Liquidity Incentives on ETH/YAM
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.
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.
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
- Keep paused for now
- Restart with flat weekly structure
- Keep paused until a dynamic structure is developed