Looking at the UniSwap pool, there is a decent number of $20K trades going through incurring around the 2% slippage. This is probably around the trade size where it becomes more appealing to break the trade into multiple smaller trades. Perhaps we should cater for larger trades and then see if larger trades start occurring.
Reading the Liquidity Mining framework, what I think we should do is really target our end user experience during the launch phase and then work backwards. For me that means picking a trade size and slippage level we want to achieve post liquidity mining. To kick things off, lets assume $40K with 1% slippage. And we expect the liquidity to taper off upon ending LM incentives, so we can bump up $40K to $50K, a 25% buffer of sorts.
A $10M pool, $49K trade is about 1.01% slippage on wBTC-USDC via UniSwap (so high divergence loss pair) and well known tokens. This pool does around $1.86M volume per day with a APR of 21.4%. Which is about double the best 3 of 6 days volume of FLIās first 6 trading days and half FLIās APR. With 6 days data, I am not sure how much value we can place upon these APR numbers, it might be APR drifts to reflect the pool size rather than the pool size grows to reduce APR - we donāt know.
After LM finish, we want to achieve $40K trade with <1% slippage. We overshoot, so say $50K with <1% slippage, which gives us a target around $10M liquidity pool. We donāt consider trading fees until after a month or two of Liquidity mining, as we wait until we have a suitable data sample to make an informed decision.
Crude math. 20% APY on $10M >> $2M >> $167K per month >> INDEX @$25 is 6,666 per month or 222 per day.
Thinking forward, I would say do this 1 or 2 months, I lean to the later and then taper off incentives by 50% each month for 2 months before stopping. 222 INDEX per day for 60 days, 111 INDEX for 30 days and then 55 INDEX for 30 days. Total 18,300 INDEX. Relative to other incentive schemes, this feels fine.
The kicker for me is, I would kindly ask for the seed capital to not be staked into any contract receiving LM rewards for reasons touched on above. If the seed capital was to going into the staking contract, well we really do risk increasing the centralisation the distribution of the INDEX token and tbf, I think the methodologist rewards are very generous already. If LM was not discussed/planned for FLI during any DG1 or DG2 discussion and Index Coop is doing this purely from a product perspective. Then we would need to apply the same logic to CGI, to be consistent in our approach.