Protocol Use Cases

Wreath Finance, with its distinct approach to decentralized bond issuance and automated liquidity provisioning, offers a versatile platform with a number of potential use cases beyond simple token sales. This document explores several of these applications, demonstrating how the protocol's core features—such as single-sided AMM liquidity creation, defined lock periods, and the issuance of Liquidity Tokens (LTs)—can be leveraged for various strategic objectives within the DeFi ecosystem. Each use case detailed below aims to provide a practical understanding of how Wreath can be applied.

1. Initial Token Launch with Committed Liquidity

A project preparing for its token launch can utilize Wreath Finance to not only distribute tokens but also to simultaneously establish foundational on-chain liquidity. By creating a Wreath bond, the project deposits its new tokens, which are then automatically used by the Bond.sol contract to form a single-sided liquidity pool on a designated Automated Market Maker (AMM) like Uniswap V3. Investors participate by contributing a specified raiseToken (such as ETH or USDC), with these funds going directly to the project creator. In return, investors receive Liquidity Tokens (LTs). These LTs represent a future claim on a share of the AMM liquidity position created by the bond. The lockPeriod intrinsic to the bond ensures that this initial liquidity remains active in the market, thereby fostering market depth and stability from the outset of the token's launch.

2. Protocol Owned Liquidity (POL) Enhancement

For established projects aiming to increase their Protocol Owned Liquidity, Wreath Finance offers a structured mechanism. The project can create a bond using its native tokens. Community members or other entities can then contribute a raiseToken (e.g., stablecoins), which are directly received by the project for its treasury or other operational needs. Participants in the bond receive LTs. Through this process, the project effectively acquires raiseToken assets while its own tokens are committed to a new, locked liquidity pool on an AMM. The LTs grant contributors a time-locked claim on a share of this newly formed LP, aligning the community's interest with the project's objective of enhancing its on-chain liquidity.

3. Token Distribution with Market Exposure (LP Share Vesting)

Wreath Finance can serve as an alternative to traditional time-based token vesting schedules for team members, advisors, or early private investors. Instead of directly distributing raw tokens over a set period, a project can allocate these tokens into a Wreath bond. The intended recipients then receive LTs corresponding to their allocation. Consequently, the assets they hold are shares of an AMM liquidity position. The value of these LP shares is tied to ongoing market dynamics, including the project token's price fluctuations, trading fees generated by the pool, and potential impermanent loss or gain (especially if the initially single-sided LP attracts trading and becomes two-sided). The bond's lockPeriod functions as the vesting or lock-up duration, creating a model where the value of distributed assets is more directly linked to the token's active market liquidity and overall performance.

4. Community-Driven Liquidity Bootstrapping

Projects can leverage Wreath Finance to encourage and facilitate community participation in bootstrapping or deepening their token's liquidity. The project initiates this by creating a Wreath bond with its own tokens. Community members then contribute a raiseToken, typically a stablecoin, and are issued LTs. This model fosters a collaborative approach to building robust on-chain liquidity. The project provides one side of the liquidity (its own tokens via the bond's single-sided LP mechanism), and the community effectively helps capitalize the other side as the LP interacts with market trades or if the project later pairs the raised funds. Community contributors, through their LTs, gain a direct stake in this locked liquidity, promoting a shared interest in the token's market stability and health.

5. Structured Token Offerings for Specific Project Milestones

Wreath Finance enables projects to conduct token offerings where the fundraising aspect is clearly linked to specific, transparently communicated objectives. When a project uses a Wreath bond for such an offering, the raiseToken contributed by investors is directly received by the project. These funds can be publicly earmarked for particular development milestones, significant marketing campaigns, or other strategic initiatives. This approach combines the goal of fundraising for defined purposes with the added benefit of committing the tokens being offered (which LT holders will eventually claim) to a locked liquidity pool on an AMM. This can offer greater transparency and build more confidence among participants compared to a straightforward treasury sale, as it simultaneously addresses the token's market liquidity for a predetermined lockPeriod.

6. Facilitating Early Access to Liquidity Provider (LP) Positions

Contributing to a Wreath bond provides participants with LTs, which inherently represent a claim on a share of a Uniswap V3 (or other supported AMM) liquidity position for the project's token. This LP is initially established as single-sided by the Bond.sol contract using the project's tokens. This mechanism offers a structured and potentially simplified pathway for users who wish to become early liquidity providers for a new or existing token. The Wreath protocol manages the complexities of the initial LP creation and the subsequent lock-up. By holding LTs, contributors gain exposure to the potential returns associated with liquidity provision, such as trading fees, while also being subject to market risks like impermanent loss/gain and token price volatility, particularly after the lockPeriod concludes and the LP shares become fully claimable.

7. Creating Secondary Markets & Capital Efficiency for Tokenized DeFi Positions

The Wreath Finance protocol can be utilized to interact with and create novel markets for existing tokenized positions from other DeFi protocols, such as yield-bearing tokens or Liquidity Provider (LP) shares.

Mechanism:

An entity (e.g., an individual, DAO, or treasury) holds tokenized assets from other DeFi protocols. These could include, but are not limited to:

• Yield-bearing tokens (e.g., Lido's stETH, Compound's cTokens, Aave's aTokens).

• LP tokens from other AMMs (e.g., Uniswap V2/V3 LP shares, Curve LP tokens).

• Tokens representing stakes in governance protocols or yield aggregators (e.g., Yearn yVault tokens).

This entity can use these "Underlying Position Tokens" (UPTs) as the projectToken when creating a Wreath bond. The Wreath protocol then wraps these UPTs and establishes a single-sided Uniswap V3 liquidity pool with them. Investors contribute a standard raiseToken (like USDC or ETH) directly to the bond creator (the holder of the UPTs). In exchange, investors receive Wreath Liquidity Tokens (LTs). These Wreath LTs represent a time-locked claim on a proportional share of the Uniswap V3 LP that contains the wrapped UPTs.

Outcomes & Applications:

• Enhanced Capital Efficiency: Holders of productive or yield-generating UPTs can raise immediate capital (the raiseToken) without needing to sell or unwind their underlying positions. This effectively allows them to leverage their existing DeFi investments.

• Secondary Market Facilitation: Wreath LTs can become tradable instruments representing a share in a locked Uniswap V3 LP of the UPTs. This can introduce liquidity and price discovery for positions that might otherwise be less liquid, more complex to manage directly, or subject to their own lock-ups (though the Wreath lockup is an additional layer).

• Fractionalization of Positions: Large or unique tokenized positions in other protocols can be effectively fractionalized through the issuance of Wreath LTs, making exposure to these positions more accessible to a broader range of participants.

• Structured Product Creation: Users or entities could strategically acquire specific UPTs, bond them via Wreath, and then offer the resulting Wreath LTs to the market. The perceived value of these LTs would be influenced by the underlying UPT's characteristics (e.g., yield, risk profile), the duration of the Wreath bond's lockPeriod, and the market dynamics of the UPT's Uniswap V3 pool.

• Unlocking Liquidity from Staked Assets: For assets that are staked or locked in other protocols but are still represented by a transferable token (UPT), Wreath can provide a way to gain liquidity against these staked positions before their native unlock period, with the Wreath lockPeriod being a known factor.

Key Considerations:

• Valuation Complexity: Determining a fair price for Wreath LTs derived from UPTs requires careful consideration of the UPT's intrinsic value, yield potential, underlying protocol risks, and the Wreath bond's specific terms (especially the lockPeriod).

• UPT Liquidity & Viability: The attractiveness of bonding UPTs is higher if the UPT itself has a degree of existing market recognition, liquidity, or a clear path to redemption or utility.

• Composability Risk: This use case inherently involves multiple protocols. The risk profile includes Wreath Finance's smart contracts plus the smart contracts and economic model of the protocol from which the UPT originates.

• Wrapped Token Behavior: The Wreath WrappedToken.sol is designed for standard ERC20 tokens. UPTs with highly non-standard mechanics (e.g., aggressive rebasing, transfer fees not compatible with Uniswap V3 LPing) might require careful evaluation for compatibility.

These use cases illustrate the flexibility of the Wreath Finance protocol beyond simple token sales. The core value lies in the linkage between token distribution/fundraising and the establishment of committed, time-locked on-chain liquidity.