Liquidity Incentives on ETH/YAM

Liquidity Incentives on ETH/YAM

Basic Summary
We need to determine incentives for the ETH/YAM pool. These incentives are to ensure liquidity for the treasury purchase during a positive rebase, as well as adequate entry/exit liquidity for YAM buyers/holders.

Motivation
Currently, the LP Incentives are paused, but this is a temporary measure allowing us to analyze our liquidity needs and create a more strategic incentive structure. Such a structure would ideally seek to target a certain liquidity and incentive APY range.

Specifications
Below is an analysis of liquidity, APY, and slippage on a $25,000 purchase of YAM. The purchase amount was chosen as large enough for bigger traders to enter YAM effectively, but not so large that liquidity needs become unmanageable.

Based on this analysis, we should be targeting liquidity between $1.5M - $5M. Regarding APY, we want to reward LPs, but in a sustainable manner that encourages project believers not farm and dumpers.

One other thing to consider is our remaining incentive budget of 600k BoU YAMs. We must guard this carefully and use it to its highest value. In addition to this LP pool, there may be additional endeavors we want to incentive.

At 5k/week we would be able to incentive this pool for the next 120 weeks, over 2 years. At 10k/week, we would have a little over 1 year.

The last thing to consider is how market cap appreciation will increase these rewards. The analysis below is based on current market dynamics. As YAM grows, the value of incentives will grow, and the liquidity will follow.

I believe we should begin incentivizing the ETH/YAM pool with 5k/BoU per week when the new pool is launched.

Poll to Measure Sentiment

LP Incentive Restart
  • Keep paused for now
  • Restart with flat weekly structure
  • Keep paused until a dynamic structure is developed

0 voters

2 Likes

Let’s keep this simple and steady rate. I support this plan; bankroll management ftw. Longevity > short term volume pump.

1 Like

voted for 5k and support adjusting as often as needed to target optimal Liquidity/APY #s

1 Like

I’m in favor of the slow and steady approach of 5k/week. The longer 2 year runway of incentives is enticing.

If we feel like we’re not getting enough liquidity we can always adjust it in the future.

I second this (5K/week). Having a pool of YAMs to use as incentives for other pools and collaborations that doesn’t require minting seems useful. Everyone is happy to get more incentives, but less is a harder sell. And even if all the current incentives only go to this pool then that still works nicely to incentivize longer term investors.

Just as a FYI, the previous incentives started at 92500 a week but decreased by 10% every week would last approximately a year. After the 29th week, it would be below 5k and shrinking quickly.

I agree with the 5k a week to have enough liquidity and have extra reserves in case we need it for something else. Looking at other projects that have unlimited inflation via farming has been a disaster for pricing long term without an easy way to recover.

1 Like

what would YAM holders profit from treasury???

if we switch to sushiswap, will this incentives go to sushiswap?

Yes, the incentives will go wherever we are purchasing from

1 Like

i vote for keep pause for now. It is likely the treasury purchase pool will go to Sushiswap. Sushi already gives incentives for YAM/ETH LP. Given the current trading volume of Sushiswap, i dont think more incentives will linearly increase the liquidity in addition to existing liquidity.

In addition to that, Sushiswap has much less trading volume than Uniswap. We may need to switch back to Uniswap eventually some day.