PSP-IPΔ2: PSP Liquidity Engine “La Seine”🌊

Keywords

PSP liquidity incentives, Synergies

Simple Summary

Provide PSP incentive to long-term committed suppliers of the PSP/ETH Sushi pool using Alchemist’s Crucible.

Context

PSP liquidity on mainnet DEX is lacking and dispersed across several Uniswap 1% pools, SushiSwap and Bancor. To complement the upcoming 80% PSP/ETH Balancer pool coming up shortly, another sustained and more balanced liquidity source is required.

The PSP/ETH SushiSwap pool has been growing and already processes a neat volume: this three months incentive program will help to grow it to a decent TVL.
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Goals

This proposal will establish a sustained and significant liquidity source for the PSP token on mainnet. SushiSwap was chosen because of the existing incentives + even liquidity distribution, preferable for the main liquidity source.

Having the reward program on Alchemist’s Crucible enables a sensible alignment of the reward structure:

  1. User deposit LP tokens into their Crucible NFT
  2. They can subscribe to reward programs to earn tokens.
  3. Exiting the program resets the multiplier.

All tokens earned are delivered upon exit, no claim is possible.
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Means

  • 5M PSP budget coming from the Ecosystem Reserve for a 3 months program, which can be renewed at the PSP holder’s discretion.
  • Additional SUSHI incentives pending SushiSwap’s team answer (see below)

⇒ Supplied to the Aludel (Reward Contract) for the PSP/ETH SushiSwap pool

Rationale

The main KPI is the TVL of the PSP/ETH SushiSwap pool, with an objective of 10M PSP + ETH equivalent supplied, two months after the launch of the program.

Governance should also monitor the volume of transactions processed by the pool to measure its effective contribution to PSP’s overall liquidity.

Forward-thinking considerations

  1. This proposal initiates a 3 months liquidity incentive program. Using the data available over the first reward period, governance will need to decide what to do for the next 3 months period with an upcoming vote.
  2. With a decent SushiSwap pool, a strategy based on Procol Controlled Liquidity could also be implemented, with PSP bonds to enable the DAO to accumulate PSP/ETH SLP.
  3. While this program was designed with the Sushi LP as the entry token, the crucible is agnostic and could support any LP needed in the future (such as PSP-ETH Curve Pool V2 LP tokens when available).
  4. The acquisition of CVX or CRV tokens can also be considered by the DAO to prepare the means to sustain our liquidity on Curve V2.

Implementation Overview

The implementation effort is minimal:

  1. Alchemist deploys the PSP reward program contract (Aludel) with the parameters given
  2. Change ownership to PS team
  3. PS DAO funds the reward contract
  4. Integration on Alchemist Crucible’s website
  5. The reward program is live and available to all

And here are additional implementation details related to the Crucible:

Aludel Parameters

  • Deposit token: Accepts PSP/ETH SLP
  • Duration: 3 months program
  • Boost Factor: x3 max boost, reached over 3 months

Modalities

Funded bi-weekly at the end of each PSP staking epoch.

3 months program, extensible by DAO vote. If there is an extension; no action will be needed from already subscribed LPs (who can potentially benefit from the max x3 multiplier from the first day of the second period).

We’ve reached out to the Crucible team and are in contact with them, they are supportive. They have the bandwidth to support ParaSwap’s crucible implementation in the wake of the PSP holders vote.

We’ve reached out to the SushiSwap team and presented this project to them - we’re waiting on their answer regarding additional SUSHI commitment for the program.

11 Likes

Does Alchemist have smart contract insurance and would we be covered by it for the 5M PSP?

3 Likes

I’m all in favor of this one - seems like there’s no reason not to bootstrap some liquidity.

Are there any other KPIs outside of TVL and volume of transactions that are relevant?

1 Like

We could monitor more KPIs, such as the number of LPs and average 7D/1M trade volume to get a better sense of the pool growth and dynamism.

Regarding insurance @detroitcoder : there is no insurance as far I know of on Alchemist but the code is based on the Ampleforth Geyser which has been audited and is used/has been used for several reward programs already.

Regarding the Safety Module Insurance, it would not cover the LP pools incentivized at first, but that’s something that could be included yeah.

3 Likes

Hey, have you considered as an alternative or complement using Tokemak as a way to ensure liquidity for the PSP. token?
I think it’s a good alternative like CVX or CRV token, to ensure a continued way to have access to liquidity and build up the treasury in a healthy way.

I think it’s still on the discussion if having a CORE 3 event, where PSP could join as a possible candidate, but if not it’s also something to keep an eye on when permissionless reactors are live!

Heya @Agustin152 and thanks for your suggestion!

Indeed several members involved with Tokemak suggested it and we explored it. It seems like the requirements were a bit too high for now and it seemed to work better as a second step to further grow liquidity if PSP-IPΔ2 and the liquidity component of the safety module are not sufficient.

Here is the last chat we had on it on the Discord if you’re interested - you’ll need to be a verified PSP holder/staker on Discord to see it. Check the #collabland-join channel for that.

Alright, will check Discord, very interested in that convo!

Thanks for the suggestion :pray:

I hold psp l hope that prise go to 2$ in 3 month later

2 Likes

A couple of questions, I’m not so technical so some may be naive ^^

Is that enhanced liquidity needed for large holders to exit their PSP position?

Aren’t the Paraswap Pools providing the necessary liquidity?

Would it make sense to have only one UNIv3 pool instead? assuming v3 is more efficient.
Using https://app.popsicle.finance/ provide decent yeild for LP without need for incentive.

PSP price action has been difficult for holders, partly due to market conditions but I bet not only.
Increasing the distribution PSP on the market is going to contribute to the downward pressure.

Thanks!

It’s a matter of liquidity simply: right now, buying or selling several ETH of PSP at once translates into significant slippage, hindering the interest of large transactions and therefore dampening the volume.

ParaSwapPools provide some liquidity yes, but also need solid liquidity sources on DEX.

UNIv3 is solid, but more intimidating for users. It’s also a bit more tricky to design a reward program that does not get gamed there. Regarding the liquidity managers; that’s another level of risk. Seems like Sorbet Finance (Gelato) just ran into an issue yesterday for instance…

With the proposed plan @Malc0lm the bulk share of the allocated PSP will go to the users who supplied PSP liquidity on SushiSwap and stayed for the whole program. Most of the rewards will be distributed around the end of the program (when user exit the reward program).

The crucible PSP-IPΔ2 proposal passed with significant community support, it included:

  1. A 5M PSP budget to incentivize liquidity for 3 months
  2. On the SushiSwap PSP/ETH pool
  3. Using the crucible reward program

During routine checks before implementation, the team remarked that while the Crucible is based on Ampleforth’s Geyser which has been audited, they are no audits currently available covering the Crucible’s code itself.

When it comes to the safety of the protocol, the team is adamant, as demonstrated with the implementation safety module and other insurances. The prospect of using unaudited code is a significant risk that the team does not want to put on the protocol.

So to make sure the proposed implementation meets the team’s safety requirements, we will be reverting to a classic dual reward program on Sushi. It revolves on contracts that were audited several times and massively used without fault so far.

The proposed implementation will result in a simpler flow for the depositors (no crucible to mint) and revolves on audited contracts only. The main downside with the sushi reward program is there is no time-based modulation of rewards (multiplier) like the crucible offered., on the contrary, rewards are dripped continuously.

There will be an additional SUSHI reward on top of the 5M PSP allocated for three months, meaning that overall the rewards will be at least identical but most likely higher (+SUSHI) than initially envisioned.

To facilitate the discovery of the program, a UI offering an overview of the various decentralized exchanges pools to supply PSP to will be available, covering all opportunities on mainnet: Uniswap, SushiSwap, Bancor, and the upcoming Balancer pool.

Forward-thinking considerations

Before the end of this program, governance will have to decide whether to continue it as such or adjust it if needed.

This situation highlights the need to explicit and formalizes the conditions of collaboration between the team and the DAO: it will be part of the constitution.

Revised Implementation overview

  1. (SushiSwap team) Deployment of the rewarder contract - done
  2. (SushiSwap team) Handover of the rewarder contract ownership to PS team
  3. (PS team) Initial funding (1 month) + parametrization
  4. (PS team) One month after the launch the second part of the PSP budget will be supplied, and the third two months after launch.
3 Likes