David Angliss, an analyst with Australia’s leading cryptocurrency investment firm, Apollo Capital, shares the fund’s weekly take on what’s happening in the fast-changing and volatile cryptocurrency space.

As decentralised finance takes off, attracting liquidity is vital to the success of any protocol.

It’s easy to understand why. A decentralised exchange for swapping tokens such as Uniswap, Sushi or Pancakeswap couldn’t operate without users offering their coins for customers to trade against in return for rewards.

And a lending and borrowing protocol such as Aave or Compound couldn’t offer loans if no one was making deposits, nor offer interest on deposits if no one was borrowing from its lending pools.

So right now these different DeFi protocols are in an arms race to attract capital, and it’s causing problems, says David Angliss.

Projects will offer incentives to gain liquidity, but then mercenary liquidity providers will flee for the next opportunity once those incentives end.

It’s a “vicious cycle,” he says.

“What that’s causing is, protocols are no longer spending all on their time actually building. They’re spending more time trying to encourage liquidity to come to these protocols.

“Yes, getting the capital is great, but it’s sort of counterintuitive, and a lot of projects are losing vision.”

There are a couple of projects working on this issue. Some readers might be familiar with the OlympusDAO and its (3,3) meme. Olympus offers a way for protocols to control their own liquidity, by buying liquidity tokens from users in exchange for discounted OHM tokens.

Olympus has been extremely successful in the past few months, and on Friday was listed as the No. 56 crypto on Coingecko.

Apollo is interested in a smaller, recently launched project called Tokemak, which allows projects to outsource their liquidity to a third party.

Tokemak works as a decentralised market maker, rewarding protocols with TOKE tokens by seeding their tokens into the Tokemak ecosystem.

Tokemak retains the trading fees those tokens generate, as well as the risk of impermanent loss.

From a protocol’s perspective, this means that rather than having to pay perpetual costs for attracting liquidity (in the form of inflationary rewards), protocols are rewarded with TOKE tokens.

“Our end goal is to be the vessel through which all liquidity flows – not just for DeFi protocols but for all future tokenised platforms, such as gaming or social tokens, and eventually, even cross-chain,” community manager end0xiii told Stockhead recently.

“Protocols spend an immense amount of time and money attempting to generate the necessary liquidity for their project to succeed. Tokemak will allow these tokenised projects to bypass that energy and effort by plugging into this liquidity engine….

“Our end goal is to be the vessel through which all liquidity flows – not just for DeFi protocols but for all future tokenised platforms, such as gaming or social tokens, and eventually, even cross-chain.”

The project has hit over $1 billion in total value locked, and it isn’t even fully launched yet.


The TOKE token has soared since its launch on October 8 at US$18. On Friday it was trading for $76.

“We want to buy,” Angliss told Stockhead recently. “We want to get exposure to Tokemak, because we see projects like this combating this pain point in DeFi, which is mercenary liquidity going from protocol to protocol.”

“Protocols that can help projects sustain liquidity are game-changers in DeFi right now. It’s what the market needs.”