Here’s historical APY information factoring in IL – as you can see it varies a lot but it’s not really the 100%+ APY that someone else had mentioned when you factor in the impermanent loss.
I still think maybe we should remove the POOL pool and focus solely on the POOL/ETH pool LPs – that will incentiveize more people to be LPs in my opinion.
SUSHI rewards for POOL/WETH LPs on Sushiswap are still over 40% APR, on top of fees generated.
This is much higher than the POOL pool.
I’m not sure why we would assume that we get significantly more liquidity by subsidizing LPs even more.
Being an LP is already the most profitable way to utilize POOL tokens.
It seems to me that either people aren’t interested in maximizing returns on POOL, or that people are not informed enough about the profitability of being a Sushiswap LP. Probably the latter.
The incentives are already plenty large from what I can tell.
The IL isn’t as bad as people think it is but it’s also not compensating for a massive move in POOL. If POOL went to $100 tomorrow are you saying POOL LPs would have been better off depositing to Uniswap as oppose to holding when it was $25?
Of course it’s a tradeoff. If we take your example of $25 POOL today and $100 in the future (ETH price staying the same),
that translates to an impermanent loss of 20%. Impermanent Loss Calculator
The LP only pays this if they make their loss permanent by withdrawing liquidity.
According to that nice chart by @microape, the fees APY has been about 60% APR so far + SUSHI rewards give another 40% APR. That’s 100% APR. So even in the (very bad for LPs) case that there is 20% IL by POOL quadrupling in price against ETH, it only takes 2.4 months of LP to make up that impermanent loss.
If however, POOL/ETH price is approximately the same when the LP withdraws, they get 100% APR pure profit.
The alternative is to get 9% APR in the POOL pool with “no risk”.
How high would the LP APR need to be that this tradeoff becomes attractive?
I would think 100% APR is plenty.
Another difference is that the LP APR is paid on 50% POOL, 50% ETH. So with the same amount of POOL tokens, you can actually deposit twice the value into the LP than you could into the POOL pool, assuming that you also hold ETH longterm (which I think most people do).
This makes two big assumptions for potential future liquidity providers
1). The value of whatever token is being rewarded on sushiswap performs similarily as POOL or extra rewards are given to LPs to account for a constant APR which I doubt is the case.
2). The volume increase in trading compensates for future liquidity additions.
I think the goal here is to have at least 8 figure liquidity in an AMM pool. You can divide the fee reward by 10 unless you model for a massive increase in trading volume with increased liquidity; should be true to some extent but not by a factor of 10. Also added liquidity will eat into both those rewards. if the reward token on sushi doesn’t perform with POOL you’ll also be drastically chopping that APY. The 100% APY isn’t a realistic proposition over 2.4 months if our goal is to drastically grow liquidity of the POOL token. I think we should be modelling this backwards; what level of liquidity are we trying to achieve and how does that affect the current parameters.
I like this idea of working backwards. LP’ing isn’t really my area of expertise though so I’m not sure what the target should be. I do though think this becomes particularly important with things like the yearn integration now live.
I have been pushing to keep incentives with Sushi because they have been helping us out by including POOL in the Onsen rewards. I did ping their team and my understanding is that we can add additional incentives to their rewards (i.e LPs on Sushi could earn both Sushi + POOL). I’ll loop back with them to ask about details.
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.
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
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:
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).
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.
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.
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
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.
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.
