Stadium Finance: Game Theory and DeFi in an Interesting Concoction

Decentralized finance (DeFi) has undoubtedly been one of the hottest topics throughout the past couple of years, and it has grown to become a household concept of the cryptocurrency industry.

This is clearly supported by the numbers. Data from DeFi Lama reveals that there’s currently slightly less than $200 billion locked across various decentralized protocols, with Ethereum being firmly in the lead, followed by Fantom, Terra, and the Binance Smart Chain.

There are plenty of protocols offering a range of different features to their users who seem to be constantly hungry for more decentralized applications (dApps), as evident by the growing number of wallets interacting with the field.

With the aim of providing a new product but also mixing it with evident game theory elements, Stadium Finance pins two tokens against each other in a battle where the winner gets to keep the proceedings of the loser. A flat-out competition between two communities underpinned by strong meme culture.

What is Stadium Finance?

First things first, it’s worth noting that the field of DeFi, as innovative and full of potential it may be, has its dark side. Scams, pumps and dumps, hyped cash-grabs, and wishful thinking – it’s full of all of it.

Just recently, CryptoPotato reported a hack against a liquidity management protocol, subsequently leading to a 95% crash in the native token’s price.

And this is just one example – there are countless. Stadium.Finance attempts to change this by bringing a new approach where users are not pinned against the market but rather against… well, users on a different team.

The protocol’s whitepaper reads as follows:

“This idea was born after GameStop and AMC taught us the power of a unified community fighting for its place in the market. Even large whales can be brought crumbling down as long as everybody has something worth investing for.”

How Does it Work?

The protocol introduces two tokens inspired by some of the most popular memes in the cryptoverse – SAPE and SPEP – based on apes and pepes, respectively.

Before explaining how it works, it’s important to consider some of its mechanics. Stadium went live on November 1st, 2021, and had a public countdown of several weeks prior to its launch. Two quadrillion tokens were minted as part of its deployment – one quadrillion for each token (SAPE and SPEP).

5% of all SAPE tokens were gifted to Vitalik Buterin – Ethereum’s co-founder and 5% of all SPEP tokens were gifted to Changpeng Zhao – Binance’s founder. 45% of the remaining supply of both tokens was sent to be burned.

There’s a 5% fee on each transaction, regardless of the token. This is an important component of the protocol.

The way it works is Stadium Finance holds a battle between SAPE and SPEP holders once every 9,699 blocks on BSC are mined. The fees collected during this period are used to build up the token’s battle treasury which is then staked during the battle.

During the battle, the Stadium.Finance smart contract checks PancakeSwap’s liquidity pool to assess which token grew faster in value since the last battle – this is a component measured by the number of underlying tokens added to the liquidity pool. The losing token is then penalized by having its battle treasury sold on the DEX, where the money is used to buy the token of the winner’s token.

All in all, it seems like an interesting approach with elements of serious game theory. The team chose the Binance Smart Chain mainly because of its size and, at the same time, more affordable transaction fees and quicker processing times compared to Ethereum.