At the moment dividends are paid out for each market.
This creates a lot of small positions and adds up to a lot of fees that ultimately stakers have to pay.
Fees accrue
when sending the rewards to the individual wallets. Sending more tokens is more expensive in the cardano ecosystem.
when individual stakers later want to exchange their rewards to a specific token (~2.3 ADA per token position (batcher fee plus transaction fee, LP fee neglegted). That is 13.8 ADA to exchange all rewards to ADA!
And
That renders rewards under 2.3 ADA often useless (If the person does not have the specific token already in their wallet) and decreases the usable Yield on staked LQ considerably
We can reduce fees and thus increase actual Yield by paying out the “dividends” in ADA. That means one big swap per Token. Instead of many hundred small swaps, saving stakers thousands of ADA in transaction fees in the short term and tens- to hundredthousands in the long term.
Holders of smaller stakes can only like this recieve their full Yield, because the fractions are often too low to have any use.
Would you like to have your Dividends paid out in ADA?
Also later there will be people with small bags that would like to recieve something they can actually use.
ADA is the native coin of this ecosystem, no matter how small the amount you recieve you will always be able to use it, at least to help to pay fees.
The problem will only get bigger when we add MIN, WRT an whatnot.
who wants fractions of 20-50 coins in their wallets?
And the accumulated transaction fees and load on the network, energy costs etc… I really think paying out in ADA is the only economical and sensible option
I like the idea of getting qTokens so all this liquidity (fee switch) goes in Liqwid’s pools/markets and stacks in our bags. Users keep qTokens in their wallets and liquidity stays in Liqwid instead of Sundae distribution platform or wallets. Many won’t supply or exchange because of small amount/dust.
While I acknowledge your arguments for the payout in ADA which is very enticing indeed, however below are some of the counter arguments which one may need to consider;
Some of the token listed has extremely low liquidity in DEXes, as such, converting these assets into ADA may incur high slippage.
Just to give some perspective
As per taptools.io, USDC and USDT only have 40,363ADA and 127ADA of liquidity depth respectively. It is impossible to trade this pairs of token.
Additional work for the team to exchange these tokens on weekly basis. They can focus on more important tasks instead.
People may game the system by timing exactly and manipulate the market by, say, dumping tokens to drop the price just before Liqwid sells these assets into ADA, and buy back the assets at lower prices.
Nonetheless, with the dust that we’re getting, users are stuck as it is not worth it to withdraw these assets and exchange them manually into ADA.
My suggestion would be to distribute dividends in the form of qTokens instead. With this, users have no rush to withdraw their assets to put it to work as they are already earning interest
Liqwid protocol is also in benefit as they effectively are increasing supply of tokens into the protocol, increasing the TVL
no risk of slippage, price manipulation,
no additional works for the team other than to resupply the assets for the qTokens.
I am in favor of all tokens. But, maybe the tooling of the rewards platform can be adjusted so each individual token distribution has a claim individual button (instead of “claim all” at the bottom. This would allow the user the option to let certain “dust” tokens accrue until the balance was large enough to offset potential fees and support decentralized decision making with selecting the optimum time to take rewards.
If we ask the payouts in ADA we literally ask the team to become a DEX/CEX broker or market maker. More markets and more users mean more revenue and more rewards from the fee switch. The bigger the payouts the bigger would be the trades. Liqwid could become a big market maker on cardano DEXs that other players would monitor and play against to maximize their profit. Also could be a lot more time consuming for the team to deal with it.
I am not against payouts from some tokens in ADA. I would also like to see if AXO can deliver, as advertised, their DEX without batchers and batching fees before we take any action as it would reduce the cost a lot.
What I would like to see in the future is a fully automated and programmable complex distribution and rewards channel. It could give also further utility to users who also hold an aquafarmer.
The best for protocol is when TVL and liquidity in the pools stays and grows. Therefore I would incentivize users who once claimed their rewards would restake their LQ to the safety pool and re-supply their payouts back to the liquidity pools. So this would be the gold standard that could be tiered by a rarity of AF in the wallet.
The biggest advantage is a lot of these internal transactions could be done off-chain by the team.
A user wallet with a Legendary AF would have the cheapest transaction cost once he confirms an automatic LQ restake and rewards tokens re-supply.
A user wallet with a Super rare AF would have a slightly higher transaction cost.
and so on…
A user who would like to withdraw his rewards to his wallet would have to face a full cost.
The further programmability and flexibility with the inflow of new tokens/markets could be not only what reward token wants each user to receive in ADA or stablecoin but also what % of the reward token wants to be converted and what % wants to keep it as it is should he wish so.
Of course, having it built with all these functionalities would take a good chunk of money and also time.
Payouts in qTokens is a great idea and it’s the best available option for users. We will explore the operational work needed to implement this. Thanks for suggesting.
Hey you bring up great points here @Hizairi thanks for this comment. Also think selling these tokens for ADA comes with certain legal and tax implications the Liqwid DAO Association would need to review in terms of Swiss regulations.
Distributing as qTokens is brilliant idea that both dogfeeds the protocol’s main function and avoids the operational nightmare of converting it (plus gives users ultimate flexibility to continue earning, or remove it).
Great idea qTokens. Is that correct though that in order to withdraw them, a user would need at least 100$ worth of tokens?
if this is the case,
should the threshold be lowered a bit?
people code provide some liquidity just to make up the 100 bucks and the withdraw immediately to collect their dividends
I guess though there are fees associated to (2).
I still believe qToken is the best (super light operationally and users will get their income at work immediately), but in this form could maybe penalise small lenders.