Liquidity Mining Adjustment #4

TL-DR : Reducing APWie integration rewards

Context :

As stated in PuRe 1 , and confirmed in PGP-4 we have gathered data to optimize the distribution of PAL for deposits with March and LBP data now that we have a token price (and that APYs can be displayed!)

Proposal :

  • Reduce APWine pool to 10k PAL / month (50/50 split to incentivize the single asset pool more) ;

Rationale :

As we now have a token price, we are currently reviewing all of our mining incentives. The most obvious overkill one is on APWine where we should be distributing 70%+ APY starting this week. This is too much, and we want to avoid bleeding too much ressources that will be much needed in the near future (Warden LM).

We are monitoring the Curve pool activity to judge if the current output is justified.

Means :

None outside of gas spendings to adjust mining output.

Voting Options :

No / Not voting will execute the changes

This proposal will go live for vote in 48h.

4 Likes

Small note: we are currently exploring additional integrations for palStkAave, any recommendation will be welcome

2 Likes

I agree that the LM for APWine was voted before PAL got a price, so it make sense to reduce the budget, however, maybe 50% is a lot

Maybe we can reduce it to 15K PAL for the first month, and then evaluate at the end of the month if we need to reduce to 10K or less

About the split, I don’t think 50/50 is the best deal because there is a lot more liquidity in the PT/Underlying than PT/FYT, which would cause a huge gap between both APR (11.9% PT/Underlying and 94% PT/FYT)

I suggest a 75/25 split with 75% for PT/Underlying and 25% for the PT/FYT

With 10K PAL, it would represent :
PT/Underlying : 2500/week x 0.75 x 52 x 1.13 / 617k$ = 17.8% APR
PT/FYT : 2500/week x 0.25 x 52 x 1.13 / 78k$ = 41.6% APR

With 15K PAL, it would represent :
PT/Underlying = 26.7%
PT/FYT = 70%

1 Like

I totally agree with @Dydymoon on the distribution (75/25)
And I think that gradually decreasing the rewards is also a good idea

1 Like

I agree to directly lower the rewards by 50% especially if it allows to better predict the LM on Warden (which will be a big step for Paladin) and if other integrations are planned.

It’s easier to lower all at once and then increase later

2 Likes

It seems wise to reduce the emissions indeed, but as @Dydymoon, @Starny and @Miaki highlighted it needs to be done in a progressive manner with hindsight on the next steps for the PalStkAAVE pool.

So here are my views and the reasonning behind it:

PalStkAAVE Budget reduction

In alignement, but let’s keep it progressive. We can maybe aim for a three-stages reduction, from 25K to 20K to 15K and eventually 10K. I think having a month in between each reduction gives enough time to measure the impact.

PT/Underlying and PT/FYT split

As said above, I’d not recommend a 50/50 split to begin with, unless we really want to incentivize harder the PT/FYT pool : the liquidity is much more consequential in the PT/Underlying ($625K) than in the PT/FYT pool ($80k).

A 75%/25% seems fitting, this is also something that can be adjusted if notice the two pools are too unbalanced.

Next steps for the APWinePalStkAAVE pool

Considering how critical this pool is for Paladin (wen Aave proposal power?) and the product/market fit it seems to have found, I think it would be wise to have mid/long term planning regard its incentivization.

If Paladin is willing to commit for the long run on this pool, having some APW tokens might be worth considering, as it would allow the Paladin protocol to vote in attractive APW incentives on the PalStkAAVE pool - making it attractive for depositors while avoiding any distribution PAL tokens.

The APWine DAO seems keen on such approach, considering they already realized token swaps with other DAOs with tokens listed on APWine to strenghten the synergies, such as with StakeDAO.

4 Likes

I agree with @Dydymoon

3 Likes

About your last point :

translation :
Me: “could Warden be applied to all other projects that have veTokenomics? Like APWine etc … ?”
Figue : :zipper_mouth_face:

Maybe there will be something fun to prepare later ? :eyes:

2 Likes

Hello everyone, thank you for your feedback.
I understand your frustration about such modifications but need to make two things very clear (I’m speaking as an individual):

  • We value our partnership a lot with APWine a lot and wish to keep building with them, but it is not a critical part of the success of our pool. The integration represents less than 5% of our palstkAave, even with the high APY. This might change with PAL LM, so I agree that we have to try it out.
  • All members who have commented here are APW bagholders. This is not a problem, but it is important to understand that there is bias. As a DAO, we don’t enable LM to reward user but to attract activity. As such, we have to take this as the only metric of success. Holder satisfaction is not a metric to take into account.

Our position as a team is that 20,000 PAL is overkill for the current size of the pool. Dividing by two might be a bit aggressive but when taking into account the APW APY, the pool provides double digit yield and yet, hasn’t grown for a while. So let’s test it out. My offer is to start at 15K a month for 2 weeks and come back on the state of the pool. If it represent under 10% of palStkAave, we will decrease to 10K.

As for the token swap, I have been against them until now, but am keen on exploring them for yield bearing governance tokens. However, if we were to do one, it would allow us to boost our APW pools, hence, not needing PAL LM anymore. I think we should build a proposal for next month.

If all commenters like this message we will proceed with the vote tonight.

6 Likes

I’m in line with this, let’s get it to a vote!

Regarding the long term plan to do a token swap with APW to transition from PAL incentives to boosted gauges through veAPW, I’m keen to help on this one and I’m confident other actors involved in both DAOs like @Dydymoon or @Starny would be too.

We can get started on this to aim for a proposal ready to be discussed next month.

5 Likes

We’ve confirmed that the above commentors were satisfied with modifications, vote will now be moving on-chain.

4 Likes

Sorry I forgot to answer before

I would have preferred one month before dropping the budget but it’s ok we’ll do our best to push it, let’s vote :fire:

Regarding the token swap, yes i’ll be happy to help on this proposal, we’ll try to propose something in the coming weeks

1 Like