Nibiru temp check: LQ stake tiers requiered to unlock full potential of LQ rewards for provided assets

preface: we are unfortunately non fluent english speaking and haven’t used translation software or IA to redact this temp check. We bet on your indulgence if some sentence should have been worded differently :face_with_peeking_eye:; and we hope the main idea will get through the barrier of language :partying_face:

Fellow Aquafarmers and beautiful people,

We are glad to introduce the nibiru proposal temp check:
:droplet:LQ stake tiers requiered to unlock full potential of :droplet:LQ rewards for provided assets.

Part I: why?
We observed that:
Most of crypto exchanges/platforms/protocols ask their users to hold a minimum of their native asset to unlock the best rates for rewards services, or access full potential of a platform.

For instance, you will need:

-tappy nfts :penguin: to unlock all the power of taptools;

-a certain amount of BNB to earn maximised rewards on Binance and discounted fees;
-a certain amount of CRO to get the best rates on crypto.com; or the best cashback rewards using the debit card.

-etc etc, examples are endless. Bringing this kind of utility to a token is not new at all and almost every protocol do it, we hope you see the point here :+1:

:arrow_right:concerning Liqwid :droplet:
As of today anyone can supply 100k $ of stablecoin (or any asset) to Liqwid and enjoy maximised rewards paid in LQ (full potential) without having to hold a single LQ.

While this seems fair, as we are big supporters of the protocol and its governance token :droplet:LQ, we would love to discuss the possibility of introducing the same kind of concept highlight above; which unlock the best rates to assets providers only if they stake a minimum amount of LQ in prorata of their assets value. If the LQ tier requirement is not met, there will be a penalty and the user lose some LQ rewards which will be re-distributed to LQ stakers and - why not- protocol treasury.

Indeed, we believe there should be a reasonnable amount of LQ to be staked by one user to unlock the full potential of Liqwid protocol rewards. We think it should be priced in % of provided asset by user with between 2 and 5 tiers maximum (to be discussed).

Part II: how?
We think the full potential unlock should not exceed 5% of the value of the assets provided by one user but this is to be discussed together perhaps some of you may say 10%. We don’t want to discriminate against shrimp wallets.

For instance, in the case we setup a 5 tiers LQ proof of stake program, what the rewards unlock could look like ?

We can imagine some reasonnable rates like:
tier 0: 0% lq staked = 50% penalty :broken_heart:
tier 1: 1% lq staked= 40% penalty
tier 2: 2% lq staked = 30% penalty :mending_heart:
tier 3: 3% lq staked = 20% penalty
tier 4: 4% lq staked= 10% penalty :heart:
tier 5: 5% lq staked or more =full potential unlocked :heart_on_fire:

Looking at these rates you see that it is much better for your rewards if you stake a minimum of :droplet:LQ.

Part III: a few examples

Lets see a few examples with our old crypto friends Alice and Bob:

:arrow_right:Alice is providing 100k of USDC to Liqwid and earns approximately as of today’s rates 20% (20k$) of LQ per year. But Alice stake 0 LQ because she has decided to milk the protocol by selling her LQ rewards as soon as received for more Ada and USDC (which is a strategy like another, we do not judge her).

If the proposal pass, what does this means for Alice? She is providing assets but got no LQ staked :sleepy:Well, her LQ stake is worth 0% of all the assets she provided to Liqwid : she qualifies for tier 0 and she will get half of the rewards (50%) she should get if she had some more LQ staked. the other half is redistributed to LQ stakers and protocol treasury.
:arrow_right:Alice will earn (in one year) 10.000$ worth of LQ instead of 20.000$ :money_with_wings:. the missing LQ (worth 10.000$) will be re-distributed to LQ stakers and -why not- protocol treasury. :moneybag:

Now let’s see Bob. Bob is providing a basket of native assets to Liqwid, for a total worth 10.000$. Moreover, he stakes some LQ token worth today 500 $. That is 5% of the value of the assets Bob provided. Bob qualifies for tier 5 and is enjoying the full potential of the protocol as long as his LQ stake is worth more than 5% of the assets he provided. Bob is smart (but please note we love Alice too).

Conclusion:
From our point of view, this proposal bring more value to the :droplet:LQ asset in 2 ways:
-from one side it contributes in increasing the demand for the :droplet:LQ asset (by lowering the sell force :brain:);
-and from the other side it creates a new stream of revenues to the LQ stakers and reinforce the protocol treasury.

This is all. We are impatient to read your feelings about this, please share your feedback! do you feel the idea is pleasant? Does it need some adjustments? Or is it evil and stupid, and shall we forget it and never speak about such an idea ever again?
Also which of the ADA or USD value should be taken into account when computing tier?

With regards,
nibiru :new_moon_with_face:

8 Likes

I don’t hate it but I think it adds unnecessary complexity and the main purpose of this would be to raise token market price/increase demand for $LQ; not necessarily add any new value to the token. It creates an extra financial barrier for suppliers even if the cost is 5% or less. Plus the team would have to code it in, and make sure oracles are monitoring the ratio of supply-LQ in real time.

1 Like

Hi Nibiru @VVV ,

Thank you for putting up the lovely proposal. I appreciate your time and effort.

I agree with @Dev. Although your objective/intention is good, which is to discourage selling of LQ rewards and reduce some sell pressure; I believe this will introduce unnecessary complexity to the already complex protocol system. Not even sure if it is technically feasible to be coded by the team.

Just take a look at our recent discord chats, some users can’t even grasp the simplest concept of APY and $ denominated rewards calculation method. It is going to be even more troublesome to explain the above penalty system if this gets implemented,

I think we should keep the protocol and coding as simple as it can be; it will also keep the protocol safer, i.e. less risk of loopholes/bug/hack.

Let’s not intervene too much and let the market runs free, if people are selling, let them be. I’m sure those who value to protocol enough will buy off some cheaper LQ on the market. The price will pick up when the time comes. We only need to focus on delivering actual value to the Cardano ecosystem.

1 Like