8RC-9: new liquidity mining & POL program [Updated]

Proposals Request for comments
#1

8RC-9: new liquidity mining & POL program

Author: 0xmcfly.eth

This proposal is expected to appear on Snapshot for voting on April 18, 2022 (UTC) . Make sure to stake your xMPH for voting to participate in the DAO decision.

Update: the Ichi proposal will be put on hold until the dust created by their recent events settle down. The Ichi MPH allocation will be redirected to the Uniswap v2 LM proposal until a solution emerge to create concentrated liquidity on Ethereum mainnet. The Bancor proposal and BeethovenX proposal are still active and will be published on Snapshot for a vote on Saturday 15, 2022, 8am UTC.

Specification

This document proposes a new program to incentivize more liquidity for $MPH trading pairs on Ethereum Mainnet and Fantom over 12 weeks. It also covers some ideas to kickstart our POL (Protocol Owned Liquidity).

Ichi Angel Liquidity Vault

Ichi’s core team invited us to collaborate on the creation of an Angel Vault. It will offer concentrated liquidity on Uniswap v3 for oneMPH/MPH and oneMPH/USDC pairs with the additional benefit of decorrelating the MPH price from ETH and offering built-in protection against downward price actions.

Angel Liquidity Vaults are a Uniswap v3 liquidity management protocol that allows LPs to deposit single-sided assets into a pool. They combine the rewarding and user-friendly experience of Uni V2 with the concentrated liquidity of V3. They enable projects to build a treasury of POL and LPs to earn fees without managing their pool positions.

Most approaches to market-making and liquidity involve putting up $MPH tokens and a base asset (usually ETH) for sale. It works great when $ETH is going up in value versus the dollar but leaves the $MPH price exposed to drops in the value of $ETH versus the dollar. Only single-sided $oneMPH is added to the proposed $oneMPH-$MPH Angel Vault. It protects $MPH price against market corrections without hurting the upside during a bull market.

It’ll also offer new assets under management with the minting of oneMPH that could serve as POL positions by leveraging the assets backing $oneMPH to mint more $oneMPH and deposit it to the Angel Vault. The leverage ratio is controlled by the Ichi team.

It seems reasonable to initially target a minimum of $2.5m liquidity on oneMPH/MPH pair to enable profitable rebalancing of the Angel Vault and enough liquidity depth.

We propose 5,000 MPH as rewards distributed to Angel Vault LPs for the first month, with a renegotiated amount for the following two months according to initial results in the limit of 8,000 MPH for the three months. We encourage everyone to post their feedback regarding these figures.

Ref: Angel vault docs.

Argument for

  • LPs will earn more trading fees with less required capital.
  • Liquidity rewards will increase the amount of buy-side liquidity without also incentivizing sell pressure.
  • The LPs rewards’ inflationary cost will be offset by the oneMPH’s deflationary minting.
  • Uniswap v3 asset management is a demanding job, Ichi core team will do it for us.
  • 88mph will build assets under management (AUM) backing oneMPH branded dollar and could be used to create our initial POL positons.
  • Exposure to a community of efficient liquidity providers.

Argument against

  • If MPH goes to zero, Angel Vault would only protect the price until a certain point. It’s not magic.
  • As with every brand-new product, there are risks associated with it.

Required actions

  1. Publish this proposal on Snapshot and organize a vote.
  2. Kindly ask the Ichi team to implement our Angel Vault before May ^^.
  3. Provide LPs rewards to Ichi with a progressive adjustment after the first month, according to initial results.
  4. Use our Ichi’s AUM to progressively build up our POL with singled-side oneMPH provisions.
  5. Ichi will build up the oneMPH/USDC pool already in use [here](Uniswap Info) to ensure deep enough liquidity for various trading routes.
  6. Progressively top-up our POL with additional assets from the 88mph governance treasury when the liquidity on Uniswap v3 will be efficient.

Bancor v2 POL and Bancor v3 LM rewards

We propose to provide 30k MPH in our Bancor v2 MPH/BNT pool as POL and allocate 5k MPH over the first 30 days as liquidity mining rewards to the upcoming Bancor v3 pool. We’ll reevaluate the next two allocations according to initial results and publish a new proposal for the second wave of rewards on Bancor v3 with a max cap of 3k MPH/monthly.

Argument for

  • This action could quickly offer some fresh air to our trading activities on mainnet while waiting for Bancor v3 LM program (dependant of Bancor release).
  • Liquidity migrated from Bancor v2 to Bancor v3 will see its Impermanent Loss Protection go from x% to 100%, as IL Protection on Bancor v3 is Instant.
  • LM rewards committed on Bancor v3 will become instantly part of the liquidity in the pool, and can be used for trading.

Argument against

  • No complete impermanent loss protection until Bancor v3 release.

Required actions

  1. Publish this proposal on Snapshot and organize a vote.
  2. Create a transaction to send 30k MPH via the governance treasury multisig.
  3. Migrate the pool to Bancor v3 when available and create a transaction to send 5k MPH via the governance treasury multisig.

BeethovenX pool and bribes

We propose to create an MPH/WFTM 80/20 pool on BeethovenX with an initial target of liquidity at $2.5m after the first round of bribes.

Bribes budget proposal:

  • round 1: 1,750 MPH.
  • round 2: 1,750 MPH.
  • round 3: 1,750 MPH.

We also propose to invest $200k worth of MPH as POL positions on BeethovenX over this 3-round period.

The following rounds (4, 5, 6, …) will be subject to a new governance vote. We’ll reevaluate the next allocations according to initial results with a max cap of 1,750 MPH/round.

PS: As a community, we should look for partners that could be interested to create a liquidity pool with WFTM/MPH/XXX/XXX and provide a wider set of bribes. Please comment below if you have some projects in mind (LiquidDriver?).

Argument for

  • BeethovenX is a friendly fork of Balancer. As far as we know, they are the most advanced DEX on Fantom, and they have probably one of the most friendly teams out there.
  • Offering bribes to their community of voters could trigger a long-lasting relationship if we can sustain decent trading volumes and fees.
  • BeethovenX allows custom pool fees. We should offer a generous variable fee of 1% by default to incentivize liquidity providers in the long term. Please advise if you have a different opinion on that topic.
  • The creation of this pool and the associated bribes could incentivize a substantial demand for MPH in the short term by farming it directly in the Fantom fixed rate pools or by bridging it from mainnet.

Argument against

  • The bribes approach isn’t sustainable in the long term without a defined POL strategy on Fantom.
  • Someone is probably working on concentrated liquidity on Fantom, so does the investment is worth it?

Required actions

  1. Publish this proposal on Snapshot and organize a vote.
  2. Create a transaction to send 5,250 MPH worth of bribes to BeethovenX protocol via the governance treasury multisig.
  3. Create at least three transactions to build up our POL positions on Beethoven MPH/WFTM pool via the governance treasury multisig over the 3-round period.

Uniswap v2 LM rewards

Alongside our Bancor proposal, we propose to strengthen MPH/ETH liquidity on Ethereum Mainnet by rewarding Uniswap v2 liquidity providers with 5k MPH over 30 days. Our existing Uniswap v2 farm can be used to launch this new LM program. We’ll reevaluate the next two allocations according to initial results and publish a new proposal for the second wave of rewards on Uni v2 with a max cap of 3k MPH/monthly.

Argument for

  • Uniswap is the defacto trading venue for the majority of 88mph community. This generous LM program could probably attract a significant amount of liquidity for our MPH/ETH pair there.
  • A trade of $10k to buy MPH on Uniswap v2 has a price impact close to 10%. This situation isn’t sustainable if we want to continue to be an attractive DeFi community on Ethereum.

Argument against

  • Generous LM programs aren’t sustainable without a defined POL strategy on Ethereum. Over the coming weeks, we’ll work with our partners to close some OTC deals and inject a portion of it to sustain our POL strategy via the governance treasury and developer wallet.

Required action

  • Allocate 5k MPH to our existing Uni v2 farm via the governance treasury multisig.
2 Likes
#2

You noted this as an argument against. Can you elaborate on this for me? Once Bancor v3 we will just have to choose? Is the likelihood that we lose efficiency on investment high or can we just transition with the protocol and/or movie to the angel vault?

#3

Is it possible to supplement mainnet gas fees back to mainnet eth instead until concentrated liquidity is an option? Maybe set a minimum amount per transaction? It sounds too expensive in my head, but $120k @ $22/MPH isn’t cheap for a short term solution. Any idea what we might make with the $200k POL to offset this? It seems like there is no stand out best way to grow POL so diversification might be our best bet… Then once we have some data points double down on our winners.

At the end of the day I think depositors will appreciate having access to easy liquidity on fantom and I don’t believe it will hurt us too much. When we do something like this on eth mainnet have the results been positive? How do we go from this to a “defined POL strat on Fantom” ?

#4

I put it as Args against because if we go with Bancor v2, we’ll be exposed to impermanent losses, so is it better to wait for the Bancor v3 release? When the V3 will be out, there’ll be a tool to migrate, so it won’t be a complex challenge to overcome.

1 Like
#5

We don’t have a lot of options if we want to build our POL. First we need cash/ETH to pair it with MPH or we need a platform allowing single sided liquidity provisions. AFAIK the only one available is Bancor. Ichi doesn’t seem an option presently. And to raise some cash, we need OTC deals, and improve the liquidity to allow the govT to perform some trades to get cash.

1 Like
#6

Thoughts on using Bancor v2 until the v3 migration tool is ready to try and get enough impermanent loss to get us going towards collecting the ETH mentioned below?

#7

Yep, it seems a good idea, especially knowing that bancor2.1 liquidity will get an instant IL protection when migration to bancor3.0

1 Like
#8

Hey, Tiago from Bancor here, happy to answer any questions!

As mentioned already, liquidity migrated from B2.1 to B3 will see its Impermanent Loss Protection go from x% to 100%, as IL Protection on Bancor 3 is Instant.

If you wish to add Liquidity Mining rewards to the pool, rewards committed on Bancor 3 become instantly part of the liquidity in the pool, and can be used for trading (by changing the trading liquidity limit in the pool via a proposal through our DAO)

3 Likes
#10

thanks for jumping in to clarify!

1 Like