The DEEP Token's Role in DeepBook Governance

Today, DeepBook version 3 officially launched on Mainnet alongside the DEEP token, marking a major milestone in its evolution. With this upgrade, users and market makers now benefit from finely tuned incentives that sets the stage for greater decentralization through community-driven governance.

DeepBook’s version 3 reduces transaction costs and introduces dynamic fees, flash loans, and shared liquidity across pools. Along with new tools for interfacing with DeepBook, this update creates opportunities for more efficient and flexible DeFi actions.

The depth of DEEP

The DEEP token is integral to Sui’s DeFi ecosystem, as DeepBook acts as the backbone of liquidity for DeFi on Sui. The DEEP token itself fuels the flywheel needed to sustain and grow DeepBook with greater trading efficiency, liquidity, and governance. 

DEEP is used to pay trading and pool creation fees, with stakers earning governance rights and market makers receiving rebates for providing liquidity and facilitating trades. As DeFi on Sui grows, DEEP plays a crucial role in enhancing liquidity and improving trading efficiency for both makers and takers.

Staking DEEP offers a range of benefits for both traders and market makers. By committing DEEP to a specific pool, users can enjoy reduced taker fees that decrease based on their trading volume. Additionally, those providing liquidity and meeting the staking requirements of the same pool will be eligible for maker incentives. 

Staking DEEP also grants users the ability to participate in the governance of DeepBook pools. Participating in DeepBook governance is essential to ensuring that the protocol functions effectively and serves the best interests of DeepBook users and Sui’s DeFi ecosystem at large.

Governing DeepBook

By staking DEEP, users can propose changes to key parameters such as trading fees and staking requirements for DeepBook pools that they have staked to. Voting power is determined by the relative amount of DEEP staked to the specific pool, and successful proposals are implemented at the start of a new epoch. 

With this decentralized governance model, DEEP holders help ensure that DeepBook remains competitive while allowing for adjustments that benefit the community. The system’s voting structure is designed to give smaller token holders a meaningful voice, balancing power between large and small stakeholders.

Using DEEP

DEEP offers multiple use cases beyond governance. First, token stakers can earn rebates by providing liquidity during periods of low liquidity, ensuring tighter spreads and better trading execution for other users. Second, DEEP can be used to pay trading fees, with users receiving fee discounts the more they trade, incentivizing more participation. Together, these functions enhance liquidity and make trading on DeepBook more efficient.

Institutional DeFi users

With a substantial stake, institutional users can not only impact decisions through governance but also maximize efficiency by earning sizable rebates on their liquidity contributions. These users benefit from DeepBook’s low slippage and deep liquidity, making it an ideal platform for executing large-scale trades on Sui.

Individual users

Even with a modest amount of DEEP, individual traders enjoy fee discounts as they trade more frequently and also participate in governance. The voting mechanisms also ensure that smaller holders can have an appropriately sized voice in platform decisions compared to large holders. DeepBook’s unique voting mechanism levels the playing field by mapping staked DEEP to governance votes in a non-linear way, ensuring that smaller holders have a meaningful voice in platform decisions. Specifics on this can be found in the DEEP token whitepaper.

DeepBook and DEEP

The DEEP token is more than just a utility within DeepBook; it’s a powerful tool for governance while increasing efficiency and building deeper liquidity within Sui’s DeFi ecosystem as a whole.

From the large institution to the individual trader, DEEP provides incentives for all participants to participate in the ecosystem actively. As DeepBook continues to grow alongside Sui’s DeFi ecosystem, DEEP will remain integral to its success, empowering users and shaping the future of DeFi on Sui.

Note: This content is for general educational and informational purposes only and should not be construed or relied upon as an endorsement or recommendation to buy, sell, or hold any asset, investment or financial product and does not constitute financial, legal, or tax advice.