Everything you need to know about Saga's Liquidity Integration Layer (LIL);

TLDR

- No more Gas Fees
- Liquidity-Centric Economic Model
- Massive potential Protocol Revenue
- Maximizing experimentation, project success & shared upside

What's the issue with current blockchains?

Liquidity fragmentation and a lack of composability are major issues plaguing blockchain ecosystems today.

Saga's Liquidity Integration Layer (LIL) introduces cross-chain composability to the Saga ecosystem, solving these widespread problems.

LIL gives the Saga protocol control over both block production and the ecosystems liquidity rails.

This unique combination enables a powerful liquidity-centric economic model on Saga, providing projects building on SAGA (chainlets) with liquidity and endowing them with composability.

What is a Liquidity-Centric Economic Model?

In a nutshell:

Saga's generates protocol revenue by taking a cut of all liquidity and value flowing through the LIL.

This also means, No MORE GAS FEES for SAGA users!

Instead of charging transaction fees from users, Saga takes a small cut of all economic activity generated by all applications on the network.

Below you can find examples of typical user flows on the network:

Value Accrual for SAGA?

The potential protocol revenue using a liquidity-centric economic model vs. a gas based toll economy is much higher for Saga.

IT allows the protocol to accrue value exclusively from the liquidity layer (LIL) instead of infrastructure cost and gas fees.

Downside of a Gas-Centric Economy

Most chains utilize a gas-centric token system. In order to interact with such chains, users must first acquire the native gas token to pay the validators to include their transaction on the chain.

This leads to bad UX, stifles growth and adoption.

Maximizing Experimentation with Zero-Cost Infrastructure

The goal with Saga's new token (liquidity) economic model is to attract as much experimentation as possible, by making infra costs super cheap or close to free.

On the backend, devs directly pay validators for spinning up and running chainlets. (Chainlet fees are designed to be commoditized)

On the front end, Saga does not charge any gas fees to the end user.

All transaction fees on Saga can be denominated in any token and are 100% returned to developers.

This model allows developers to offer a completely costless blockchain experience to their users utilizing recycled gas tokens.

Read more on Recycled Gas Tokens:

Maximizing Project Success

From a pool of wild and experimental applications, only a handful of projects will hit product market fit and morph into a revenue-generating application.

Saga's economic model is designed to convert as many experiments as possible into successful projects.

Protocol Revenue derived from LIL is used to help bootstrap new dApps and support them through all stages of their project lifecycle.

Saga will also engage in Protocol Owned Liquidity (POL) activities and help with user acquisition via their Power Level Over 9000 airdrop campaign. This helps games with bootstrapping liquidity and finding an initial base of users and games.

Maximizing Shared Upside

The final phase of Saga's economic model is where Protocol Revenue comes into play.

Rather than accruing value by charging gas fees, Saga optimizes for application & ecosystem success, before it takes a share in the upside of each applications success.

Shared upside in successful projects is orders of magnitude more valuable than taking a small fee from many unsuccessful projects.

As mentioned above, for the first few years (Saga's growth phase) protocol revenue is fully reinvested in the Saga ecosystem to maximize project success and experimentation.

This creates a positive flywheel mechanism where successful breakout applications finance and encourage new projects to build, experiment, and launch on Saga, further reinforcing this virtuous cycle.

Following the design principles of Appel's App Store

1) Lower the barriers to entry for developers to attract a massive developer base. Application developer have access to the full iPhone ecosystem without basically paying anything. This fosters experimentation and innovation.

2) Apple provides all developers with tools to build the best applications, even without monetization potential.

3) As an application hits product market fit, garnered a large user base and is ready for monetization, Apple takes a share in the upside of the project by taking a cut of every dollar generated on the Apple App Store.

There is a natural network effect that leads to better apps, competition and innovation, which brings in more revenue for Apple in the long-run.

Saga's Liquidity Integration Layer (LIL) is aiming at creating the very same network effects as the Apple App Store does, introducing a battle-tested, successful and highly profitable economic system of Web2 to Web3.

Thanks for reading folks, we hope you've found this article helpful.

Disclaimer

This article is intended to educate readers about certain topics and should not be considered financial advice in any way.