Dual style AMM with swap functions for multiple different asset types
Volatile pairs (Uniswap V2, x*y = k) and stable pairs (Curve, x3y + y3x = k)
For pool creators - they have the ability to design a pool based on their needs through:
Different fee tiers for each individual pool
Potential to set dynamic directional fees (ex. 2% fee for selling, 0.01% fee for buying)
Automatic fee adjustment based off of market volatility
Interesting example of this in use is Plutus’ plsAsset/asset pairing (https://medium.com/@plutusdao.io/camelot-migration-guide-cead2d9ba58f)
Ability to offer additional rewards through custom Nitro pools
For Liquidity Providers and Users:
For a liquidity provider in any pool, they are awarded 60% of swap fees from that pool
LP tokens may be wrapped into “spNFTs”, which provide additional benefits (such as potential boosted rewards in GRAIL/xGRAIL, and the ability to utilize Camelot’s unique “plug-in” features)
Additional yield from staking generated xGRAIL
Nitro Pools
Nitro pools may be created by an external protocol to incentivize or reward a specific subset of liquidity providers. They allow users to deposit spNFTs (which can represent liquidity tokens or even other assets) into the pools for pre-defined rewards. The upside for the issuer is the customizability that Camelot’s Nitro pools offer, such as:
Issuers can specify required criteria – like a lock amount (number of LP tokens) or lock duration in order to receive emission rewards from the pool
The incentives they offer can be based on a custom emission schedule, with a start and ending time
They can white list specific addresses, allowing only them to deposit. This could enable different utilities such as loyalty rewards for long term LP’s, winners of a contest, targeted airdrops, etc.
In the future, single sided staking in the pools could be possible via wrapping the asset as a spNFT (possibly for regular NFT’s)
Partners of Camelot can also receive additional incentives (via GRAIL/xGRAIL emissions)
Official Nitro Pools are deployed by the Camelot team, community Nitro pools are openly deployed by anyone
spNFTs
spNFT’s act as a wrapping layer for LP tokens, enabling them to be staked (in Nitro Pools), transferred to another address, split, or merged with other LP positions
They can generate emissions in the form of GRAIL and xGRAIL, the LP pairings that receive emissions are specified from Camelot’s Master Contract (not every LP pair is eligible)
They offer users the ability to boost their potential yield in various ways, such as assigning lock durations for the liquidity and/or utilizing the xGRAIL Plug-in features (more detail below)
Camelot rewards are distributed in a 20/80 split, with only 20% being liquid GRAIL, 80% in escrowed xGRAIL
Other potential benefits (via plug-ins) could be developed for them in the future; or additional uses such as using as collateral to borrow against
This feature is a lot more customizable and sustainable compared to most DEXes that use SushiSwap’s MasterChef contract to emit token incentives. It offers the utility for protocols to align rewards with the liquidity providers that are loyal over the long term (sticky liquidity)
An example: A user wants to deposit into the GMX Nitro Pool (for bonus GMX/GRAIL emissions), and the requirement is a minimum lock of GMX-ETH liquidity for 1 month. The user would then pair the GMX and ETH Tokens into the yield farm, and stake them as a spNFT. They then could assign a lock duration of 1 month to the spNFT, and deposit that into the GMX Nitro pool for additional rewards.
Tokenomics
The token design of Camelot is very unique. Although they are an emissions-based DEX, most emissions are in the form of their escrowed token, xGRAIL. The team believes this aligns incentives between protocols, liquidity providers and Camelot. By issuing emissions mostly in an escrowed token (and paying a dividend from trading fees), Camelot hopes to discourage mercenary yield farmers. Additionally, they have built in several deflationary mechanisms to help protect the value for holders.
GRAIL – native token, liquid and tradable. 100K max supply (623.44 already burnt)
xGRAIL – escrowed governance token, not transferable and earned through staking GRAIL (1:1 ratio), or emissions. Main utility is a feature called “Plug-ins”, which allows xGRAIL to be allocated to special contracts (described below).
The current active Plug-ins are called Dividend and Yield booster.
Dividends: receive 22.5% of all trading fees on Camelot. Current APY of 17.63% paid in ETH-USDC LP tokens
Yield booster: allocating xGRAIL to this plug-in provides a bonus multiplier to the users spNFT position (this is in addition to the boost earned via locking liquidity for longer duration)
A Plug-in called ‘Gauges’ is listed as ‘coming soon’ in the documents
In the future Camelot will enable any protocol to create community based plug-ins
A de-allocation fee of 0.5% is charged when removing xGRAIL from any Plug-in. The fee (in GRAIL) is burnt.
Deflationary mechanism overview
Periodic buyback and burn of GRAIL
xGRAIL redemptions - when redeeming staked xGRAIL back to GRAIL, a minimum vesting duration of 60 days is required to receive the full allocation. If a user redeems xGRAIL to GRAIL at the shortest vest (14 days), they would receive 50% of their original staked allocation. The amount redeemed scales linearly to a full vest period of 60 days. Any GRAIL that is vested early is burnt.
For example: User staked 100 GRAIL to xGRAIL and after a week wants to redeem as quick as possible. After 14 days, they would be able to redeem 50 GRAIL. The other 50 GRAIL would be burnt.
There is also a 0.5% de-allocation fee when removing xGRAIL from a Plug-in (mentioned above)
Distribution and Vesting
Genesis Launch (30%):
15% Public Sale (allocated as 10% GRAIL, 5% xGRAIL)
10% to Protocol Owned Liquidity (7.5% used for initial liquidity, pre-minted in a multisig)
5% to the Genesis Nitro Pools distributed linearly over 6 months as xGRAIL (reward for early liquidity providers)
Remainder of Distribution (70%)
22.5% to Liquidity Mining (released over the next 3 years)
20% to the Team (vested linearly over 3 years)
10% to Partnerships (6-months cliff and 2 years vesting)
8% to Reserves
5% to Ecosystem
2.5% to the Development Fund (vested linearly over 3 years)
2% to Advisors (vested linearly over 3 years)
All emissions are made via a combination of GRAIL and xGRAIL, except the development fund and the reserves fund.
Revenue Breakdown
60% fees go to Liquidity Providers in LP tokens
22.5% of fees redistributed to xGRAIL holders in the dividend Plug-in
12.5% of fees dedicated to GRAIL buyback and burn
5% to the Core Contributors funds
*Note – the Core Contributor funds is used for operational expenses. Unused amounts are reallocated to Dividends or used for buyback and burn, at the discretion of the team.
Review of their Public Sale
Took place on Camelot launch pad between November 29 and December 5, 2022.
15% of supply - with 10% issued in GRAIL, 5% in xGRAIL
All purchases settle at the same price
Any unsold tokens are burnt
Goal: Circulating Market cap: $300K, $20 per grail, FDV of $2.0M
Results:
Raised $3,796,460.86
Final grail price = $254.21
Circulating Market cap: $5,719,727.37
FDV: $25,421,010.52
Commentary: This was impressive considering the month of November 2022 for the crypto markets. They raised 10x their target goal directly after the FTX collapse and in midst of a bear market.
Fundamentals
The fundamentals for Camelot all appear to be trending up significantly. TVL has tripled from approximately $10.0M to >$30.0M USD in a little over 5 weeks. Daily active users and swap volume has also increased over the past week, driving more fees and revenue to liquidity providers and xGRAIL stakers. Currently, 50% of circulating supply is staked in xGRAIL. The next major wave of redemptions from xGRAIL to GRAIL appears to be happening June to August 2023, with approximately 5500 GRAIL (20% of current total supply) set to be redeemed. Around 600 GRAIL has already been burnt through early redemptions and buybacks.
Conclusion
Camelot is a unique DEX on Arbitrum that has the potential to be the liquidity hub for native protocols. Arbitrum has seen rapid growth over the past year in development and TVL, and they have not incentivized this with a token. If this were to continue or if a token were issued, TVL could gain many more multiples which would benefit Camelot. Fundamentally all metrics have been progressing very well with new highs in TVL, volume, swaps, and daily active users. From a technical perspective, Camelot has already had a large price appreciation. It is valued similarly to other DEX projects on comparable blockchains. However, Camelot maintains upside as long as development and liquidity into Arbitrum continue rising.