Proposal to Enact a Dual Incentive Program with Wanchain

Temp Check Discussion
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Proposal to Enact a Dual Incentive Program with Wanchain

This proposal is for the reallocation of INDY emissions to partner with Wanchain in incentivizing 4 stableswap pools consisting of iAssets and their corresponding bridged asset on Cardano from the Wanchain bridge (USDC-iUSD, BTC-iBTC, ETH-iETH, and SOL-iSOL).

Teaser
Teaser1536Ă—864 94.7 KB

Acronyms

CPMM - Constant Product Market Maker

DAO - Decentralized Autonomous Organization

DEX - Decentralized Exchange

DIP - Dual Incentive Program

PWG - Protocol Working Group

Background

The Indigo PWG has piloted experimentally incentivizing an iUSD-USDC pool to help increase iUSD liquidity and provide an arbitrage loop to help stabilize the iUSD peg. The incentives have helped to attract up to 500k ADA in TVL to the pool which has provided up to 900k ADA/day in volume. Overall, we consider the pilot a success and wish to expand it to other iAsset pools.

The PWG has reached out to Wanchain and together have made a agreement to both provide approximately $1600 in incentives per epoch over the course of 6 months to be distributed among 4 stableswap pools: USDC-iUSD, BTC-iBTC, ETH-iETH, and SOL-iSOL. The incentives for the Dual Incentive Program (DIP), on Indigo’s end of the deal, will be provided in INDY while Wanchain will (at least initially) provide bridged USDC/USDT, BTC, and ETH as incentives. The agreement is contingent on both parties providing incentives and, as such, is subject to the Indigo DAO approving a redistribution of incentives towards these pools.

Rewards Update

Current Rewards

For the current rewards structure, we previously weighted the total incentives going towards any given iAsset by the relative USD value of the minted iAssets (which is now since outdated).

Current Rewards
Current Rewards1552Ă—1050 230 KB

Proposed Rewards

For the newly proposed rewards stucture, we’ve shifted some of the weightings to align more with the relative income that the iAsset generates from interest rather than strictly the minted TVL. This allows us to provide more incentives to those iAssets that have higher interest to more balance the risk/reward of minting higher interest iAssets. The overall effect is that iBTC, iETH, and iSOL receive fewer INDY incentives while iUSD receives more.

In addition to a reallocation between iAssets we are shifting a significant amount of rewards from standard CPMM pools to stableswap pools in order to meet our requirements for DIP.

Due to demand, we are also proposing incentivizing an iUSD-USDA stableswap as well for a trial period. These incentives may remain or can be reallocated during the next rewards update, depending on how well the pool performs.

Finally, as part of the long-term plan to reduce INDY emissions, we are also proposing a very modest cut to the overall rewards from the current 25,316.8 INDY / epoch to a flat 25,000 INDY / epoch. As an actual emissions cut will require a protocol upgrade, we simply propose sending the excess 316.8 INDY / epoch to the DAO Treasury.

Proposed Rewards
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12 Likes
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Personally supportive of this streamlining!

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Incentivizing iAsset stable pools is more than ideal for a synthetics protocol aiming to tighten peg stability.

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4

I really in favor of this guys! Great job you all!

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5

It looks like a great initiative!

1 Question / 1 concern to the team, which it would be great to have your thinking ?

Question: is the main strategic purpose of such dual reward program to attract more liquidity to the protocol via wanchain ?

Concern: at about constant emission, and at constant iASSET interest rates, I would see a risk to dilute liquidity across more pools, with a weakening of liquidity on iUSD/iASSETs…

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6

Sound good for me Lets vote!

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7

Very nice proposal. Well done PWG team!

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8

I am in Favor of this proposal.

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9

very nice proposal, its a yes from me!LETS VOTE THIS

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10

I fully support this proposal. Very nice to see this kind of program !

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11

I’d say the answer is many fold:

  1. Yes, we want to attract more liquidity to the protocol (via Wanchain)
  2. We want to help strengthen the peg by providing an arbitrage route for iAssets. An example arbitrage loop (starting on a CEX) is USDC<->wanUSDC<->iUSD<->ADA<->USDC.
  3. To establish a working relationship with Wanchain
  4. To take advantage of the deal we’ve worked out with Wanchain where we are both incentivizing a pool with each other’s assets. You can either look at this as “we only have to incentivize iAssets and not the other half of the pair” or as “Wanchain is also incentivizing iAsset liquidity,” Either way it’s a huge win.

As far as your concern, yes we have to spread our constant emissions across more pools, but this doesn’t mean that liquidity will be diluted. We’ve noticed with the current rewards structure that increasing rewards on some pairs hasn’t necessarily led to increased liquidity and you might guess that decreasing those rewards back might not necessarily result in decreased liquidity. Cardano liquidity providers have proven to be quite “stubborn” and actually don’t always react to changes in incentives like a “rational player” would react by trying to optimize their yield. Aside from this, we’ve tried to minimize the relative changes to existing LP rewards in hope of not driving away liquidity from the current pools.

2 Likes
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Thanks for taking time to answer and elaborate, very much appreciated

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The main strategic purpose is to maximize the realized value of the incentives we have to distribute. This proposal aims to both deepen iAsset liquidity and ensure incentives are used to strengthen peg stability.

Furthermore emissions and iAsset interest rates are not constant. These are metrics we adjust regularly with approval from the DAO.

Lastly this proposal would not dilute liquidity, but rather it would re-route liquidity in a way that is more advantageous to iAsset peg stability.

1 Like