Proposal 001 Debriefing

Summary of Proposal 001

After the successful vote, the following changes in the tokenomics were accepted:

  1. Removal of yearly halving in community incentives.
  2. Allocate 17% of token supply to LQ stakers in the Agora Safety Pool.
  3. Allocate 4% of token supply to LPs of the LQ/ADA SundaeSwap pool.
  4. Replenish the initial 5% DAO Treasury allocation

With the updated tokenomics 68.5% of LQ token supply is allocated directly to the community across 3 categories (47.5% Community Incentives to lenders/borrowers, 17% Agora Safety Pool stakers, and 4% DEX LQ/ADA LP’s).

Other points of attention raised during the discussion of Proposal 001

Several community members have expressed concern about the 4% DEX allocation in Proposal 001 going to a single DEX. The driving purpose behind launching community governance pre-Agora was to enable open collaboration and good faith discussion to move the protocol forward. The mission behind governance forum communications is to bring the best ideas to the table, for the entire ecosystem to review and weigh in on. That said our core team has reviewed feedback from community members on Discord, this governance forum and Twitter including during community calls. It’s our goal to make sure some of the voiced concerns are fully discussed and the most impactful strategy for the Liqwid ecosystem is the path enacted. This is what building community is all about.

The first major concern mentioned was on the number of actions included in the Proposal 001 being too many. Raising this as an issue is warranted but as mentioned previously multi-action proposals are a common practice in DAO communities; if every individual action required a separate vote it would be extremely inefficient to the voting phase step. There is not a requirement for a nominal hard cap on actions per proposal at this time. In addition the Agora governance module can support many updates per proposal so placing artificial limits on pre-Agora community governance at this time feels premature. That said as described in the community governance Medium article large-scale proposal changes submitted during this interim governance must be formally submitted through Agora at mainnet launch. It’s clear the action to point incentives to a DEX (or multiple DEXs) represents a community decision that requires its own individual proposal to hash out the source of each unique concern, brainstorm all potential solutions and decide on the best tactic for the Liqwid protocol moving forward.

Alternative incentives mechanisms

The next major concern was the LQ/ADA SundaeSwap pool as the sole DEX included in the allocation. As previously mentioned when Prop. 001 was submitted SS was the only live DEX, things have changed quickly and this debriefing and subsequent proposal aims to be reflective of these changes. With the successful launch and liquidity scaling of the Minswap DEX multiple community members have expressed their wishes to have part of the DEX LP incentives pointed to LQ/ADA pool LP’s on Minswap and potentially future DEX’s (e.g. WingRiders, Genius Yield DEX’s).

Other users pointed to bonding versus yield farming programs, which present various tradeoffs we must fully explore and navigate as a community to select a well-balanced liquidity incentives model for this ecosystem.

Conclusion

Both the number of DEX’s (liquidity fragmentation) and the type of liquidity incentive programs selected (bonding/yield farming) come with pros and cons the community must fully analyze before deciding next steps. The biggest positive is this community is full of smart thinkers with diverse perspectives, our core team is confident this collaborative brainstorming effort will bring about the most quality options. Another positive, there is no time crunch on making this decision at all, it’s entirely up to the community to implement the framework used to measure Cardano DEX viability for inclusion in a LQ incentives program and we fully recognize this will take some time.

For these reasons we have created Proposal 002 as a standalone proposal dedicated to selecting how the 4% DEX LP incentives should be allocated. We encourage you to review and leave feedback. Please keep in mind this is an early draft version of the proposal which will go through several community revision rounds before it’s finalized and ready to be voted on.

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