DPI Liquidity Mining - June 2021

Governance Proposal
1

Title: DPI Liquidity Mining - June 2021

Author: OverAnalyser @overanalyser Mel @mel.eth

Created: June 7, 2021

IIP-28: IIP-28 DPI liquidity Mining #6
Recent LM proposal: DPI Liquidity Mining#7

Simple Summary
Extend INDEX liquidity mining incentives for the DeFi Pulse Index (DPI) Set for 30 days with an issuance of 567 INDEX/day (approx. $17,500/day; 30-day MA), a 37 INDEX/day increase from the previous 30-day period, or approximately 7%.

Data Collected
7-day Average Liquidity (Uniswap V2: DPI-ETH Pair): $51,432,912
+2% Depth (As of June 4, 2021, at DPI price of $380.26): $521,855
-2% Depth (As of June 4, 2021, at DPI price of $380.26): $520,287

Calculations:
Percentage of target liquidity achieved (7-day trailing): $51.43MM/$55MM = 93.51%
Further calculations here: DPI Liquidity Mining - June '21 - Google Sheets

Specification:
Extend the current LM campaign for DPI-ETH Uniswap pair for 30-days using the existing contract (as outlined in IIP-28) for an additional 17,010 INDEX (increased from 15,950 for the May 2021 LM Update No. 7 linked above). No action would be necessary for existing liquidity providers.

Motivation:
Despite broader market price volatility in May 2021 (DPI Specifically: High: $635.50 Low: $248.48) 7-day trailing liquidity on Uniswap is currently within 10% of the target of $55MM. Liquidity dropped to a minimum of $38,710,717 on May 23, 2021 (70.38% of $55MM target) and reached a maximum of $98,201,488 (178.55% of $55MM target) on May 14, 2021.

This proposal is in keeping with the mandate of IIP-28 and would establish the LM incentive for the third and final 30-day period of the 90 days covered by that IIP.

Factors considered:

  1. The result of the adjusted LM incentive has been calculated using the targeted Uniswap v2 Liquidity for the ETH-DPI pair and falls within the 300-1,000 INDEX/day range as established by IIP-28.
  2. DPI is currently the market leader and sustained liquidity is a core driver for broad spectrum adoption.
  3. Maintaining continuity of incentives will likely retain current LPs.
  4. Uniswap v2 is the dominant market for DPI with a +/-2% depth of ~$520k.

Limiting factors:

  1. While there have been discussions regarding the broader implications of LM ( Liquidity Mining Strategy ), this proposal is limited to the mandate of IIP-28 and would be the third and final 30-day extension of incentives under that IIP.

Data Sources:
Coingecko
Uniswap

Next Steps:
This post is the formal recommendation of the rewards for days 61-90 as per IIP-24. Implementation is currently planned under the existing mandate; no action is required by the community.

2 Likes
2

The range around the target liquidity is interesting - it’s measured in $ but the pool is DPI/ETH. I get that this is most practical from an exchange point of view but I wonder how long until traders and analysts will continue to use $ and not just ETH to gauge depth, or, if $ investments are the point, if a DPI/USDstable pool will come to the fore?

Completely different note, as @overanalyser has mentioned somewhere, whales may migrate to Uniswap v3 for better yields than v2 and LM combined. This would naturally signal an end for LM. What communication and signaling would be appropriate, and are there plans other than to just taper off, such as L2 LMing that might help form a powerful narrative?

3 Likes
3

I / we have always discussed liquidity in USD terms, and I suspect that the largest influence on DPI liquidity value in the last month has been the drop in ETH and DPI price (Although @Matthew_Graham has noted some LP token redemptions Discord )

Looking forward I see the liquidity mining strategy comprising 3 pillars:

  1. L1 Pool size required for trades without undue price slippage
  2. Liquidity to maintain market dominace in a sector.
  3. Liquidity to promote adoption of L2’s etc.

Until now we have used Uni v2 to address #1 and #2.

With the advent of uni v3 and more side chains / L2’s there are many more options to work with.

PWG have a work team looking at Uni v3, and how it impacts the coop’s product/liquidity mining.

Note
There is already a Uni v3 pool for DPI, and I’ve started doing some comparisons over 14 days:

image

@$400 DPI, on v2 we are seeing ~10 trades a day over $100,000 which has a 0.68% price impact.

[V3 has 0.8 or 2% price impact depending if you are buying or selling…]

At the moment, I’m hoping that we can have a general discussion on LM / uni v3 / trade size / growth before the end of June and have a new strategy in place before the end of this final 30 period of LP under this mandate.

PLease see the discussion here:

3 Likes