[SCP-25] Launch bonds for FOX-ETH Liquidity


Build on the recent FOX liquidity mining extension and implement a bond program for the DAO to own its own liquidity. Protocol-owned-liquidity is the future of liquidity incentive programs.


Incentivizing liquidity provision is a balancing act for protocols seeking to distribute their governance token, between high inflation and low liquidity depth. The extension of liquidity mining incentives will be an excellent tool to distribute FOX to community members providing liquidity. However, the emissions rate may continue to have a negative impact on token price as farmers compound their rewards. By implementing a bond program for FOX-ETH liquidity, ShapeShift can distribute its governance tokens to more users while also accumulating its own liquidity.


  • Currently, FOX has $23M in liquidity on Uniswap in the FOX-ETH pool. The recent liquidity mining extension will have the following impact, assuming constant liquidity at $23M:

    Original reward rate: 175,200 FOX per day (~125% APR)

  • New reward rate: 117,384 FOX per day (~85% APR)
  • Reward savings: 57,816 FOX per day (~$26k)

One of the risks mentioned in the reward rate reduction proposal is a reduction in total liquidity, as mercenary capital rotates into higher-earning farms. A bond program may help offset this loss of liquidity, as users rotate out of their LP positions via bonding for FOX instead of withdrawing liquidity. Additionally, the bond program may attract new capital and provide fresh liquidity.

The proposed bond program would sell FOX at a discount in exchange for FOX/ETH LP tokens. Current liquidity mining programs essentially reward liquidity providers with FOX in exchange for temporary liquidity, which exposes those providers to impermanent loss from fluctuations in the underlying assets. Bonds allow active users to stack FOX tokens at a discount while removing the exposure to IL. The discount rate on bonds is achieved by a novel pricing mechanism that allows the market to set the discount. Basically, bond prices are decreased until a bond is purchased which then pushes up the price of the next bond. For reference, here is the average discount of Olympus’ bonds with their extremely high APY:


Olympus Pro

Olympus is offering to provide its expertise in bond contract management to support other DAOs interested in owning their own liquidity. This will include providing the UI for bonds and maintaining bond control variables to balance emissions with liquidity accumulation. In exchange for the implementation and community engagement, Olympus would take a 3.3% on all FOX bonds sold. Olympus will use the FOX earned as backing for the intrinsic value of OHM, which would act as a supply sink for FOX.


Proposed Bond Program:

FOX bonds would be offered with a week-long vesting period, which helps prevent immediate price impact from discounted tokens. This aligns the goals of the protocol with those of bond participants. Typically, higher bond volume is seen when users expect the price of the token to increase during the vesting period.


Allocate half of reward savings (28,908 FOX per day) to target $1.5M of liquidity over the new reward program duration, end of February 2022.

Success criteria

  • Discount rate < 10% on bonded FOX
  • Minimal impact on FOX price


  • Permanent liquidity source
  • Increased treasury value from liquidity that also earns trading fees
  • Exposure to paired asset in liquidity pool (ETH)
  • ShapeShift can stake its LP tokens to provide additional runway for incentive programs


  • Additional FOX emissions via bonds may increase sell pressure, but should be reduced in comparison to current reward rate (prior to October 13th)
  • Protocol-owned-liquidity can be seen as diluting existing LP holders

Sentiment Poll

Very excited for this, strongly support this moving forward!

Good move. Please proceed.

One piece of feedback - when this goes to snapshot (maybe as soon as tomorrow!), please make sure to add in the total budget of FOX that the DAO is approving for this first bond program.

It could be calculated from the current information, but I think it’s important to make that explicit.

interesting take on providing liquidity

Abosolutely agree on the moving forward on this proposal!

I think we have good support for this proposal to move it forward.

StakeDAO just launched their bond with Olympus FYI: https://twitter.com/StakeDAOHQ/status/1443587485464817664?s=20

I’ll reiterate I’m a huge fan of this whole concept 1f642

We need to notify everyone on our social media platform to be know now

By using the #StakeDAO on all social media platform thank you so much

This is nice one to is information