Rebalancing Rewards for iAssets and iUSD/iAsset LPs for Minswap V2 Proposal

Specifically

The Protocol Working Group (PWG) at Indigo has been collaborating with Indigo Labs and the community to boost INDY rewards and enhance liquidity. We aim to maximize iAssets impact on Cardano by redesigning liquidity incentives. We found that current ADA/iAsset rewards may not optimize iAsset benefits due to ADA redirection. To solve this, we propose shifting rewards to iAsset/iAsset pools on DEXs that support order routing. We started with SundaeSwap V3 and now will continue with Minswap V2 when launched.

Objective

Presently, our liquidity pool rewards are primarily allocated based on ADA/iAsset pairs. However, this approach inadvertently diminishes the effectiveness of iAssets incentives when 50% from the liquidity pool is ADA.

We propose shifting our reward focus to iAsset/iAsset liquidity pools. This transition allows us to capitalize on innovative order routing capabilities and reduced fees from newer DEX updates, (SundaeSwap V3 and MinSwap V2). This strategic shift is vital for enhancing iAsset utility, ensuring liquidity providers are incentivized to support Indigo Protocol’s growth and sustainability, and facilitating the expansion of new synthetics within our ecosystem.

  1. LP Reward Restructuring (iUSD/iAsset)

We aim to restructure LP rewards by transitioning from rewarding ADA/iAsset liquidity pools to iUSD/iAsset LPs.

iBTC and iETH are traded against ADA, however, in the wider crypto market these assets are more traded against USD. Having it denominated in USD allows for much more correlated pricing for traders in these iAsset pools as well as reward users for the combination of various iAssets they hold.

Creating more denominations in iUSD also increases the utilities of iAssets in general and potentially open iUSD as the denomination for other assets in the space. We can align incentives more effectively with our objectives and bolster liquidity support for iAssets within the ecosystem.

  1. DEXs

To sustain iUSD/iAsset LPs effectively, we need to choose advanced DEXs that support order routing with minimal fees to avoid significant spread widening. Therefore, SundaeSwap V3 iUSD/iAssets were a successful start and now we shall continue with Minswap V2. Minswap V2 will offer a wider range of pool fees along with reduced batcher fees. It also grants more control over pool fees to the LP users.

  1. Minswap V2 Liquidity Pools

New liquidity pools (LPs) will be created on Minswap V2 for iUSD/iBTC and iUSD/iETH. ADA/iUSD will be migrated with an updated pool fee to 0.05%.

  • ADA/iUSD - 0.05% pool fee
  • iUSD/iBTC - 0.25% pool fee
  • iUSD/iETH - 0.25% pool fee

Scope of Changes

Current Rewards:

Proposed Rewards:

We propose that these rewards changes take effect once Minswap V2 has launched and the new iAsset/iAsset pools have been created.

12 Likes

Full support and I like the rebalance that indigo does not prioritize a dex.

6 Likes

Are trading fees to low?

I know it’s the industry normal but Minswap is recommending projects go slightly higher.
Dynamic Fees Part1
Dyanmic Fees Part 2
We also have to remember that the minswap dao takes 1/6 of of trading fees for themselves. So setting ada/iusd at .05% and also reducing its earned indy from yield farming is going to severly reduce its APR and attractiveness to liquidity providers.

2 Likes

Are trading fees to low?

We will be using the standart pool fees set for SundaeSwap V3, later they can be changed by LP voting. Tbh we need more data to see if the higher volume from order routing will compensate the smaller fees. I would say 0.1% for ADA/iUSD and 0.4% for the other pools. Do you have any suggestions? This change would definitely affect peg too, so it should not be incentivized

earned indy from yield farming is going to severly reduce

It won’t be reduced, it’s going to be increased (4996 → 5.154). However, the rewards will be splittled between the two DEXs so you should expect liquidity migrating between DEXs to balance rewards.

Bruh I wish I knew the magic number to start the pools at.
What I do know is .05% is to low. At the very least it should be market standard .3 but I’d be willing to wager we go .6%(minswap dao would get .1% while LPers get .5%) on buys and 1% on sells.

Run the sell side fee higher during times of depeg downwards and lower when things stablize.

Don’t the new order routing features make the iUSD/iAsset pools unnecessary? If i’m able to trade iUSD for iBTC through routing iUSD->ADA->iBTC, then what is the point of incentivizing iUSD/iAsset pools?