Title: DPI Liquidity Mining #7

Author: OverAnalyser @overanalyser George @george

Created: 2021-05-04

IIP-28 DPI liquidity Mining #6

**Simple Summary**

We propose reducing liquidity rewards for DPI:ETH Uniswap pool inline with IIP-28 mandate from 700 INDEX per day to 530 INDEX per day. The 30 day period from 9th May to 7th June will consume 15 950 INDEX and cost $876,150 at $55 per token.

**Mandate for days 31-60 within IIP-28**

- $55 M liquidity based on 7 day average to day 25 (01May21)
- Minimum 15 000 (500 INDEX per day)
- Maximum 30 000(1000 INDEX per day)

- 15 950 INDEX represents ~0.16% of total issuance.

**Data collected**

- 7 day average liquidity = $ 72.42M
- 20 day TWAP for INDEX = $37.81

**Calculation of new LM rewards:**

$72.42M/ $55M = 32% excess in LM pool.

LM rewards will be reduced by 32% (21 000->15 950) to target $55 M Liquidity in Days 31 -60.

**Specification**

30 day LM campaign for DPI:ETH Uniswap pair using the existing contract to start on shortly after the current contract ends with a total of 15 950 INDEX.

**Additional Information**

The below table and charts highlight what the potential slippage is for the average trade size. Slippage is the difference between the expected price of a trade and the executed amount. The trading sizes were gathered for a minimum of 16 weeks and bucketed into the different percentile groups. A trading range is calculated by deducting the 10th percentile from the 90/95th percentile. We can approximate what the slippage is vs the liquidity pool size.(Trade Size Range / Liquidity Pool)

**Analysis of the trade size shows the following:**

**Note: * Percentile calculation includes all trades (i.e. does not exclude arbitrage where slippage = profit)**

Liquidity seems to be in line with the trading range size.

The specified INDEX rewards rate of 530 INDEX over 30 days and the INDEX 20 day TWAP price of $37.81 is a 13.34% APY in mining rewards for a $55 M pool size.

In addition to the LM rewards, the LPâ€™s trading daily fees have averaged $9 745 over the 7 days 25th April to 01 May 2021 which is 6.42% on a $55M pool size.

**Extension beyond 30 days**

After 25 days of the continued liquidity mining, the Product and Treasury Working Groups would review the average value of liquidity in the staking contract over the previous 7 days and agree on the ongoing reward rates for the next 30 day period.

**Liquidity incentives methodology**

- 7 day Average Liquidity / Target Liquidity which determines whether we are over or under our target as %.
- If we are over or under our liquidity target we will reduce or increase the rewards proportionately.
- Update of the fees earned from the liquidity pool based on the last 7 days volume, this is also used as a metric when comparing to the future incentives.
- Additional info such as the slippage calculations will also be updated.

**Next stages**

This post is the formal recommendation of the rewards for days 31-60 as per IIP-28. Implementation is planned under that mandate. The community needs to take no action.