Proposal/discussion on next set of liquidity mining rewards

Honeyswap is going to be adding a few more tokens to their polygon farms shortly and we could add fox token to that list. Fox would be the only token that we would be adding with no joint deployment at same time.

Would shapeshift community like to see honeyswap hold off until you make an asserted effort to market polygon LM or go ahead independently of what shapeshift does?

If we deploy fox incentives independently from shapeshift it may not get a tremendous amount of excitement but because we have several others we are adding, for us adding fox at this time we think would be more attractive timing to maximize traffic and exposure.

We are willing to do what’s best as a whole if it means we need to work with the others and delay a short bit as well. We are open to any ideas, thanks.

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I personally think it would be great for honeyswap to go ahead and deploy FOX on polygon if you all are interested regardless of if we are ready to fund LM incentives or not.

If you all are willing to push some rewards towards that pool then I think that may excite the ShapeShift DAO community regardless and maybe even help push forward allocating some additional FOX rewards from the community after the fact.

I would be for some amount of FOx being allocated to honeyswap on polygon for LM rewards, but it seems like the community first needs to align around the next set of uniswap rewards so I am unsure how fast things will move timing wise on LM rewards for honeyswap, but I do think you all pushing forward independently of the ShapeShift DAO’s timing is prob the right way to go.

I am curious what other community members think about this of course though.

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@Shapeshift

I put forward above that I feel the utility of the project superseded seeding multiple chains and pools with the token. I was actually quite impressed with the level headedness of @elmutt response above, not just the quoted section. However, if Shapeshift could seed a pool and provide a nice Ui/Ux on the Shapeshift site for LP token deposits on multiple chains at the time a Polygon project is seeded…

The chain is selected in the MetaMask browser plugin at the moment and the Ui is practically identical in design. This might not be true for mobile, but I don’t use Shapeshift’s current mobile app.

…there is value in the token being distributed in another ecosystem.

I would love to see FOX added to HoneySwap. What is your timeline looking like? Perhaps we can push a proposal into official voting sooner if the DAO and HoneySwap can agree on a joint initiative. Unfortunately I am not qualified to suggest ideas or say X will work better than Y, so I’m more interested in what you guys have in mind! I’ve been pushing for HoneySwap for a while now, and whether or not something passes soon, I will continue to push and support!

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I agree with @jonisjon that honeyswap moving forward with adding fox to their polygon farm would be a good move, even with no joint deployment at this time. Appreciate you putting that out @monstrosity and checking for feels.

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It’s great to see all the discussion on this important topic! Looking forward to continuing the discussion on the optimal mix of programs for the DAO to incentivize FOX liquidity.

In the meantime, what do you guys think of making a standalone proposal to the DAO to deploy a second liquidity mining program for the FOX/ETH pool on Uniswap v2?

I haven’t seen any pushback or modifications to @jonisjon’s original idea of allocating 15,760,000 FOX over 9 months, and would be happy to take this proposal through the governance process. I’m thinking we could plan to start this 2nd liquidity mining program on October 13th, 48 hours before the initial program ends.

Based on the current amount of funds in the DAO’s treasury (6.58M FOX), the current amount claimable (3.45M FOX) the amount of FOX that will be claimable from the Sablier stream by then (an additional 12.5M FOX), there should be more than enough of FOX to available to fund this program on October 13th. Furthermore, the DAO will be able to claim any unclaimed FOX from the airdrop contracts and replenish the treasury on October 23rd, and I expect this amount to be ~10x the 15.76M FOX required to fund this program.

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As promised, I just posted a draft proposal to extend the Uniswap v2 liquidity mining program for 9 months to ideation: Boardroom Management Portal

Should be live tomorrow (August 30). Please take a look and lmk if you have any feedback :fox_face:

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Firstly, thank you Jon for starting this discussion. Liquidity incentives are extremely important when projects are first getting off the ground, and even more important when the project doesn’t yet have broad centralized exchange presence.

At time of writing, FOX is currently listed on:

  • Uniswap
  • Hoo
  • MEXC Global

Uniswap is decentralized, while MEXC and HOO are both centralized. To help folks understand the importance of LP incentives, I want to detail the current FOX liquidity situation. First, I’ll define a few terms:

Spread: The difference in price between the “buy” and the “sell” side of the market.
Depth: The amount of liquidity up or down to a certain price.
2% depth: The amount of order volume which which will move the price by 2%. Calculated as x = (-2% depth + 2% depth) / 2

Uniswap - 0.6% spread | 2% depth = $217,336
Hoo - 2.34% spread | 2% depth = $1,127
MEXC - 0.93% spread | 2% depth = $308

As you can see from these numbers, the only realistic place to trade FOX is currently on Uniswap. Even a small order of $300-$1100 can move the market by 2% in one direction or another on the centralized exchanges. Whereas on Uniswap it would take a $200k order to make the same movement. Additionally, the spread is far more attractive on Uniswap. Over time, FOX will get listed on better exchanges with smaller spreads and more liquidity but we’re not there quite yet.

Another important metric is total LP. Currently on Uniswap there is $21.6 million in total LP. Historically, when LP rewards are dropped it results in a proportional reduction in available LP. So, with the currently proposed 1/3 reduction I would anticipate total LP to reduce to roughly $7.2 million. That is a VERY small liquidity pool for such a major company converting over to a DAO, and will discourage many investors from participating. A lot of community members love to vilify whales, but they’re incredibly important to a healthy coin distribution and tokenomics for a fledgling project. It’s true that too many whales can cause other problems, but I don’t believe FOX suffers from such poor distribution where we need to concern ourselves with that.

With all of this said, I think we should be more careful with reducing the rewards. Here’s my suggestion:

  • Reduce the current UniV2 rewards by 25%
  • Provide these rewards for 6 months
  • Don’t setup a Sushiswap pool (too early to split liquidity)
  • Do integrate with Bancor (this will be excellent automatic marketing, will further distribute the coin, give more users more ways to stake)

Burn Rate Math:

Current
Current rewards: 15,768,000
Duration: 3 Months (July - October 2021)
Current daily burn: 175,200 FOX

Proposed
Rewards: 11,826,000 (UniV2) + an unknown amount for BNT holders based on snapshot. Let’s use a (high?) estimate of 3,000,000 FOX (15,000 BNT holders each getting 200 FOX)
Duration: 6 Months (October 2021 - April 2022)
Proposed daily burn: 82,367 FOX

Jon’s proposed burn rate with Sushi/BNT/77% reduction in rewards: 127,911 FOX

As you can see, my suggestions will reduce the overall burn rate by eliminating the Sushiswap pool and bolstering the UniswapV2 pool a bit more. I anticipate this will result in a retention of $16.2 million in LP, which is a reasonable amount for this sized project at this stage of its lifecycle.

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awesome comments @outragedhuman, thanks for taking the time to put them in writing :pray:

  • Reduce the current UniV2 rewards by 25%
  • Provide these rewards for 6 months
  • Don’t setup a Sushiswap pool (too early to split liquidity)
  • Do integrate with Bancor (this will be excellent automatic marketing, will further distribute the coin, give more users more ways to stake)
  1. To clarify, do you mean reducing the current FOX staking rewards rate by 25% rather than by 66% like @jonisjon initially proposed? I would support something in the middle, I’ve seen other projects successfully apply a ‘halvening’ rate to their rewards emissions (ie. Pickle Finance) and they did not experience a corresponding 50% drop in liquidity. 75% APR on FOX is still very attractive, especially for a reputable project like ShapeShift.
  2. I am open to reducing the period from 9 months to 6 months. 9 months felt a bit long to me too to commit to a program on UniswapV2, especially with liquidity slowly but surely moving from V2 to V3, not to mention all of the other liquidity mining innovations/alternatives that have launched recently (tokemak & olympusDAO) and will be launching in the coming months.
  3. Fully agree with you here. I don’t see any need to fund a liquidity mining program on SushiSwap mainnet at the moment as this will just fragment liquidity between the Uniswap and SushiSwap pools. I would be open to a smaller liquidity mining for SushiSwap on Polygon though, especially if SushiSwap were to partner with us on Sushi rewards.
  4. Fully Agree
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Something else to keep in mind is the intrinsic relationship between liquidity and APR.

For example, let’s imagine that if we reduced the rewards by 50%, 50% of the liquidity would indeed get removed. If this were to happen, the APR would actually not change because half the amount of FOX would be rewarded to half the amount of liquidity, which would in turn incentivize more liquidity. Perhaps more realistic is that we’d see a 25% reduction in liquidity which would result in a 25% reduction in APR, but I estimate the reduction in liquidity will be even lower than this. Ideally, the decrease in liquidity mining rewards will be offset by strong DAO traction/performance and a corresponding increase in interest in the project, and liquidity & volume will grow despite a reduction in rewards.

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Thanks for the reply, I’m already loving this process :slight_smile:

  1. To clarify, do you mean reducing the current FOX staking rewards rate by 25% rather than by 66% like @jonisjon initially proposed? I would support something in the middle, I’ve seen other projects successfully apply a ‘halvening’ rate to their rewards emissions (ie. Pickle Finance) and they did not experience a corresponding 50% drop in liquidity. 75% APR on FOX is still very attractive, especially for a reputable project like ShapeShift.

My suggestion is to reduce by 25%, yes, but I could certainly accept a slightly faster tapering off. Splitting the difference is 45% so maybe that’s where we could start, but I think I’d feel better with 33% to start with. Another compromise would be to lower the duration even further (maybe 3-4 months) so we can re-evaluate sooner if we determine the taper was too slow/fast.

  1. I am open to reducing the period from 9 months to 6 months. 9 months felt a bit long to me too to commit to a program on UniswapV2, especially with liquidity slowly but surely moving from V2 to V3, not to mention all of the other liquidity mining innovations/alternatives that have launched recently (tokemak & olympusDAO) and will be launching in the coming months.

Yea I like the idea of a 6 month timeframe for two reasons, it allows the rewards to stay a little higher without using a larger chunk of the treasury and it provides for a sooner opportunity to re-evaluate if conditions change (v3, price changes, liquidity changes, new tech, etc).

However, at the same time it gives LPs some security for 6 months, and that’s an entirety in crypto so LPs will love it.

  1. Fully agree with you here. I don’t see any need to fund a liquidity mining program on SushiSwap mainnet at the moment as this will just fragment liquidity between the Uniswap and SushiSwap pools. I would be open to a smaller liquidity mining for SushiSwap on Polygon though, especially if SushiSwap were to partner with us on Sushi rewards.

Appreciate the support! I like the idea of a separate, cheaper, chain supporting another pool. I think we could skip that for this round just to make passing this less complicated, but it’s definitely something we should engage with other Dex’s over to have something ready for the next round.

  1. Fully Agree

Thanks!

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Something else to keep in mind is the intrinsic relationship between liquidity and APR.
For example, let’s imagine that if we reduced the rewards by 50%, 50% of the liquidity would indeed get removed. If this were to happen, the APR would actually not change because half the amount of FOX would be rewarded to half the amount of liquidity, which would in turn incentivize more liquidity. Perhaps more realistic is that we’d see a 25% reduction in liquidity which would result in a 25% reduction in APR, but I estimate the reduction in liquidity will be even lower than this. Ideally, the decrease in liquidity mining rewards will be offset by strong DAO traction/performance and a corresponding increase in interest in the project, and liquidity & volume will grow despite a reduction in rewards.

Good points, yes. I just think we should do something a bit less drastic this time around so we can get another data point to improve the next round’s forecasting.

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Good news! Chatted with @Outragedhuman and they are stepping up to take ownership of getting the community aligned on an LM proposal and taking it through the governance process :partying_face:

I will stay involved until the end, but please direct any questions or feedback on this proposal to @Outragedhuman going forward.

My suggestion is to reduce by 25%, yes, but I could certainly accept a slightly faster tapering off. Splitting the difference is 45% so maybe that’s where we could start, but I think I’d feel better with 33% to start with. Another compromise would be to lower the duration even further (maybe 3-4 months) so we can re-evaluate sooner if we determine the taper was too slow/fast.

  1. Awesome, I am open here and think we’re getting closer. Looking forward to seeing what everyone thinks in the poll results.

Yea I like the idea of a 6 month timeframe for two reasons, it allows the rewards to stay a little higher without using a larger chunk of the treasury and it provides for a sooner opportunity to re-evaluate if conditions change (v3, price changes, liquidity changes, new tech, etc).

However, at the same time it gives LPs some security for 6 months, and that’s an entirety in crypto so LPs will love it.

  1. Agreed, and also curious to see what everyone else thinks in the poll.

thanks so much @Outragedhuman! excited to see you push this forward :rocket:

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Excited to hear @Outragedhuman is taking ownership of moving this important governance item forward!

The more I think about it, the more I am sympathetic to @Outragedhuman 's points and I would support a significantly higher LM rewards for this next program.

I think something like a 25-33% reduction in rewards make more sense than my original idea of a 67% reduction in rewards after additional thought on this.

I am still personally for 9 months of rewards instead of 6, but some fair points were made on that front too and its not a dealbreaker for me. If the community decides it would be better to only extend for 6 months for now I would be okay with that, but otherwise my default position is 9 months gives everyone the security of knowing the DAO will have sufficient liquidity for at least the 1st year of it’s life.

I look forward to see the proposed revisions @Outragedhuman makes to the current ideation post in boardroom.

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Thanks, @willy I appreciate the handoff and the vote of confidence. Happy to run point in this discussion and see it through to the Proposal phase. We will keep all facets discussed so far under consideration, but for now we’re only going to move forward with the Uniswap v2 component of the discussion (holding the Bancor/Sushi/etc… components for individual votes at a later date).

This should allow the proposal to be considered more readily by most participants, and it will help to ensure we have the next set of rewards locked down before the current set ends (it would be very detrimental to have a complete lapse of rewards).

To move forward on the rewards proposal we need to decide on rewards (as a percentage of current rewards) and duration. Please find polls below:

How much should current rewards be reduced by for the next round of LP rewards? (Pick up to 2)

  • 25%
  • 33%
  • 40%
  • 50%
  • 66%

0 voters

How long should Uniswap v2 rewards be extended for after October? (Pick 1)
Note: A new discussion and proposal will be introduced before the expiration of this extension.

  • 3 months
  • 6 months
  • 9 months

0 voters

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This has been more formalized in ideation here: Boardroom Management Portal

Edit: Removed for now to due a calculation error, as well as some new information regarding current available quantity of FOX in the treasury.

Edit2: Fixed math, re-posted, updated the link above.

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This is now being voted on: --removed–

Edit: Removed vote because this was done prematurely. Waiting 2 more days to re-publish on snapshot.

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Quick comment for @Outragedhuman and all leaders who step up to lead projects or workstreams, etc.

Doing polls is great and can be a valuable datapoint. However, don’t get trapped into thinking you need to follow the crowd’s voted preference.

Gather the information you want, and then make a decision.

The DAO is an economically-weighted democracy at the on-chain treasury voting level, but at the project and workstream level, specific individuals need to lead and use their discretion and judgement. Art and innovation are often destroyed by popular consensus.

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Great point, @Beorn, thanks!

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Proposal now re-posted since the desired waiting time has passed: Snapshot

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