Coral Finance: Creating a New Paradigm for the Pre-Market System, Triggering a New Round of DeFi 2.0 Wealth Effect

Author: 0xDaBai

Web3 marketing is becoming a means for early-stage crypto projects to achieve launch, user acquisition, and engagement, characterized by direct interaction and value exchange between brands and users through blockchain technology. Token-based airdrops with reward characteristics are often effective and common execution methods in Web3 marketing. Executives expect to expand brand appeal to users through this strategy, which is commonly referred to as a token-driven growth pool. It typically achieves the goal of acquiring and activating potential customers effectively.

Starting from the airdrop itself, early-stage projects usually announce airdrop rules at a certain point in time and measure user contributions through snapshots and other methods, such as trading volume and interactions, among other indicators. Subsequently, after the token TGE, users can claim token airdrop incentives on specific interfaces, with representative projects including Uniswap, ENS, Aptos, Optimism, and Arbitrum One.

In November last year, Blur launched a new project called Blast, which measures user contributions to the ecosystem through points and uses these points as the basis for future airdrops or rights. This significantly boosted market sentiment, officially kicking off a wave of point-based Web3 marketing.

After that, different projects began to launch point systems in large numbers, with some representative examples including EigenLayer's Swell, Renzo, Puffer Finance, and Eigenpie; DeFi protocols like Hyperliquid (Arbitrum), Scallop (Sui), and Drift (Solana); Bitcoin ecosystem projects like B² Network, BounceBit, and Merlin; as well as Layer 2 projects like Blast Network and Scroll mentioned earlier.

Why is the "Point System" So Popular?

Focusing on the point system model itself, related projects typically list the points for each address and provide rankings. Points are usually only related to the amount of funds users deposit, such as the value users participate in staking pools in the LRT project, etc. However, how points are linked to token airdrops is still explained by the project parties, and there are significant differences among different projects.

In fact, compared to the initial method where users captured potential airdrops through "blind operations," the point system is evidently a more visualized incentive method for contribution behavior. Users can more clearly quantify their contributions based on ongoing trading, interactions, staking, and other behaviors, fostering a sense of competition. Points resemble a future voucher for airdrops or rights, allowing users to better anticipate potential earnings (especially since many projects have clearly stated that these points will later convert into valuable tokens), which enhances user engagement and loyalty.

Of course, the point system also has deeper considerations.

As the scale of the crypto industry continues to expand, it has increasingly drawn the attention of regulatory authorities, especially with the tightening of regulations by the SEC in recent years. Many tokens are at risk of being defined as potential securities (even many tokens that are distributed for free to users, such as UNI tokens, are still embroiled in securities allegations), facing the risk of lawsuits. From the perspective of crypto projects themselves, issuing tokens too early is detrimental to the long-term development of the ecosystem and poses legal risks, while keeping community users in suspense for too long can lead to the loss of loyal users. Launching a point system perfectly addresses the above dilemmas, indicating that the project may issue tokens in the future while waiting for more regulatory clarity. Based on the characteristics of the point incentive system, it is often referred to as "pre-market incentives."

Not a Perfect "Point System"

Of course, the point system has its unique advantages, but it is not perfect. In fact, point systems are typically similar to off-chain behavior recording systems, capturing users' on-chain behaviors and marking them off-chain. This means that the control and interpretation of points lie with the project parties. Therefore, from the perspective of points themselves, they often lack intrinsic value due to non-on-chain assetization and have a strong speculative nature.

Currently, the vast majority of metrics for acquiring points are usually related to the amount of funds, and some projects have seen a rapid increase in TVL due to the introduction of point systems, attracting a large number of big players. This gradually dilutes the proportion of points for long-tail users under these game rules, leading users to lose confidence and interest in participation. Moreover, point issuers typically provide users with a very vague expectation of tokens, and they do not guarantee that they will fulfill the promise of fairly rewarding users' points.

In this context, some DeFi projects are attempting to provide potential liquidity for "pre-market incentives" through derivatives. A well-traded points market can serve as an effective price reference, and combined with a clear point acquisition system from the project, it can estimate approximate yields. Additionally, users holding points can better exit from this market, which is also referred to as the "pre-market."

Previously, the most representative project in the market was Whales Market.

Whales Market is an OTC platform on Solana and one of the earliest platforms to support crypto point trading. It employs a method similar to options settlement for trading points, where point buyers and sellers must pay a certain margin to the platform during the transaction, and the delivery of airdrop tokens occurs when the airdrop is distributed. However, this model is not favorable for buyers. We see that buyers and sellers often establish agreed trades when points do not yet have the ability to be exchanged for airdrops, but points may depreciate in value over time. Buyers have only two choices: either lose their margin and let the trade fail or settle at expiration, putting buyers at an absolute disadvantage, while sellers are limited in their capital utilization due to long-term margin staking.

In addition to Whales Market, Pendle is also a DeFi platform narrating the pre-market. Pendle introduces a traditional financial interest rate swap model, splitting income-generating assets into PT (fixed income) + YT (floating income) parts, where PT can be understood as the principal asset stripped of income rights, and YT can be understood as further tokenizing the income of points and interest. Users can choose to stake some LST assets to earn YT assets in a leveraged manner, while also purchasing futures PT assets at a discount. As a point asset, YT will have a value of 0 at expiration, and users can exit at the current market price at any time while retaining all points earned up to that point. The YT asset representing point tokenization is always in a state of value depreciation, and the pre-market may generate a lot of bubbles due to its leverage effect.

In addition to Whales Market and Pendle, Aevo, Hyperliquid, and others are also establishing potential trading markets for pre-market incentives based on different perpetual futures schemes.

We see that the vast majority of pre-market schemes are attempting to help point holders exit better through derivatives, aiming to make them beneficiaries even before the market opens. However, from the perspectives of projects, investors (buyers), and various roles such as liquidity and long-term community user participation, these schemes do not seem to be the optimal solution.

Currently, the on-chain derivatives platform Coral Finance is addressing a series of issues faced by the pre-market through its unique L.t.U (Locked to Unlock) liquidity scheme. The L.t.U mechanism ensures that users can lock in the value and yield of points in advance through locking and accelerated unlocking, while also ensuring the controllability of secondary market point prices. Based on DEX, buyers and sellers can trade points freely without the need for margin. It can also bring benefits to projects, such as acquiring liquidity at a lower cost and enhancing project scalability while unifying the rights confirmation method and point distribution rules.

Coral Finance's Pre-Market Narrative

In fact, points, as the main form of pre-market incentives, essentially serve as off-chain markers that cannot be traded. However, most existing pre-market trading schemes typically turn points into potential future assets through perpetual futures, but they still cannot circulate and trade freely in a standardized token manner. Coral Finance's solution provides a new standard for pre-market trading.

In Coral Finance, anyone can create a point liquidity pool that supports holders of project protocol LST/LP Tokens for staking. After successfully staking, Coral will convert the points held by users into locked corTokens.

For unlocked corTokens, users can freely trade them on Coral's DEX, while users who do not participate in DeFi protocols can directly purchase corTokens through the DEX. When the corresponding project TGE occurs, Coral will tally and settle all corTokens (both unlocked and locked) held by users and distribute tokens according to project rules, meaning that the held corTokens will serve as the final basis for point redemption. This means that even if users do not participate in the Coral Finance DeFi market, they can still obtain the effects of pre-market incentives at a very low cost.

When users obtain locked corTokens, they have a basic unlocking speed. The unlocked corTokens can help users generate considerable income from Coral Finance, enjoying multiple yields, including pre-market incentives. If users want to accelerate the unlocking of corTokens, they need to engage in some trading activities to achieve a faster unlocking speed.

How to Accelerate corToken Unlocking?

In Coral Finance, users can add liquidity to corTokens and stake the corresponding LP Tokens.

Users can add liquidity for the corresponding corTokens in Coral's DEX and, after completing the liquidity addition, stake the LP assets in the corresponding pool to gain acceleration rights. Coral will increase the unlocking speed of corTokens for users based on an algorithm. At the same time, users will also earn yields from farming activities.

In addition, Coral Finance plans to further introduce a governance mechanism similar to veCRV in the future. Users can lock CORL tokens in Coral Finance to obtain veCORL tokens and use veCORL tokens to vote for different liquidity pools, influencing the distribution of liquidity rewards (projects with more votes will have their corresponding LP pools allocated higher farming incentives). The veCORL tokens in this process can also serve as one of the options for accelerating rights.

Advantages of Coral Finance

In fact, pre-market schemes based on perpetual futures require traders to have a certain understanding of derivative trading, which is not friendly for many novice traders. Meanwhile, early pre-market schemes typically assign potential trading redemption scenarios to points in a fully circulating manner, which not only diminishes the effectiveness of points but also makes it difficult for users to continuously participate in providing liquidity and other benefits for projects and related tokens. Additionally, P2P trading significantly reduces users' capital utilization.

We see that Coral Finance's pre-market incentive system is built around real assets, automatically converting points into tradable tokens. Each type of point corresponds to its own corToken, and through backend integration with project points, users can redeem tokenized points with one click.

Through the "base + acceleration" unlocking mechanism, Coral Finance is the only one based on a "non-fully circulating" point market, allowing users to redeem yields in advance while also accelerating the accumulation of yields by adding liquidity. The locking mechanism effectively maintains the value of points and reasonably avoids the issues faced by most pre-markets based on perpetual futures, namely that the closer the point value is to the token launch time, the more severe the depreciation effect, thus promoting the sustained effectiveness of points. Through unrestricted trading between buyers and sellers, all roles will collectively determine the price of the points, rather than the past situation where project parties and platforms held higher pricing power, achieving better pre-market incentive effects. At the same time, it also brings extended value beyond liquidity, such as staking, re-staking, and leasing, continuously providing benefits for tokens.

From the user's perspective, unlocking and trading points is not based on perpetual futures but rather through familiar methods based on DEX protocols and aggregated liquidity. In this process, there is no need for margin, and through additional rewards, including CORL tokens and flexible leasing options, users' income is significantly enhanced, continuously stimulating their enthusiasm for contributing liquidity.

From the audience perspective, participants in Coral Finance's pre-market scheme are not limited to point holders; both users and project parties are involved, and interactive users, investors, speculators, and traders can all find suitable positions. With the future introduction of the bribery mechanism, Coral Finance will not only promote healthy competitive cycles among projects but also become a catalyst for a new round of "pre-market" liquidity wars, continuously enhancing liquidity effects.

Coral Finance's Value Flywheel

Based on the locked unlocking mechanism (L.t.U) at the core of the pre-market trading system, Coral Finance is building a multi-party revenue value flywheel system.

From the user's perspective, Coral Finance itself is a "pre-market incentive" market that tokenizes points into corTokens and supports users in obtaining multiple additional yields through providing liquidity, leasing LPs, bribery voting, and various other methods, deepening the binding between users and projects, enhancing user engagement and stickiness, while continuously achieving better liquidity effects. At the same time, based on a series of yield methods such as Boost acceleration rights and leasing markets, it will drive the dual growth of liquidity and trading volume of corToken/LST assets, becoming the ignition point for accelerating the operation of Coral Finance's pre-market value flywheel system.

The growth of liquidity and trading volume of corToken/LST assets represents that more and more users can redeem income in advance. As the point assets in Coral Finance possess diverse utility scenarios and the continuous promotion of Boost yield incentives, the value of corTokens will continue to rise, ultimately stimulating market users to repeatedly participate in the protocol or increase their participation amounts, and eventually reflecting in the sustained growth of the protocol's TVL, continuously bringing funding scale benefits to the project itself. At the same time, it will further activate interactive users and attract a large number of new external users and funds.

The continuous expansion of funding scale and user base will significantly enhance the incentive effects of the pre-market, allowing projects to maintain heat and vitality, ultimately transferring value to the token market and continuously exceeding expectations, with the potential to maintain enthusiasm even after the token TGE.

Overall, the continuous increase in TVL, the expansion of the user base, and the overall positive trend brought by sustained heat will ultimately bring more market exposure, financing opportunities, and accelerated growth opportunities for projects.

Currently, Coral Finance has launched its first point project, Quantlytica's QTLX Point, which saw its price increase by 150% within 24 hours of launch, and its TVL exceeded $600,000 within a week of launch.

This directly verifies the effectiveness of Coral Finance's pre-market point scheme in terms of liquidity and capital capture, while also confirming the considerable yield benefits that investors can obtain based on this scheme. As Coral Finance launches more point projects, it will continue to bring wealth effects.

Development Potential of the Pre-Market

From the perspective of the DeFi market alone, the mainstream DeFi protocols adopting pre-market incentives currently have a significant market share in TVL, and many small and medium-sized projects are also using the same method to attract users and boost TVL. With the continuous achievements of ETFs and the implementation of various crypto policies, it is expected that the overall market capitalization and TVL of DeFi will continue to rise, attracting more users to participate in DeFi protocols. In addition to the DeFi sector, many potential tracks, including SocialFi and DePIN, are also expected to become advocates of the pre-market incentive model, which is likely to gradually become a conventional method.

For the pre-market, this sector itself is a niche track in the on-chain derivatives field, but it can connect with all projects building pre-market incentives and crypto point users, meaning it will be backed by a vast active user base and funding scale.

Whales Market, Pendle, Aevo, Hyperliquid, and others have laid the early tone for the pre-market, while Coral Finance is driving the development of the pre-market to new heights with its innovative solutions. With Coral Finance, the pre-market will be able to leverage liquidity models to achieve sustained pre-market incentive effects while allowing various roles, including project parties, users, investors, and speculators, to participate deeply and benefit mutually, constructing a continuously accelerating value flywheel. Coral Finance is pushing for innovation in the pre-market sector and is at the forefront, backed by a large-scale potential market.