Introduction

Building durable liquidity and aligned incentives for Monad.

Overview

Monswap is a ve(3,3) decentralized exchange built natively on the Monad blockchain. “VE” refers to vote‑escrowed tokenomics, first popularized by Curve Finance, where users lock tokens to gain governance power and economic benefits. The “(3,3)” concept, originating from OlympusDAO and inspired by Nash equilibrium, models cooperative behavior: when participants act in the protocol’s best interest (e.g., locking, voting, providing liquidity), total value increases for everyone.

The ve(3,3) design, introduced by Andre Cronje (creator of Yearn Finance), aligns incentives among liquidity providers, traders, and voters. By coupling emissions with governance and long‑term commitment, the system aims to sustain deep liquidity, competitive pricing, and durable rewards.

Deep liquidity and aligned incentives are the foundation of a healthy DEX. ve(3,3) is designed to reward those who commit capital and governance attention over time.

Governance controls

Monswap’s ve‑governance focuses on two critical levers:

• Direction of emissions: decide which liquidity pools receive incentives.
• Total emissions level: increase or decrease protocol‑wide emissions on an epoch basis.

Game theory and incentives

Pool selection and APY

Token holders direct emissions toward specific pools, boosting their APY. This can support new tokens, emerging DeFi projects, or underserved pairs on Monad by attracting liquidity where it’s most useful.

Dynamic emissions policy

Initial discussions favor aligning “tail emissions” with Monad’s growth over time. This setting is adjustable each epoch—up, down, or unchanged—acknowledging market cycles and enabling prudent incentive management during expansions or contractions.

Cooperative equilibrium (3,3)

When participants coordinate—locking, voting, and concentrating incentives—liquidity deepens, slippage falls, and rewards become more sustainable. The protocol evolves toward a shared objective that benefits all stakeholders.

Baseline scenario (0,0)

In the least cooperative case, the system functions like a standard AMM (e.g., Uniswap) with routine swap fees but without ve(3,3)’s incentive alignment and governance‑driven emissions.

Why ve(3,3) on Monad?

• Capital efficiency: emissions flow to the most useful pools, improving depth where demand is highest.
• Long‑term alignment: lockers gain governance power and rewards for sustained commitment.
• Composability: governance‑driven incentives guide ecosystem liquidity where it creates the most value.

TL; DR

Monswap brings vote‑escrowed, game‑theoretic incentives to Monad. By coordinating emissions and governance, the protocol seeks to cultivate deep, resilient liquidity and a healthier trading environment over the long run.