I think that Liquidity mining sits pretty much at the centre of the coops products / customer experience, with significant overlap with growth and treasury.
We are coming to an interesting time in the coops development from a single product to many products, so I think it’s work starting a discussion on a few things.
Within 10 days we will have 4 funds on chain at different stages of their live cycle.
DPI is our cornerstone and dominates the DeFi fund space. However, it’s not profitable as the LM incentives are greater than the streaming fee. I think we have a consensus that we want to reduce incentives with the goal of DPI becoming profitable while maintaining dominance of AUM and liquidity.
CGI Has a different strategy with more direct sales. However, Liquidity mining without full coop commitment is being considered
ETH2-FLI is enjoying a staged launch with the supply cap being increased as we gain better insight into how the code behaves in the wild. The fund appears to generate sufficient liquidity without incentives, so the question will be, what happens when we add incentives.
MVI Is being launched as a community methodology with an INDEX Liquidity Mining strategy proposed.
So, it looks like we are going to be opening the taps on liquidity mining, so we need to think about whether we start to start fighting against ourselves. i.e. will mining MVI cause LP’s to sell DPI to chase INDEX token income (I’m certainly considering it…).
So some thoughts
- I would like to cut rewards on DPI, it’s our biggest cost and we have been consistently above the $30 m Uniswap target (and further liquidity on Sushi, Balancer and others)
- Exchange issuance for DPI will help larger trades.
- I think I would feel comfortable with ETH:DPI on Uniswap dropping to $20 M, so long as there as another $5 M in other pools.
- If we consider the current incentive of 700 INDEX per day started 21 days ago then we have maintained ~x2 the target liquidity, and the INDEX price is x3. So we could expect that a reduction in rewards by a factor of 6, could result in the Uniswap liquidity dropping to ~$25 M.
- We might even consider stopping LM rewards entirely on ETH:DPI
However, with MVI LM about to start, we could damage the DPI liquidity if we stop entirely.
So, a continuation for 30 days at 100 INDEX per day might make sense.
Is about to launch with LM mining shortly after it goes live. The strategy allocates $140,000 to the first 30 days, and the 20 day TWAP was looking at $24 and 5,700 tokens. However, given the recent price increase in INDEX, it’s likely that the TWAP will be closer to $40, so 3,500 tokens or 116 per day.
With MVI going live on the 7tth, and DPI rewards ending on the 9th April. I wonder if the following makes sense:
- Set the 20 TWAP for MVI rewards on the 5th (Monday)
- MVI launches on the 7th.
- MVI liquidity mining starts on the 9th +/- a few hours of the DPI liquidity mining.
- MVI and DPI LM rewards are set at the same level (100 to 116INDEX per day)
- We communicate the schedule.
The aim is that:
- We allow some LP’s to be informed and lazy and stay in the DPI pool without FOMO.
- We protect DPI liquidity by having comparable rewards for the next 30 days (and I expect DPI to have much higher average trade volume)
- We learn more about the sticky ness of LPS - do they move DPI:ETH to Suchi/ others, do they move to MVI:ETH
- We cut back heavily on daily INDEX issuance for the total liquidity mining programme (700 → 250)
FLI and CGI
I’ve not touched on ETH2-FLI and CGI liquidity mining in my suggestion. My initial thought is that ETH2-FLI would be less likely to pull LP’s off DPI:ETH. I think that CGI:ETH could be more likely to cannibalise INDEX farmers, so it’s something we should consider when planning the size and timing of the LM programme.
ETh2-FLI may need a different strategy for liquidity minings, something that targets bear markets when FLI unit numbers could be expected to drop.
I would appreciate your thougths.
Finally, I’m trying to schedule a Product WG call where Liquidity Mining is likely to be discussed. If you are interested in joining. share your availability here: