OK, I think it’s clear that we need to think about long term strategy in terms of token distribution and liquidity mining.
We started the Coop with a very successful 60 day liquidity mining campaign on $DPI. Since then it’s been much more ad hoc with a few IIP’s to extend Uniswap incentives and a couple of Loopring programmes that have gone via the growth working group/treasury committee. This has worked to date, but I think it’s clear that we need an ongoing strategy. particularly as we launch new funds.
I tried to kick this off a couple of weeks ago with a slide deck / proposal for a meeting, and I know @BigSky7 has been looking at liquidity mining as a business development tool but it’s probably easier to work in the forum to get some ideas.
LIquidity mining has a number of benefits:
- Kickstarting AUM - Essential for launch
- Distributing INDEX tokens in a decentralised way - Essential for becoming a decentralised organisation.
- Marketing our product
- Defending AUM against competitors
- Reducing slippage on large trdes
- Building links with AMM communities
- Expanding the visible storefront for our products (@BigSky7 ).
Personally, I’ve been trying to move the coop to minimal INDEX issuance for liquidity mining while supporting a minimum size trading pool ($330 M as proposed in IIP-11). In addition, I have pushed for a reduced amount of Liquidity mining on Loopring - mainly to help facilitate small trades. We have also discussed incentivising the sushi swap pool to build bridges.
Looking at the historical data for the Uniswap Pool each week (Assuming all Uniswap LP tokens are staked for INDEX - so an underestimate of the actual rewards):
Where is the liquidity at the moment:
|21feb21||Pool size ($ M)||Volume ($ M)||Fee income||Incentive|
During the Org call on Wednesday there was an extensive discussion on incentivising the Sushiswap pool with a number of objectives:
- Building a second large liquidity pool to aid trades and increasing our visibility
- Marketing the (expected) addition of $SUSHI to $DPI
- Building relationships with the sushi community (who have been supporting the coop by incentivising both DPI and INDEX pools)
Sushiswap runt he Onsen programme, and it’s possible to have joint incentives (i.e. $Sushi and $INDEX), however, I think this needs a modified staking contract (i.e. outside the Onsen interface)
We have run a couple of 14 day campaigns to incentivise liquidity on looping, and this has succeeded in gaining liquidity, and allowing small trades (I think the majority of trades have been < 0.5 ETH). Loopring has the advantage in that we don’t need a staking contract, and users don’t need to stake LP tokens - it’s all done by the loopring team - However, you need to stay int he pool (/on L2) to receive the back dated rewards.
In addition to an AMM, Loopring can offer order book marketing which can be much more efficient in terms of slippage vs capital. This relies on incentivised market makers who maintain the order book spread close to the market price. Loopring think that running both an order book and AMM for the same pair will drive more volume to both (they are also planning a common interface for both markets, so spot buys would see a single interface and trades would be filled from both liquidity sources)
This should allow larger trades of DPI to be done with less slippage for a given pool, size. Purchase relies on sourcing the underlying tokens and then issuing the DPI token. This costs much more gas than a single AMM trade, and so is only economic for large trades that would push the AMM off the NAV.
@BigSky7 has been asking is a single pool is better than 2 pools that are half each. I’m not sure anyone has been able to give a definitive answer (maybe a backburner question for the analytics team @jdcook ?). Personally, I think that if everyone is using an aggregator/checks both pools, then 2 are better, as there is a chance that 1 will be above NAV while the others is below. While not enough to make arbitrage profitable, they can give a better price for the trader. The doens side is if people are using a wallet that only allows use of 1 of the AMMs.
Anyway, I think that is probably enough to give some context and kick start a debate on what we want to do in terms of Liquidity mining.
I think we need a strategy for $DPI liquidity mining going forward:
- (and the elephant in the room: “wen UNI v3?”
- Do we see this as a good way to decentralise INDEX ownership?
- marketing and BD tool?
I’m going to reply later with a suggestion of what we could do, and I welcome anyone to suggest alternatives.