Liqwid-Minswap DAO Token Exchange, Liqwid DAO Protocol Owned Liquidity, LQ/MIN pool on Minswap v2 with Triple Farm Incentives

Temperature Check
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Following active community feedback on the initial Minswap triple farm proposal including launch of Liqwid DAO Protocol Owned Liquidity (POL) an alternative proposal is being submitted that fully mitigates all of the negative tradeoffs community members have mentioned. The initial proposal for the Minswap triple farm was 2% of LQ token supply emitted over 12 months to LQ/ADA LPs on Minswap. The two main concerns raised by the community are 1. opposition to increasing LQ emissions and 2. sell pressure from LPs farming the triple farm rewards.

*Currently ~150k LQ is emitted per month to Liqwid lenders (100k LQ), Liqwid ADA borrowers (20k LQ) and LQ stakers (~30k LQ).

While most community members responding to the post agreed that DEX incentives should be pointed to the DEX with the most volume and liquidity (currently Minswap) the opposition to increasing LQ inflation rate and potential selling pressure from farming of the triple farm rewards was mentioned several times by different community members. After discussion on these points with members in both Minswap and Liqwid DAOs we are now ready to propose to both DAOs an alternative path that fully addresses both of these major community concerns.

Liqwid’s core team feels this proposal fully mitigates the downsides of a traditional Minswap triple farm noted by community members and also creates a positive sum outcome for both Minswap and Liqwid DAOs.

The following proposed plan will now replace the initial triple farm and Liqwid DAO POL proposal. If onchain votes in both Minswap and Liqwid DAO successfully pass the following proposed changes will be implemented:

1. Minswap and Liqwid DAOs will complete a 1:1 token exchange ($1 of LQ from the Liqwid DAO treasury will be exchanged for $1 of MIN from the Minswap DAO treasury).

A legal contract between the Liqwid DAO Association (Swiss-based Non-Profit Organization) and Minswap Labs will be enacted that states:

A. Both Minswap and Liqwid DAOs agree for the next 10 years no LQ and MIN tokens exchanged via this DAO token exchange will be sold and may only be used for staking, providing liquidity or using as collateral to borrow against.

B. Minswap DAO agrees to delegate 50% of their LQ voting power to Cardano community members, SPOs or Liqwid DAO stewards of their DAOs choosing.

The exact USD amount of LQ and MIN tokens to be exchanged by each DAO is still under final consideration and will be included in this proposal shortly. For the purposes of early discussion on this proposal a range of $1-3m tokens from each DAO can be assumed.

2. A LQ/MIN pool will be created at the launch of Minswap v2.

3. LQ/MIN Minswap v2 pool with triple farm for the next 12 months (2% of LQ token supply, 35k LQ per month).

4. Liqwid DAOs acquired MIN will be paired with LQ from the DAO treasury and used to LP in the newly created LQ/MIN pool.

5. The Liqwid DAOs LQ/MIN LP tokens will be staked in Minswap Farms to bootstrap Liqwid DAO’s POL earning MIN, ADA (staking rewards and trading fees) and LQ.

6. LQ will be sent to the Liqwid DAO treasury wallet, MIN will be staked to earn ADA yield via MIN staking and the ADA will be supplied to Liqwid ADA market to compound the DAOs POL.

To summarize how this proposal mitigates the negative tradeoffs of a regular Minswap triple farm:

  • The majority of additional LQ emissions to the LQ/MIN pool will be returned to the Liqwid DAO treasury wallet as Liqwid DAO will be the largest LP in the pool.

  • The lack of emissions to non-Liqwid DAO LPs equates to reduced LQ selling pressure for LPs farming the triple farm incentives.

To summarize what Minswap and Liqwid DAOs gain from this DAO-2-DAO token exchange transaction:

  • Minswap DAO earns ADA real yield on their newly acquired LQ (Liqwid programmatic distributions to LQ stakers) which would otherwise remain as MIN in their DAO treasury not staked earning any real yield.

  • Minswap DAO earns additional LQ (LQ staking rewards) which they can stake to compound their DAOs POL and delegate/vote with on Liqwid governance proposals.

  • Liqwid DAO is able to leverage MIN’s deep ADA liquidity pool via the Minswap multi-hop feature allowing users to easily swap LQ into ADA via the Minswap app UI or a DEX aggregator UI.

  • Liqwid DAO bootstraps POL with ADA and MIN from Minswap triple farm rewards.

  • Liqwid DAOs MIN earned from Minswap Triple Farm rewards can be staked to earn ADA real yield (MIN staking).

  • Liqwid DAO can vote on Minswap governance proposals using MIN in the LQ/MIN LP and with staked MIN.

  • Liqwid DAO can supply ADA yields from MIN staking to the Liqwid ADA market to further compound POL.

  • Liqwid DAO can vote on Minswap DAO supported Catalyst proposal votes and earn voter rewards fees to further grow POL.

Summary

Liqwid Labs Core Team feels this proposal balances community feedback and creates a positive sum outcome for each DAO. Considering Minswap’s upcoming v2 launch will require a migration of liquidity to their v2 Aiken contracts we feel the sage timing of this proposal will also be a major contributing factor to its success. As the two largest liquidity protocols on Cardano Minswap and Liqwid are well positioned to continue accelerating on current growth trajectories and advancing Cardano DeFi. This DAO-2-DAO token exchange transaction represents a new era of coalition and experimentation in innovative liquidity bootstrapping methods.

A huge thanks to all of the Liqwid community members who participated in discussions related to this proposal in the original forum post and the Discord governance discussion channel. Your input helped shape this updated version of the proposal.

Do you support this proposal for a Liqwid-Minswap DAO token exchange, Liqwid POL and LQ/MIN pool on Minswap v2 with Triple Farm Incentives?

  • Yes
  • No

0 voters

2 Likes
2

Big YES from me.

3 Likes
3

This goat is turned on.

1 Like
4

as a LQ staker, id love a small addition which would be for the ADA yields to be 50/50 split.

50% to the ada market, 50% to boost programmatic distributions.

thoughts? @DC1

3 Likes
5

I’m going to have to start collecting MIN too

2 Likes
6

As a member of both DAOs, this symbotic relationship of DAOs believing in each other enough to hold each others real yield generating tokens is HUGE.
This is what its all about! WAGMI

3 Likes
7

Interesting proposal. My initial reaction is yes this is a positive for both daos. However, I see that liqwid is requiring 50% of the voting power acquired by Minswap to be distributed to community or SPOs or liqwid delegates. Should liqwid also do the same for the acquired Minswap voting power? Unsure how this is technically feasible, but thought it’s a valid point to consider.

2 Likes
8

I do not support this.

  • Minswap has a USD value twice that of Liqwid. A $1:1 exhange of tokens grants Minswap DAO twice the governance control over Liqwid that Liqwid DAO receives in exchange. Based on the above this deal would give Minswap Labs governance control over Liqwid to the extent of between ~2 and 6% of total supply unless I misread. This will be compounded by massive LQ rewards they can receive from staking. It essentially makes them a leading entity in control of the protocol.

  • Unless I missed something, we are getting: the benefit of not selling any LQ on market, deeper liquidity on Minswap, and LP rewards including retaining a large % of the 2% of incentivized farming rewards. ---- What we are giving up for this is disproportionate control of Liqwid DAO, LQ staking rewards, and on top of that all of the LQ/MIN that we will LP will be going towards boosting Minswap’s TVL, whereas the LQ they gain does not contribute to our TVL (unless I’m mistaken that a protocol’s own staked tokens are counted).

  • While their gamble is similar (albeit much less since the % of their supply is 1:2 against what we’re getting) we are tying 2-6% of our token supply to the gamble that Minswap remains the top dex on Cardano, does not suffer critical exploit, etc)

While I think it’s a good idea from a farming perspective, it is not a fair deal in my eyes and heavily benefits Minswap compared to the benefit we receive. Are we that desperate for deeper DEX liquidity and some farming PoL that we’re willing to give up 2-5% of our total supply and take on added risk?

Hoping someone can assuage my concerns.

3 Likes
9

Hence 50% of voting rights.

1 Like
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50% to the DAO, 50% for them to delegate to a “community member” at their discretion. Which can basically be anyone, someone who is very close to the Minswap team and votes in alignment with them. No matter how look at it it is giving Minswap a team-member level (or multiple team member) seat(s) at the governance table for Liqwid DAO and not giving us the same influence over their dapp. It might not cause market action but it is still a sale, of a large number of LQ tokens at a very undervalued price… in exchange for dex liquidity, POL and a minor share of control over Minswap DAO.

2 Likes
11

I have known Minswap to always do the right thing by the community and ecosystem and I believe this will apply here as well. Plus this vote would also have to pass the Minswap dao as well for any of this to happen and if the dao is giving up their treasury then there will most likely be a vote passed down to the dao on whom that other 50% would be delegated to as well. I am voting yes.

12

Whether or not you believe they would vote for good things is beside the point. The point is that this vote effectively gives up 2-6% of LQ’s supply to another defi protocol. In exchange for non-critical benefits for which viable alternatives exist. The main goal of this discussion is to increase liquidity depth on dexes and generate PoL. Both of those things can be achieved in more gradual manner. There is no incredibly urgent need to rapidly accelerate them in exchange for a large stake in Liqwid DAO… a controlling stake potentially in many cases.

2 Likes
13

Win - win on my opinion. Controlling stake is also given to you guys. Both min and lq would just be sold by normal lps otherwise. LQ dao will also be seeding a v2 pool and earning min from farming and staking that to compound yield earned in ada for treasury. Lq dao will have 1-1 voting rights in MIN as well, so the benefits are mutual (maybe even liss in MIN dao case). With boosted staking voting rights, your staked MIN will also have extra governance. Min dao gets another way to use their MIN as well instead of just triple farming and rewards being sold for profit (cresting more sell pressure on min).

I think it is a win-win as mentioned earlier. Sell pressure on both LQ and MIN for amount agreed upon is mitigated for 10 years and assets put to work to compound both treasuries.

14

I agree, MInswap is getting a better deal. I would rather see an allocation across the top 5 DEXes according to a specified metric or adjust Minswap’s allocation so it is more balanced.

I believe it is crucial that other protocols that provide value to the ecosystem must hold $LQ in their treasuries. The more parties, and players who hold a token, the higher the perceived value of said token.

1 Like
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Controlling stake is not given to us. And no it is not 1-1. They will give 50% to a community member of their choice, which is essentially anyone they want. That is fluff. Again, it’s not a matter of whether it’s a fair trade only. It’s a matter of if this is even necessary. It is not. Min also gets “boosted” governance share after 6 months when their staking jumps from 5% to 30% and then to 50% at 12 months in LQ rewards (thousands more weekly they could compound).

Sell pressure is not “mitigated” by giving DAO controlled LQ to another entity… There is no sell pressure from that to begin with, without a DAO vote. We could simply use treasury revenue to build PoL. The only mitigated sell pressure would be if we did this proposal instead of allocating 2% to farming reward incentives. And the sell pressure mitigated would be very minimal, even dc agrees with that.

The only reason this is even a proposal is because some community members want increased liquidity death and to start growing PoL. This is not the ONLY method to do so, it is just the most accelerated option proposed. We can grow it organically and even dedicate DAO revenue to buy LQ off market to add to LP if we wanted to… We generate $20-30,000+/month now based on January numbers.

16

Not really. Lq gets 100% of the MIN tokens to be used as voting rights (while MIN dao only 50%), they get yield in a dex that dominates 75% of all market transactions, they mitigate LQ farming sell pressure, and also seed a v2 pool. Imo, voting on MIN governance currently has a much larger impact on ecosystem than any other ded due to their huge ada wallet from tvl. LQ dao now gets to own rights to control a piece of that vs less prominent dexs. Sure it is more decentralized to spread it, but you get a lot more value for your LQ by choosing MIN. Your yields, voting rights, and influence on ecosystem as a whole (especially with cip-1694) will be more prominent than other dexs.

17

Fruit for thought. Combine tvl of all other cardano dexs on defillama. It is still lower than min. Add all their volumes and its still lower. It would actually be bad stewardship of LQ dao assets in this case to spread across dexs. Your voting power and yield generated diminish greatly.

18

They get 2% of our token supply to their 1%. It is only 1:1 in USD value. Again, their market position is irrelevant and not assured. Spectrum topped at 20% market share within months of being live. Axo is coming up. Aggregators level the playing field of volume. But none of that matters. The question is whether this is necessary, and whether or not other viable alternatives exist that don’t demand giving up very significant (team level voting rights) to another defi application.

Liqwid controls a 70 million+ ADA pool for Catalyst voting. With the amount of participating votes in the first round, if Minswap had the allocation proposed here they could have unilaterally decided all 20 winners of that vote. 18/20 proposals were funded. That is not a small value.

Minswap TVL is also irrelevant to the debate. Beyond the point that we would also be benefitting their TVL with this trade whereas they are not benefitting ours I don’t believe (I dont think defilama or others count the protocol’s own staked token). I’m not proposing “spreading DAO LQ across dexes”. I’m proposing growing PoL/depth with DAO revenue.

1 Like
19

I think coming up vs already here for 2.5 years and still going strong are facts vs speculation.

The MIN wallet had 83,000,000 ada two funds ago to vote. Tvl matters because the higher tvl dex gets more orders and lq would essentially get real yield paid back in ada by holding MIN. As MIN has a staking program.

You look at it as MIN “gets” 2% of LQ supply. I look at it as this agreement would mitigate sell pressure on 2% of your LQ which would otherwise have to be distributed to farmers who are not obligated to hold for 10 years. LQ would reduce their circulating supply by 2% if this works out, making their asset scarce, but also putting it to work to generate yield for dao.

1 Like
20

this proposal contains too many actions in one, it should be split into few separate proposals as some are no brainer and some are contradictory

2 Likes