MVI Liquidity Mining#7

[george]

Title: MVI Liquidity Mining #7
Author: OverAnalyser @overanalyser George @george
Created: 2021-05-04

Link to IIP-24
IIP-24: MVI Liquidity Mining -

Simple Summary

Extend liquidity rewards for MVI:ETH Uniswap pool inline with IIP-24 mandate with 4 447 INDEX over 30 days (a 28% reduction)

Mandate for days 31-60 within IIP-24

• $5 M liquidity based on 7 day average to day 25 (01May21)
• Minimum 2,850
• Maximum 11,400
• 4 447 INDEX represents ~0.044% of total issuance.

Data collected

• 7 day average liquidity = $ 6.4 /M
• 20 day TWAP for INDEX = $37.81

Calculation of new LM rewards:
$ 6.4M/ $5M = 28% excess in LM pool.
LM rewards will be reduced by 28% (5700–>4447) to target $5 M Liquidity in Days 31 -60.

Specification
30 day LM campaign for MVI:ETH Uniswap pair using the existing contract to start on shortly after the current contract ends with a total of 4447 INDEX.

Additional Information
The below table and charts highlight what the potential slippage is for the average trade size. Slippage is the difference between the expected price of a trade and the executed amount. The trading sizes were gathered for a minimum of 4 weeks and bucketed into the different percentile groups. A trading range is calculated by deducting the 10th percentile from the 90/95th percentile. We can approximate what the slippage is vs the liquidity pool size.(Trade Size Range / Liquidity Pool)

Analysis of the trade size shows the following:

Note: * Percentile calculation includes all trades (i.e. does not exclude arbitrage where slippage = profit)
These take the low percentile values as trading conditions normalize over time.

Liquidity is in line with the trading sizes and will develop with time.

The specified INDEX rewards rate of 148 INDEX over 30 days and the INDEX 20 day TWAP price of $37.81 is a 32% APY in mining rewards for a $5 M pool size.

In addition to the LM rewards, the LP’s trading daily fees have averaged $828 over the 7 days 25th April to 01 May 2021 which is 6% on a $5M pool size.

Extension beyond 30 days

After 25 days of the continued liquidity mining, the Product and Treasury Working Groups would review the average value of liquidity in the staking contract over the previous 7 days and agree on the ongoing reward rates for the next 30 day period.

Liquidity incentives methodology

1. 7 day Average Liquidity / Target Liquidity which determines whether we are over or under our target as a %.
2. If we are over or under our liquidity target we will reduce or increase the rewards proportionately.
3. Update of the fees earned from the liquidity pool based on the last 7 days volume, this is also used as a metric when comparing to the future incentives.
4. Additional info such as the slippage and calculations will also be updated.

Calculations

Next stages

This post is the formal recommendation of the rewards for days 31-60 as per IIP-24. Implementation is planned under that mandate. The community needs to take no action.

[dylan]

Looks like there was an error in one of the parameters of this proposal:
The LM reward amount that was deployed to MVI for IIP-24 was 3810 INDEX, not 5700 INDEX.
Therefore, a 28% reduction should target 2743 INDEX instead of 4447 INDEX.

[overanalyser]

You are correct,

George and I calculated the reduction in rewards on the original IIP-04 number 5.700. and not the revised number:

This means that the rewards were lower in this initial 30 day period, and that the calculated reduction by 28%.

My apologies.

[overanalyser]

OK, a quick snapshot of the impact on MVI liquidity.

Calculations were done on the 4th May 2021 and we had 39,860 units in the incentivised pool:

We currently have 46,000 in the same incentivised category, so a 15% increase with a 28% reduction in the number of tokens rewarded.