Liquidity Incentive Alignment for Yield Assets & Crosschain Incentive

Liquidity incentive between an underlying base asset (MON, SOL, ETH) and its yield-bearing derivative (PT-MON, PT-SOL, PT-ETH) is often separately managed between different protocols - split between the lending protocol (Morpho, Aave, etc.) and the fixed rate protocol (Pendle, RateX etc.). Leveraged yield strategy based on yield-bearing derivatives requires liquidity of the underlying asset and is limited by the liquidity depth of the asset.

Similar to how Curve's gauge incentivizes stable pairs to deepen the liquidity experience of swapping between stablecoins in a singular incentive design, TownSquare implements an incentive design aimed at improving the liquidity borrowing experience between the PT and its correlated asset.

TownSquare liquidity incentive design has the following characteristics in the overarching goal of being the liquidity hub for the yield asset and its correlated PT:

• Enhanced borrowing experience for leveraged yield strategy

The liquidity of the underlying yield asset and the derivative PT is incentivized in a paired fashion. Depositors of the underlying asset in the passive lending pool and the PT depositers of the leveraged yield vault earn incentivized APYs simultaneously (e.g. MON passive vault depositors & PT-aprMON passive vault depositers).

• Crosschain emission incentive for all assets powered by crosschain messaging

The emission incentive for depositors supports passive yield vaults and PT vaults on all chains - powered by a Monad-native and cross-chain-compatible model via crosschain messaging. This allows maximum compatibility with yield assets deployed on most blockchains.

• Flexible liquidity allocations for optimizing passive yield

Lending vault liquidity can be custom allocated to various yield sources to optimize passive yield for depositors, including LST-PT LPs to enhance liquidity for leveraged yield strategy and 3rd party markets such as Morpho and Curvance etc.