IIP-11 DPI Liquidity Mining #2

Proposals
#1

iip: 11
title: DPI Liquidity Mining #2
status: Accepted
author: Dylan Tran (@dylan), Abhishek Punia (@puniaviision)
created: 2020-11-30

Simple Summary

Extend INDEX liquidity mining incentives for the DeFi Pulse Index (DPI) Set for 1 month.

Abstract

Create a new INDEX liquidity mining program for the DeFi Pulse Index Set with the following parameters:

  • Program runs for 30 days (from ~12PM PDT, December 7th 2020 until ~12PM PDT January 7th 2021).
  • Liquidity mining releases INDEX at a target APY rate of 30% for a target pool size of 30M (i.e. $15M ETH, $15M DPI).
  • Using the 20-day rolling average price of INDEX at $6.47, a total of 115920 INDEX tokens will be distributed over 30 days.
  • 115920 INDEX tokens represents 1.15% of total INDEX supply.

Motivation

The DeFi Pulse Index currently has fairly high liquidity on the Uniswap ETH - DPI pool. This is in part due to the liquidity mining incentive program. High Uniswap liquidity allows users and third party integrators to confidently enter and exit DPI positions.

The current liquidity mining incentive program ends on December 6th. This proposal seeks to extend liquidity mining incentives with a new liquidity mining program to continue growing distribution and adoption of the DPI.

FOR

  • Extend liquidity mining incentives for the DPI set according to the parameters above.

AGAINST

  • Do not extend liquidity mining incentives for the DPI set according to the parameters above.

Specification

Overview

The deployed smart contract being used for the current liquidity mining program can not be re-used for the proposed liquidity mining extension. To benefit from the new liquidity mining program, users will be required to migrate their Uniswap ETH DPI LP tokens to a newly deployed contract.

The proposed smart contract for distributing liquidity mining rewards functions exactly the same way as the current liquidity mining smart contract:

  1. Users deposit ETH and DPI into the Uniswap ETH - DPI pool and receive Uniswap ETH DPI LP tokens.
  2. Users deposit their Uniswap ETH DPI LP tokens into the proposed Index Coop liquidity mining contract.
  3. Users receive INDEX tokens in proportion to the quantity of ETH DPI LP tokens deposited.

The newly deployed contract will be identical to the original liquidity mining contract except for the INDEX distribution quantity (115920) and the program duration (Dec 7th - Jan 7th).

Copyright

Copyright and related rights waived via CC0.

IIP-11 DPI Liquidity Mining #2
  • FOR - Extend liquidity mining incentives for the DPI set according to the parameters above
  • AGAINST - Do not extend liquidity mining incentives for the DPI set according to the parameters above.

0 voters

2 Likes
INDEX Token Demand
We should stop talking about Uniswap Liquidity
Liquidity mining strategy - starter for 10
#2

It will cost $750k a month just to keep $30m in liquidity on Uniswap. DODOex https://dodoex.io/ is a much better alternative than Uniswap.

  1. DODOex will only need $3m in liquidity to run in the same depth as the $30m pool. Ultra LP efficiency.

  2. True single asset pool entry and exit.

  3. DODO runs on Chainlink.

  4. Near perfect slippage, DODO runs in the top 3 exchanges on 1inch for blue-chip Defi tokens.

  5. DODO will also offer an option to customize the market maker algorithm to subsidize liquidity on the backend or run a frontend liquidity incentive.

1 Like
#4

Dodo just doesn’t have wide adoption. By listing on Uniswap, we automatically become available on Pillar, Argent, Dharma, etc. That helps with marketing as well as accessibility. Also Uniswap is just the dominant place where people trade and discover assets so it doesn’t make sense to move.

#5

Seems worth it to try in parallel for a while if it could have 10x more efficient liquidity.

DODO isn’t radically harder to use than UNI for anyone not using those apps, if someone wants to buy DPI on a dex, they’ll buy DPI on a DEX.

#6

I don’t think it’s really about liquidity, it’s marketing mainly.

1 Like
#7

I think that this would be useful for just another 4 weeks.

Do we have any statistics on how many wallets there are holding DPI + how many wallets are currently farming? It would be important to see what they look like now, compared to what they are in ~4 weeks when the next liquidity mining program will finish- does it attract new community members? Is it just the same wallets as it is now? How many of them are just farming and dumping vs. farming holding? And do we think that this use of $ is worth it, based off of those numbers (CC: @DarkForestCapital)

It’s also important to realize that doing the liquidity mining over a long period of time is really a terrible use of $… It’s incredibly expensive to support liquidity mining, so a focus on organic deployment of liquidity into the pools is important (not just monetized incentives). Are there any collaborations that can be done with the MEME community where people could stake their INDEX to farm and mint NFTs? We need to be able to try to attract a larger audience ;).

There is 1 key step to get DPI more effective as an easy-to-use investment asset for people- because right now it’s really just degen/crypto minded people on Uniswap. Doing so, would massively increase the AUM for the coop.

  1. Direct ramps into DPI from fiat. Whether this be through a CEX (not my preferred option), or through noncustodial API solutions (e.g. MoonPay, Wyre, Ramp, etc.). This will enable investors to easily be able to buy the asset, not just through Uniswap, but on wallets too directly through fiat. We might be able to promote this through https://transak.com/ which allows you to buy ETH, and they route it through Uniswap to buy specific tokens. Though, I don’t know if they support DPI or not. This could be a widget that we place on the Indexcoop website, or defipulse website for people to buy directly from fiat.

Is there an incentive we can look to give to one of these fiat gateway providers to support DPI?

2 Likes
#8

Also another note- I think it would be a waste of $ to do liquidity mining solely on DODO… very small audience. It could possibly be worthwhile to do a small liquidity mining promotion there on top of this, just to promote to the greater Asian audience, which could definitely be worthwhile. Most of the DODO users are based out of Asia if I’m not wrong, while Uniswap tends to be more American/European.

Maybe not something we aim to do now, but can think about later on

2 Likes
#9

I don’t really understand this.

The customer journey will start with the intent to buy a specific token, not landing on Uni, right?

#10

Yes. But if you go to many people and say, oh if you want to buy an index of the DeFi tokens here’s how you do it.

  1. Go to Coinbase.
  2. Buy ETH (along with the steps to buy using fiat).
  3. Download wallet that supports ERC20s.
  4. Send ETH to wallet.
  5. Make a trade on Uniswap.

Instead, this would require people to:

  1. Download app
  2. Buy DPI with fiat.

That UX is 1000x more effective. Why do you think it was so powerful when Aave was able to get an MSB in Europe? That allows direct fiat gateways into a-tokens, and not having to buy the underlying asset, swap, or deposit into the protocol to get an a-token. It’s the goal of making something like this appealing to more people, not just defi degens or uniswap traders.

2 Likes
#11

Sorry, meant to say that the objections to DODO don’t make sense to me if the ideal is to have efficient DPI liquidity.

I see the a lot of people saying UNI is valuable for the marketing angle, but I think that’s kind of a backwards look at how people purchase tokens.

I definitely think we should have an on ramp and way to purchase on index/dpi site.

#12

Well if we can get people to purchase INDEX, by all means I’m for it, but it doesn’t seem like the intent from the Set team is to focus on “INDEX purchases”, but moreso creating sustainable demand for DPI, and that creates indirect demand for INDEX.

There’s a lot of legal ramifications around what they can and can’t do, but if they can offer direct ramps into INDEX, then that’s great. I’m all for it. The liquidity is awful right now for INDEX, so that won’t likely occur anytime soon, but we would be able to do that for DPI most likely.

2 Likes
#13

worse than this lightness generated by produdizir index only benefits those who have a lot of resources for the stake or farm and in addition the community treasure was better to be distributed to those who are on the network providing lightness in dpi, in this objective community is form whales for those who already have

#14

I’m talking about buying DPI on indexcoop site, not buying INDEX

#15

We’re actively working on getting DPI on exchanges with fiat onramps to make it easier to buy

4 Likes
#16

Hey ansteadm you can take a look on Dune for up-to-date stats, currently 4170 DPI holders total. Market cap of DPI is around $29m and of which $23m is in the Uni pool so 80% of liquidity is being used to farm $INDEX. We will be watching to see what happens now the rewards are changing, my guess is that @richard will be keeping track of the numbers in detail.

Definitely the community agrees we’ve been overpaying for liquidity hence the proposal to reduce. I don’t see the numbers in the OP but I think Punia mentioned the largest trades being around $50k on average so we don’t need as much liquidity to facilitate that level of trade slippage free. As the next mining period is 4 weeks long we can study the outcome and adjust after, I think an 80% drop in rewards is significant enough to see what happens and personally prefer to adjust based on data and the slippage target going forward.

6 Likes
#17

Cool, that summarizes a lot of this up well. Appreciate the feedback!

1 Like
#18

It looks like for this month’s liquidity mining program we will all have to restake with a new contract. In order to prevent us from having to do this again, we might want to consider making the new staking contract be renewable with new parameters (using a function that only the community multisig can control). This would allow us to make changes to the LP program in the future without requiring everyone to execute two transactions to unstake and restake with the new contract.

5 Likes
#19

Good idea. We’ll definitely be thinking of this upgrade going forward

2 Likes
#20

Does the current LP mining staking contract allow for extensions / addition of more INDEX?