PSP-IPΔ18-1 | PSP-IPΔ18-2 - Liquidity Mining Renewal and Budget Re-Allocations

TL;DR of the proposal: Adjust the budget for Protocol Owned Liquidity to allow a more aggressive capturing of liquidity. For ease of maths, performance will be measured using today’s pool volumes to show the importance of increasing the budget ASAP.

With our pilot with Olympus Pro now officially approved, it’s time we start considering how to approach the transition towards this more sustainable model of liquidity. This is a very big matter to address, but it’s important we start deciding quickly how to approach it, as the foundation’s extension will be ending in a little under three weeks: https://twitter.com/paraswap/status/1505311718058205190

To fully understand this proposal, you will need to read the following ones before continuing:

Targets, budgets and roadmap

Before we can assess how much $PSP we need, it’s important that we examine the current existing liquidity. Here are some of the major pools of $PSP (excluding bancor, as it’s already been addressed in prior proposals):

Paraswap Safety Module (ETH):

Total value: 435k
Of which 350k PSP and 85k in eth

Paraswap SushiSwap Pool (ETH):

Total value: 1.4M

Quickswap Pool (MATIC):
https://info.quickswap.exchange/#/pair/0x7afc060acca7ec6985d982dd85cc62b111cac7a7
Total value: 835k (down from ~1M pre-rewards)

ComethSwap Pool (MATIC)
This is not a major pool, but worth noting that ComethSwap only currently has 28k in liquidity following a drop in rewards, highlighting the importance of protocol owned liquidity over mercenary farmers, as well as highlighting why I wish to suggest the current allocation:
https://charts.cometh.io/token/0x42d61d766b85431666b39b89c43011f24451bff6
Total Value: ~25k (down from 100k)


With these stats in mind, we can see that with a monthly budget of ~1M PSP at a price of ~0.15, it would take around 8 months to capture just the $MATIC liqduitiy, and around a year and a half to capture the sushi liquidity! Considering how fast things move in DeFi, I feel this is not fast enough.

Because of this, I think it’s important for us to re-balance the budget a little, to allow us to reduce emissions a bit faster.

Proposal suggested: Liquidity Emissions Release and Budget re-allocation

Let’s look back at the budget chart:

Due to the points mentioned before, I propose the following budget adjustments:

  • Re-allocate all sidechains’ 80/20 pool budgets to acquire them directly with bonds: Initially, the Matic balancer and beets.fi pools were added to incentivise potential future safety modules. However, it will be better for the protocol’s health if we use this to permanently own this liquidity in the safety module, as it will serve as a safer insurance.

  • Re-allocate secondary farm pools for PoL programmes in their respective chains: As we’ve seen with cometh vs quickswap, it seems like allocating multiple farms on one chain is counter productive, as people will just chase the highest yield. Instead, we could use these extra farms’ PSP to kickstart the PoL programmes there as well.

  • [?] Move the ‘future liquidity pools’ budget and undeployed chains to POL? I’m not sure about this one, but maybe it’s best we don’t introduce even more LM schemes, and instead start with bonds to kickstart liquidity. What do you think?

  • Move LM budget to PoL
  • Keep the budget in Liquidity Mining
  • Abstain

0 voters

Finally, in preparation to the foundation’s LM rewards running out soon:

  • Extend Sushi and Quickswap LM programmes. Protocol owned liquidity’s introduction functions best when running side-by side with LM.

  • [?] If we’re moving the budget of undeployed farms to PoL, talk with the OlympusDAO to introduce new bonding schemes for other liquidity pairs.

PS: Following feedback from the budget proposal, I think it’s best that each of these bullet points counts as a separate vote on snapshot. So don’t worry if you disagree with some of these points, I’ve made them to be mostly independent from each other!

Future considerations and conclusion

This thread is already getting a bit long, so I’ll keep this one short. I feel that, going forward from now on, we should reduce LM emissions with every month, relative to the success of OHM Pro bonds. Because of this, we must be ready to adjust emissions depending on how well the bonding pilot goes. I’d say we could start with a 15% reduction per month, and see how it goes from here.

Final point, due to the urgency of mining rewards soon running out again, I think it’s best we plan to have this ready on snapshot by the first week of April, that way, everything is ready to deploy by the 19th and the transition is smooth.

3 Likes

I agree with the direction of reducing emission and safeguarding POL.

  1. Regarding the budget, are we allowed to reallocate the unused portion from Feb and Mar, not only from April to boost POL?

  2. Regarding the “secondary farm pools”, is it purely judged by volume of pool? Is there anything that is not visible to us worth considering? E.g. the easiness of talking with the pool’s team, speed of implementing changes, the pool’s reward given or other qualitative factors like this comment:

  1. Can we assume those pools that have a budget but not currently giving rewards will continue as-is? Correct me if I am wrong as I am not on all chains, but I was under the impression that anyway on BSC we are not giving rewards, and on Avalanche PSP token is not deployed.

Assuming that the budget has not been spent yet, back-allocations are possible, especially if we decide to slash some of these farms altogether!

Currently , the main factor I looked at when deciding which farm to propose reducing was Volume and TVL, as we basically want to invest in the farms with the most active users to attract liquidity.

However, you are also right that if we end up collaborating with a smaller (known) DEX, it could be useful to shift the rewards towards them instead. Currently, I know of no DEX’s of the ones mentioned that are looking for a partnership (dual boosting, promotion, etc), so I stuck with the former one for now.

@dydymoon could comment on the idea, but I feel that from what we saw in Matic the outreach was not worth the extra emissions.

As a default, yes. However, as part of the (probably longer term) discussions I was wondering if re-allocating the majority those rewards to acquire permanent liquidity would be more efficient. That way, we launch on new chains with a strong foothold as opposed to playing catch-up.

Even in this scenario we would keep some LP for farming, but that would mostly serve as a form of soft marketing, as opposed to the current solution we have now of using it as a form of maintaining liquidity.

1 Like

Hey, here’s the draft for the liquidity renewals!

In addition to the discussions we’ve had here and in the discord, I went back to the calls we had with Olympus pro to examine their suggestions regarding tokenomics issuance and transition towards PoL. One important point that was missing from the discussions is the important of keeping the bonds ROI as favourable as possible compared to LM, and this proposal aims to address that. These budget allocations will be for a month only to be able to adjust our strategy 3 weeks from now depending on bond performance.

The proposal will be subdivided in two sections: One for the Ethereum Mainnet and one for the Polygon Network. This makes sure that people that have a choice to vote on each network, keeps the contracts deployable, and keeps the parts that are intrinsically tied still together.

Feel free to write your thoughts, I am aiming to put this up on Monday to make sure the proposal passes on time by the time the current rewards run out.

The two proposals are:

PSP-IPΔ18-1 – Liquidity Mining and Protocol-Owned Liquidity Strategy – Ethereum Mainnet

The aim of this proposal is to renew rewards for Liquidity Mining pools in the Ethereum Network. Additionally, this proposal re-allocates some of the PSP towards supporting Protocol-Owned Liquidity bonding programme, supporting ParaSwap’s aim to transition towards fully protocol-owned liquidity, and to make bonds a more competitive option compared to liquidity farming.

  • 300 000 PSP will be allocated towards SushiSwap
  • 150 000 PSP will be allocated towards Balancer
  • 1.50M PSP of the budget will be allocated towards Olympus Pro bond rewards for the Ethereum Network

Here’s the link to the relevant proposal discussion:

PSP-IPΔ18-2 – Liquidity Mining and Protocol-Owned Liquidity Strategy – Polygon (MATIC)

The aim of this proposal is to renew rewards for Liquidity Mining pools in the Ethereum Network. Additionally, this proposal re-allocates some of the PSP towards supporting Protocol-Owned Liquidity bonding programme, supporting ParaSwap’s aim to transition towards fully protocol-owned liquidity, and to make bonds a more competitive option compared to liquidity farming.

  • 75 000 PSP will be allocated towards QuickSwap rewards
  • 475 000 PSP of the budget will be allocated towards Olympus Pro bond rewards for the Polygon MATIC Network

Here’s the link to the relevant proposal discussion:

2 Likes

Nice job, agree to vote !
PS : just need to replace “Ethereum” with “Polygon” in the first line of the second proposal.