Title: FLI Liquidity Mining #1
Author: Punia @puniaviision
Created: March 23rd, 2021
Start liquidity mining incentives for the ETH2x Flexible Leverage Index (ETH2x-FLI) Set for 30 days.
Create a new $INDEX liquidity mining program for the ETH2x Flexible Leverage Index Set with the following parameters:
- Asset pair will be ETH2x FLI:ETH to maintain a net 1.5x ETH long ratio for LPs.
- Programme runs for 30 days.
- Programme will use a new Smart Contract with the same functionality as the one currently used for DPI liquidity mining.
- Programme will have an issuance targeting certain pool parameters described below and calculated using the 20-day average price of $INDEX prior to launch.
The ETH2x FLI will be the first leverage token of its kind. It will allow retail traders to access leverage without having to worry about the overhead required in maintaining their position. Because it is a token that is meant to be traded and not held long term, transaction costs to buy the ETH2x FLI need to be minimized in order to keep the retail audience.
Currently, to mint an ETH2x FLI costs almost 4x as much as buying off of Uniswap. This will still be tenable to larger retail investors, but not accessible to the broader base. A highly liquid initial secondary market would help FLI achieve it’s product vision.
Secondary Market Parameters Consideration:
Assumption: People will want to buy an ETH leverage token using ETH.
|Gas Costs||1 hop: 130k||2 hop: 200k||350k|
|Distribution||Automatically integrated with wallets.||Automatically integrated with wallets.||No or few wallet integrations.|
|LP Net Exposure||1.5x ETH||1x ETH||1.3x ETH|
|LM Sustainability||Cheap in a bull market, unsustainable in a bear.||Easily sustainable. Paying people for longing ETH.||Easily Sustainable. Paying people for longing ETH.|
|Liquidity||Balanced||Balanced||2x Sell Side|
Given the above, and based on community feedback, we believe continuing to support the ETH2x-FLI:ETH pair on Uniswap is the correct choice. While a Balancer pool is interesting, implementing it would cause drastic technical overhead up and down the technology stack that is not worth the pay-off. Alongside the liquidity skew.
The Uniswap pool will calculate the issuance of $INDEX based on the trailing 20-day price of $INDEX prior to launch targeting the following parameters:
- A Uniswap pool of $10M
- 2% depth of $100k
- Target APY of 25%
At an $INDEX price of $20, this would equate to 10,416.67 INDEX, or about $208k/month.
An interesting thing to note is that the net exposure of the pool will be 1.5x ETH. This means that an LP can earn trading fees and LM reward fees for being leveraged long ETH! We should see this pool develop a deep organic liquidity base after the program helps attract capital.
A secondary reason is for the marketing and customer acquisition benefits of running a liquidity mining program. As we saw with DPI, we were able to keep supply of DPI up while we slowly reduced incentives. Similarly, with ETH2x FLI, the liquidity mining program will serve to expose the product to a large initial customer base, a majority of whom will continue to use the product even as rewards are reduced.
We intend to aim high and potentially overshoot for the first month while we learn and attract liquidity. Like the DPI, we will taper down after.
- Start liquidity mining incentives for the ETH2xFLI set according to the parameters above.
- Do not start liquidity mining incentives for the ETH2xFLI set according to the parameters above.
Copyright and related rights waived via CC0.