Proposal 002 - Framework for Implementation of DEX LP Incentives

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!

29 Likes

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.

13 Likes

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

19 Likes

Is the 4% allocated to dexes released over the 3 year time period?

I advocate that all changes to proposal 002 be submitted and enacted by the end of the Q2 2022 to set a time frame.

3 Likes

2 DEXs at a minimum, but 3 DEXs are ok if the TVL is a greater that 25% to be efficient with ample liquidity on the dex.

3 Likes

Top 2 DEXes max for better liquidity

8 Likes

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.

2 Likes

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.

3 Likes

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

11 Likes

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. :slight_smile:

1 Like

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.

3 Likes

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.

2 Likes

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.

2 Likes

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.

  • DEX eligibility process
    1. the DEX must have carried a good launch in enhancing the reputation of DEXs on Cardano.
    2. the DEX must have carried a best in class LBE process(ala. MINSWAP LBE process) so far.
    3. post LBE the DEX must carry equal or more than ADA 20Million TVL
    4. Low VC involvement and therefore centralization of token.
  • DEX selection process
  1. a vote on reputation of the DEX, score 1 to 100.
  2. an valid LBE like price discovery process that is pro-decentralization not VC centric
  3. High LBE price discovery value locked more than 20MIllion ADA
  4. 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
  1. Top 3 DEXs in TVL
  2. 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)
  1. 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
  1. 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.
12 Likes

I agree with most of your proposition, except for the allocation curve, which I think could be more regular to prevent massive short term moves.

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.

2 Likes

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.

2 Likes