Incentivize the POOL/ETH LPs

Hi.

New to the forums but I’ve been following this project for a while and recently I’ve been trying to accumulate a large POOL position and provide liquidity.

Uniswap has the most liquidity but frankly it’s toy amounts and I can’t execute a reasonable order without insane slippage. It’s not possible for me to participate as an investor at the moment and I believe I am not alone.

You want people interested in your project to direct funds at one of your pools on Pool Together. I get it. But your token incentives depend on a healthy market for POOL. Right now that market is not healthy. You’re excluding bigger investors that want to acquire POOL outside of the lottery protocol.

It seems a POOL/ETH LP incentive is controversial because it competes against the POOL pool. Right now the focus should be diversifying POOL holders via LP incentives and a healthy market for POOL, not entrenching existing holders further.

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Yeah agree, a $10k buy/sell order has a 2% slippage. If we want to be a mainstay DeFi project, we need 50x more reserves to be even included in DeFi Indexes/baskets

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Would it be possible for the treasury to provide more liquidity? Just fund it ourselves. We may suffer some impermanent loss but if it brings more investors it may be worth it. I’m not that knowledgeable in this front just spitballing.

Thanks for hopping in and sharing your perspective! Definitely very helpful to hear. I’m convinced we need to work providing deeper liquidity.

Awesome.

I don’t use Sushiswap but would happily do so if there was decent liquidity. If there is already a relationship with them it would make sense to start there.

I believe the best way to bootstrap liquidity is through POOL incentives. Under that scenario, the effective APR for ETH/POOL LP’s should target something substantial like the USDC / DAI pools. The rate doesn’t need to have parity with them but it should be competitive and actually attract LPs (research needed). The POOL distributed to LPs can be lowered further by factoring in Sushiswap’s incentives. The simple playbook is:

  • New investors enter via exchanges, driving the price of POOL up.
  • POOL price increase attracts new yield-seekers to USDC / DAI pools.
  • TVL increase attracts more investors.

This is a virtuous cycle that will amplify your jackpot reserves, so it’s long term aligned even after the initial POOL distribution ends (assuming it doesn’t get renewed).

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Might be related to the point on treasury diversification (Treasury Diversification - #15 by Praneeth) - but might be quite interesting to see if we can go down the route of enabling the treasury to work towards a smart balancer pool for POOL-ETH (similar to what Idle and IndexCoop have been working towards) to facilitate automated means for managing some part of the POOL treasury.

Question is - how much depth we’d like to see in the pools, and that might be something that a poll might help with.

As a show of skin, I just added ~$0.5m to SushiSwap’s POOL / ETH pool. SushiSwap isn’t lagging far behind Uniswap now. Hopefully we can start to see more activity focus on SushiSwap since they are friendly / partners (?) with the project.

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Agreed. As I mentioned in other spots on this thread. The Sushi team has been more actively supporting PoolTogether via Onsen and some of other things as well.

So since you are a vested party, @frown. What do you think makes sense in terms of LP incentives? I’d love to have your input.

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Nice one, I noticed!. Still gotta get those Uniswap LP incentives going, but that’s awesome man.

Wasn’t there a proposal idea floating around? Maybe I saw it in a post about POOL distribution after the current iteration ends. It had some good ideas on how much POOL for LP incentives there should be. Made sense to me while reading it.

Very cool to get the insight of actual whales on what their barriers to entry are. I’m convinced now that LP rewards are a good step.
So the question becomes

  1. How much liquidity do we want to target
  2. How big does the daily POOL distribution need to be to reach that

I guess for 2. we need a reference for what APRs make LPing sufficiently attractive in the face of impermanent loss. Any input on that from frequent LPers? Maybe @frown @ageless @Uncle?

My other thought is that since we are now deciding to pay for liquidity, we should look at centralized exchanges aswell. If our LP rewards were in the realm of 100 POOL/day, that’s $900k per year. We can probably get listed on a big exchange with lots of liquidity and users for much cheaper.
The end solution will be a mix between centralized and decentralized exchanges.

We should check with those participating in the POOL pool.

Based on Coingecko circulation details and available pool data: ~1/3 of the circulating supply of POOL is in the POOL pool. ~1/8 of the circulating supply is among the top 10 POOL pool participants. These people probably also hold ETH and can LP. This is in the range I’d expect to see liquid.

We’ll want at least the rate of the POOL pool for LP’ing, though probably something higher to account for switching costs + locking up ETH.

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I think Lp rewards should be much higher than POOL pool. LP’s take on much more risk than POOL pool depositors. If rates aren’t attractive enough then whales will be presented with an opportunity cost dilemma. I would propose 500 POOL/day for a limited time. This will provide the liquidity needed for others to purchase a larger amount of tokens without moving the market. This is standard in most protocols. Lp token staking rewards are much higher than simply staking the token alone.

Just cross posting for another thread where I posted this:

let’s say we want to get around 200k POOL in the AMM and lets assume it’s a constant whatever happens with the price (I know it won’t be but just for simplicity). At 100 POOL/day that’s Pricex100/(200000xPricex2)x365 = 9.1%. Not attractive with the POOL pool offering a similar return for half the capital.

At $25 we will have $10mm at $100 we will have $40mm in the AMM pool with 200k. I think you’ll get the pool size to be around 1/3rd to maybe 1/2 of 200k with 100 POOL reward. I think 25% in the native is where the cusp is where people on the side will get interested in it. So I think this could grow the pool to around 75k, maybe 100k POOL.

In my view 3x the LP reward relative tp POOL pool reward minimum. I think @RegisIsland was calling for 5x. I wouldn’t be against that either, better to be too much than too little.

I agree that LPs should be making quite a bit more than the POOL pool.
We need to also factor in the trading fees that the LPs will be generating in their APR.

I think if we want to make the LP distribution 3-5x that of the POOL pool, we need to lower the distribution of the POOL pool below 100. Our thesis is that some whales will leave the POOL pool and start LPing, so APR in the POOL pool should naturally go up as it shrinks, even if the absolute number of POOL per day goes down.

@ageless What do you mean by “similar return for half the capital”?
An APR is always calculated on the entire capital.

If anything, I would argue that you can get the APR on double the capital now, assuming that the limiting factor is exposure to POOL. Most people will have ETH in their portfolios already.

that’s a good point. I hadn’t thought of lowering POOL pool distribution as part of this proposal. if we cut that down to 50 POOL/Day then five times that would be a much more palatable 250 POOL/day.
at todays prices 250 POOL/day would be approx 2.1 milliond USD over 12 months.

another question that needs to be resolved is how long will this LP reward issuance last? one quarter? six months? I think it is probably good to go with one quarter just to see how things go.

Yes, one quarter sounds good to me. If it’s limited to a relatively short time like that, we can also be more aggressive on the amounts to kickstart the process.

and how you gonna distribute them… on chain or off chain (via wallet snapshot)? Good ex is Robonomics - they incentivize LP providers via off chain distribution of their token.
https://www.robonomics.events/#/liquidity

I like offchain option bc 0 fees for LP providers

I’ve been thinking about it alot and I don’t think POOL pool should be lowered. Being in the POOL pool is becoming less and less appealing already. The fact that a vote can pass and your snapshot vote not be counted along with now reducing rewards. I get the concept that people will jump from POOL pool to LP’ing and that’s supposed to increase APY on POOL pool but I would rather see LP’ing grow and POOL pool continue to grow as well locking up more tokens. Cutting POOL pool drip in half would only save 18,250 POOL per year, I don’t think we need to be so frugal. I support everything else proposed in the reduction and think the LP’ing rewards are very important.

I think you only need one month of LP incentives to achieve decent liquidity. LP farmers beget hodlers that aren’t focused on maximizing yield (no shame @stakeybakey).

I saw in another thread that an exchange was asking for $50k listing fee. If we turn that cost into 1 month of POOL/ETH LP incentives (2,500 POOL @ $20), we will see a dramatic rise in liquidity. I also strongly believe that will create external buy-in (from the POV of non-farmers like myself).

edit: @Torgin I meant to reply to this comment you made: Incentivize the POOL/ETH LPs - #64 by Torgin and not the one this post is technically replying to.

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