So recently you may have heard a lot of excitement from Snowbank DAO talking about their turbines that have launched during the rebirth of the DAO on its roadmap to V2. You like me are probably wondering what a turbine actually is or is this just hypeium…
Since partnering with FRAX Finance, Snowbank DAO has been making some significant moves to improve their liquidity and turbines seems to be the first realisation on the projects journey to V2.
So what is a turbine. To understand the main mechanics of turbines you need to first understand minting (bonding).
Let me explain what minting represents in the DAOs ecosystem and how it is profitable to minters and the treasury. By minting a bond to the treasury, you are essentially purchasing your rebase token at a discounted price therefore receiving more for your money at the end of your vesting period.
Lets say you had $1000 USD and bought 4% Mint when 1$token was equal to $1000. You would purchase the mint for $960 and receive $1000 in $token once your vesting period was finished. The positive number discount is the precent you get discounted to mint tokens into the protocol.
This is one of the best features about rebase tokens, the fact that the protocol owns its own liquidity so their are no human-controlled liquidity providers needed to keep the project’s liquidity deep and stable.
A turbine in its simplest form is a specific minting contract where by it still mints tokens but the contract is focused on a given liquidity pair. What is unique about the turbine is the LP is not rented from third parties but directly purchased outright by the protocol.
The flexibility of a turbine is where this comes into its own compared to minting. Turbines are voted on by the DAO during governance voting periods this allows the DAO ($token holders) to propose/select which turbines will be available and also decide on the capacity of that turbine on top of a predefined capacity (which may arguably help or hinder its chances of being selected during a governance vote). Along with this partners are also able to add incentives onto the turbine such as FXS governance tokens or gOHM tokens rewarded to minters as part of the turbine process.
So the easiest way for me to see this is its a minting contract on steroids providing LP fees to the DAO on top of the LPs intrinsic value. The outlook should APY be low and stable is profitable if LP fees are set between 0.5–1% to reduce risk of impermanent loss. IMO this would be an extremely positive action and could result in significant increase to POL and cross-chain options for even greater POL.
