The purpose of this proposal is to determine how to best implement a framework to allocate the 4% DEX LP incentives voted in Proposal 001’s updated tokenomics (read full proposal here).
The main discussion points this proposal hopes to spur are based on how the community should implement a framework for deciding DEX LP incentives:
DEX eligibility process
DEX selection process
Total number of community selected DEX’s
Type of incentives program (bonding/LBE or yield farming)
LQ allocation per DEX
Technical implementation of each incentives program across selected DEX’s
We understand this is not a regular proposal submission as the final vote parameters will be based on the community decided framework for selecting DEX’s. A series of temperature checks will be conducted over the course of this proposal to gauge community sentiment on specific points.
Please leave your feedback and suggestions on potential frameworks below!
We should limit the number of DEXs we incentivize liquidity to 2. More than that will lead to liquidity being spread too thin causing high slippage which is discouraging for a lot of investors. Also keeping lq incentives close to 50-50 ratio between the two makes most sense for me, unless lq gets special treatment compared to other pairs at 1 of the 2 DEXs we decide on.
Dex must be one of the top by TVL - assuming a fair comparison point. And available before the time of V1 Launch.
DEX should be audited
Open sourced is better
Active communities
I would suggest 3 - 4 Dexes soo as not to favor one specific DEX with equal liquidity
Choose DEXes based on highest TVL, if a few are relatively close it’s worth considering more than one, but as it stands SundaeSwap is the clear winner.
I suggest a mechanism to reassess every quarter. We’ve just seen Minswap overtake SS in a matter of a week. There are others set to launch this summer also.
There are two DEXs that are currently responsible for 272m of TVL are MiN and SS.
Requirements for 4% should be
-top 2 TVL or maybe a third
-consider Cardano defi alliance projects
-utilize a team or council from community to continuously monitor the best DEXs and maybe adjust quarterly
Most other projects only offer a 1% of supply incentive program. If we were to select the top 4 DEXs and each receives a 1% incentives program, it would reach a wider user-base. Community-vote on the DEXs. As far as the period switching according to biggest DEX by TVL: Other projects currently don’t plan it. Check the Sundaeswap proposals, It seems rather fixed. Are there costs associated with initializing these incentive programs?
Wait until TVL grows a bit and go for max 4DEXs (1% per DEX). After more DEXs launch and the dust settles we will see what DEXs stands the strongest and go for those.
Seems like we need to establish how many DEXs before which ones. I think we can all agree at 4% no more than 4 DEXs but definitely more than one is necessary. For determining which ones, seems like TVL (total value locked) is the most telling stat.
It’s clear that just because you were the first to launch does not mean you will have first-mover advantages. Better dex, more functionalities, and features will come in later dexs. I’d say at the V1 launch, we should commit 1% of the 4% to the highest TVL dex to test out the water. This gives a change to new Dex’s coming online and the existing one competing for the liquidity. Once the Defi space matures a bit then we can really commit more. Otherwise, we’re gonna just do exactly what happened in proposal 001.
I believe that dividing the incentives across dexes is the way to go. If we select 1 or 2 we will ve favoring some dexes. Having said this, I do not believe we should dillute it more than with 4-5 dexs.
It would be cool to provide liquidity to some dexes in the milkomeda side chain. I know it might not be ideal but it would allow LQ to enter inside that ecosystem first.
Either partner dexes or dexes that speak of LQ highly (see Minswap’s tier system and how they valued LQ). This is goed for mutual benefit. With LQ becoming available to stakers after launch I’d say 4 incentivized dexes max to spread liquidity is a great start.
the DEX must have carried a good launch in enhancing the reputation of DEXs on Cardano.
the DEX must have carried a best in class LBE process(ala. MINSWAP LBE process) so far.
post LBE the DEX must carry equal or more than ADA 20Million TVL
Low VC involvement and therefore centralization of token.
DEX selection process
a vote on reputation of the DEX, score 1 to 100.
an valid LBE like price discovery process that is pro-decentralization not VC centric
High LBE price discovery value locked more than 20MIllion ADA
Pro-decentralization with token sale mainly to community. No private DEXs or heavy VC sponsored DEXs.
5.Develop metrics for decentralization and select DEX with only HIGH ratings ( Low MED HIGH ). Eg. how was ISPO conducted, effects on Nakamoto Coeff, transparent sale data and report of ADA from ISPOs…
Total number of community selected DEX’s
Top 3 DEXs in TVL
Consolidate using a TVL/ (avg. volume) target of 10% on the first month, 5% 2nd month, 1% third month, 0.02 on 6 months. these are just examples.
Type of incentives program (bonding/LBE or yield farming)
LBE is proven to be quite successful with MINSWAP now the highest TVL DEX on Cardano.
2.Yield Farming is popular and although more complex to understand has proven popular.
LQ allocation per DEX
Allocate and Consolidate using a TVL/ (avg. volume) target of 10% on the first month, 5% 2nd month, 1% third month, 0.02 on 6 months. these are just examples. this would depend on a model of uptake of volumes and TVL achieved post launch.
Nice proposal !
I would say that 2-3 DEXs can be a correct number, based on highest TVL and also if they have a reward program themselves for LQ pools(or had one by the past).
The allocation per DEX could be proportional to the TVL of the LQ-ADA pool, with maybe a monthly snapshot to reevaluate.
There are many great dexes to come. Each with an unique user base. Since there will be tribalism about dexes anything less than 3 will probably leave out a significant part of the Cardano Community.
3 should be the minimum. I don’t think liquidity will be too thin if we spread it out over 3 dexes. 4% is a big part of the tokenomics therefore we should aim to maximise the effect.
I think it is important to ask the question: Why do people want to incentivize one Dex over another.
I fear the answer is because people have a financial interest in one Dex succeeding over another. Eg people have farmed up Min or SS tokens and would like to see number go up. This thinking is self serving and doesn’t serve the greater ecosystem.
That being said I think the fairest way to divvy up rewards is to make them dynamic. Eg the rewards will be the relatively the same regardless of which Dex you decide to allocate liquidity towards. This can be achieved by a simple flat APR across all dex’s that are included in the program. By doing this you remove the LQ incentive curve, and people can choose which dex they support based on other factors. LQ LP’s are rewarded the same regardless of which Dex they choose.
As for Dex selection, I think it is best to choose Dex’s that are part of the Defi Alliance and have a working relationship with the Liqwid team. Additionally, I think dex’s that incentivize LQ/ADA pairs with their own token should also be given favor.
