Tokenlon is a decentralized exchange (DEX) and payment settlement protocol powered by 0x Protocol. Tokenlon was incubated by the imToken team back in April 2018.^[1][2]

Overview

Tokenlon was first launched in 2018, at that time, it offered two native decentralized trading options within the imToken wallet. On July 31, 2019, imToken's built-in decentralized exchange (DEX) Tokenlon was upgraded to an independent decentralized exchange (DEX). Different from the previous versions, in which imToken natively integrated with the Kyber Network (KNC), Tokenlon is currently a new version of DEX based on 0x Protocol. ^[3][4]

Tokenlon is neither an Automated Market Maker (AMM) nor an order book exchange. Tokenlon uses an exchange methodology called a request for quotation (RFQ). Thanks to the RFQ methodology, trading on Tokenlon looks like trading with an automated over-the-counter (OTC) desk. Like with a traditional OTC desk, the user first asks for a quotation to - for example - sell 100 ETH for USDC. The market maker, on the other side, then quotes (cryptographically signed) - for example - 46,116.69849 USDC. The user can then trade that exact price.^[5]

Roadmap

• 2020 - Genesis Mining : establish a reward system to motivate traders, referrers, and market makers among ecosystem participants and reward LON to early Tokenlon contributors and complete 30 million genesis LON distribution to the community.
• 2021 - Tokenomics : complete the release of Tokenlon 5.0. Start trading, referral, market making, and other continuous community incentive programs, launch liquidity pool incentives, introduce buyback, staking and other mechanisms. Improve the LON economic model, and make LON the main driving force to promote the development of the Tokenlon network.
• 2021, 2022 - Community Governance Bootstrap : based on the current off-chain pre-governance, introduce a LON-based governance module, start minimal governance, and gradually open up the governance of various economic parameters and mechanisms. Decentralize the decision-making process, and finally have development of Tokenlon all led by community proposals, forming a decentralized autonomous organization.
• 2022 - Open Network : through the establishment of a P2P relay network, allow developers other than the core team to become Tokenlon relayers, making Tokenlon a liquidity network supported by many relayers. At the same time, a permissionless strategy platform will be established for liquidity providers to freely design and deploy trading strategies based on protocol standards and access the Tokenlon network.
• 2023 - Cross-chain Channel: to start building the cross-chain channels to support the atomic settlement of cross-chain transactions based on the developed cross-chain solutions in the space. Leveraging the cross-chain liquidity network built by Tokenlon to launch open payment and settlement services and inject decentralized liquidity into more real-life use cases such as payment.^[6]

Tokenlon 5.0

In December 2020, the Tokenlon team released the upgraded version of its DEX, Tokenlon 5.0. The 5.0 update brings benefits to those holding the ^[7]Tokenlon token (LON) via trading fee discounts, trade mining rewards, staking, and buybacks. Lucas Huang, Head of Growth at Tokenlon, said:

“Tokenlon has repeatedly hit every goal we’ve set for it over recent years, however, to really step up and compete at an even higher level, the upgrades included in the 5.0 version are necessary. Through the inclusion and distribution of the LON token, we hope to attract and incentivize even more users to the platform in order to build Tokenlon into a self-sufficient, distributed crypto exchange that offers the best value possible.”

Additionally, the 5.0 update will see additional tokens available to trade on Tokenlon via Uniswap and Curve, with more exchanges to be added, as opposed to the 26 tokens available for trading on the V4 version.^[8]

LON Token

LON is a utility token issued by Tokenlon, used to align all parties involved in the ecosystem and incentivize participation and expansion of the ecosystem.

LON tokens have the following two main use cases:

1. Fee discount: Tokenlon charges a standard 0.30% fee for most transactions. By holding LON, users can get corresponding fee discounts based on the number of tokens held.
2. Governance: LON gives the community the right to participate in the governance of Tokenlon. LON holders can improve Tokenlon by initiating Tokenlon Improvement Proposal (TIP) proposals and voting, such as determining the use of the treasury, fee parameters, buyback parameters, supporting assets, product features, etc.^[9]

LON Distribution

The total amount of LON is capped at 200,000,000, of which 130,000,000 LON are allocated to the community through the LON Network Incentive Plan (LIP). 49,680,000 LON is allocated to the core team, 10,320,000 LON is allocated to stakeholders, and the remaining 10,000,000 is allocated to the development reserve.

To encourage community participation, LIP completed the distribution of 130,000,000 LON in two phases. The 70,000,000 LON that belongs to the team, stakeholders and the development reserve will be unlocked and released with linear vesting for two years.

LON Mining

The LIP distribution plan was implemented in multiple stages, and genesis mining was finished from September 26, 2020-December 20, 2020. Genesis mining was divided into two stages. The first stage started on September 26 and was divided into five weeks. Takers and referrers were issued 5 million LON as the mining reward. The second phase started on October 31, issuing 10 million LON as a mining reward to takers, referrals, and market makers.

In order to encourage the community to provide liquidity for LON, Tokenlon started a one-year liquidity incentive plan. A total of 10,000,000 LON are to be used for liquidity pool incentives. A total of 1,500,000 LON will be issued in the first phase of liquidity mining, from December 24, 2020, to January 21, 2021, for 28 days. During this period, a user can obtain LP tokens by joining Uniswap's LON/ETH liquidity pool, and stake LP tokens to Tokenlon to participate in LON liquidity mining. The LON obtained from mining can be redeemed in real-time.^[10]

Governance

According to the Tokenlon whitepaper released in December 2020, Tokenlon governance will be gradually opened up through three stages, gradually handing over decision-making power to the community. The core team is expected to start the governance contract development in the third quarter of 2021, and the specific launch date and implementation plan will be announced to the community in the future. Before the governance contract goes live, the community will be able to participate in early governance through Snapshot (an off-chain gasless multi-governance client with easy to verify and hard to contest results) , conduct off-chain voting, and participate in forming proposals led by the core team.^[11]