[GIP-39/2] Liquidity and Liquidity Mining Update

Main & Discussions
1

Edit Dec 28th - Fixed hidden hand reference to votium
Edit Jan 17th - Change 4 month LM program to 6 months, instead of 8 months. Added some quantitative bribe data.
Edit Jan 20th - Added instruction for multisig to utilize votium

Proposal

  1. Multisig is to seed a new 50/50 GEAR/stETH pool on Balancer with 0.3% fee, using 300 ETH from strategic round 2 funds and matching value in GEAR from the main treasury.
  2. Modify liquidity mining from GIP-36 from 4 months to 6 months, keeping the total quantity the same (13.33m GEAR)
  3. Divert 1/3rd of liquidity mining funds from GIP-36 to bribing the Balancer pool through Aura/Hidden Hand.
  4. Switch all remaining liquidity mining (from GIP 36 and Cider’d) to bribe vlCVX voters through votium
  5. DAO will collect all earned BAL and AURA rewards and lock them, voting for GEAR/WETH emissions with its locked positions.

End result:

  1. Multisig owns 600 ETH worth of Balancer GEAR/stETH liquidity.
  2. 4.44m GEAR over 6 months is used to bribe Balancer GEAR/stETH liquidity pool
  3. 8.88m GEAR over 6 months is used to bribe Curve GEAR/WETH liquidity pool
  4. ~15m GEAR over 4 months is also used to bribe Curve GEAR/WETH liquidity pool (from Cider’d)

Justification

Cider’d raised more fees than were anticipated, thus resulting in high APR even at high amounts of liquidity. Keeping cider’d rewards over the 4 month period helps continue to absorb volatility for the new GEAR token, while splitting and extending the current GIP-36 program creates an assurance of rewards continuing after Cider’d rewards are used up (subject to anything that overrides this proposal in the future).

Multiple liquidity sources are necessary to make an oracle feasible. Oracles are necessary for many third party integrations in DeFi, which can bring utility to the GEAR token.

Creating liquidity on Balancer will also diversify partnerships, and the Aura and Bal rewards will create a semi-sustainable baseline of liquidity incentivization for the DAO over time.

stETH is used as a pairing as yield bearing assets recieve rebates from trading fees, which are recyled into bribes for veBAL holders. There are risks in pairing with stETH, but these risks are lessened significantly by the fact that the curve liquidity pool will remain as the largest liquidity pool for GEAR.

Bribing is used due to efficiency. The bribe multiplier is defined as the amount of emissions sent to LPers per $1 in bribes. For CRV it’s ~$1.87 and for Aura it’s $3 - both making bribes a no-brainer.

With the DAO owning initial POL in balancer, it will ensure that excess bribes are not wasted (as they will be returned to the DAO). Additionally, this would allow the DAO to build an Aura position that can be used to create additional rewards for LPers (including the DAO itself). The position would be worth the stake (600 ETH proposed) x the APR (~100% in current Curve v2 pool), and could be used to justify reducing liquidity mining expenses in the future.

Execution

Prior to executing this proposal, the following must happen:

  1. A DAO contributor must get a proposal passed for a Curve and Convex gauge for GEAR/WETH (in progress)
  2. A DAO contributor must seed a GEAR/WETH pool on Balancer, here.
  3. A DAO contributor must get a proposal passed for a BAL and AURA gauge for GEAR/WETH, following the process here: Instructions & Overview - BAL Gauges - Balancer
  4. A DAO contributor will need to contact votium to get GEAR enabled as a valid bribe token: Buyer Manual - Votium Protocol, as well as contact Hidden Hand (Redacted) for the same reason.

Additionally, DAO contributors should seek to get both GEAR pools adopted into various aggregation services such as Matcha, Paraswap, 1inch, etc.

Multisig Bribing Instructions

  1. Every 2-week epoch, the multisig simply needs to deposit the required reward amount to votium (for the Curve pool): https://votium.app/ (or for tracking purposes, could do the Cider’d and normal LM bribes separately)
  2. Every 2-week epoch, the multisig simply needs to deposit the required reward amount to Hidden Hand (for the Balancer pool): https://hiddenhand.finance/aura?slug=aura

Note hidden hand and votium are utilized due to simplicity. Other bribe options exist, including Paladin and StakeDAO solutions to bribing veCRV holders. A future proposal could suggest switching Votium bribes to one of these platforms. This proposal could come at any time - it’s a trivial task for the multisig to switch sending bribes from Votium to another platform, so the majority of the work is explaining to the DAO how it works and why it is better.

Voting

Voting will be simple “for” or “against” the full plan with an “abstain” option.

Voting is ranked choice:

  1. Do All
  2. Do All Except Deposit Treasury Funds
  3. Do Only Curve Bribes (Nothing Balancer Related)
  4. Do Something Else/Keep As Is
1 Like
2

I don’t agree with this approach. Now the gear is not short of liquidity. In this environment, adding LP to the BAL is equivalent to a gear flow of 300E in disguised form, which will cause a fatal blow to the token price.

2 Likes
3

I do not agree to this proposal as it is written. I think it is overly complicated. The Cider LM as is and the Curve gauge should be enough as far as liquidity rewards go, and extending the Cider’d reward time would discourage LP’ers. As far the DAO funds and treasury goes, I’d rather see that go to a simple GEAR staking pool to incentivize holding the token

4 Likes
4

against - lets stick to the initial plan, more fees doesn’t mean we should change the outcome of ou initial agreement

1 Like
5

I do not agree to this proposal
As correctly noted above, this will greatly affect the value of the token, which is already below the price of the private round!

6

Just to note this 300 eth is less than what was set aside for ciderd and wasn’t used, but it does create more gear for sale. It also creates more eth for selling into. At a price below the strategic round, you could view it as buying tokens back for cheaper. But I agree there is dilution here, the question is if it’s worth it for a potential Treasury revenue stream and increasing trade volume for a potential future oracle.

7

Why do we need to pay people to hold the token? And this proposal reduces the spending on LM which benefits holders… I’m confused if your concern is that this proposal is over or underspending. Also everyone said ciderd was overcomplicated and this is far simpler.

8

Why doesn’t a different result than expected justify a differing approach? That’s not really an argument, but perhaps concerns about losing more liquid than expected could be valid, or arguments that we have the right amount.

9

Scheme 1: If possible, you can purchase GEAR with 150E, and then form a LP with the remaining 150E to establish a flow pool in BAL. Why should we extract GEAR from the national treasury. It is strongly opposed to withdrawing GEAR from the national treasury to increase the circulation of tokens in the market at this stage. In addition, you do not buy back tokens in this operation. Don’t confuse this concept.

Scheme 2: 300E can be added to CURVE or UNI V3 pool to increase the pool depth. Currently, only 700E LP is left in the curve pool.

1 Like
10

At this point I’m actually fine with the DAO seeding a new liquidity pool and funding the bribing. I’m not so concerned about the spending but people would not be happy to have their LM rewards suddenly cut in 1/2. It would show bad faith to do do that now after it was so clearly spelled out during the Cider campaign. As for paying people to hold the token, it’s a proven technique and it works. Most people are simple creatures and if the token is just sitting in their wallet, they will panic sell but if it’s staked they will not.
I know it’s “vanilla” but have you guys even tried vanilla? It’s delicious!

11

They are not being cut 1/2, a portion of the rewards are being cut 1/2, the rest of the rewards remain as is. Also, it’s OK that people aren’t happy - they can leave the pool. That’s the point. Things change in DeFi - fast. you can’t keep things the same just because something was decided a while back. The proposal is a reaction to cider’d earning far more GEAR than most expected. We can’t control the market nor should we but we can control excessive spending while also not screwing over LPers.

12

Main change being considered right now is removing the POL deposit. If we don’t do the POL deposit, we don’t earn any Aura, so at that point should consider Bal and Aura bribes for whichever is more efficient. Both are partners though, so if no strong difference I would lean towards utilizing Aura to support both.

Aura farming is pretty lucrative right now so I do want to put some numbers to what we are missing out on if we do not use POL

13

Balzy and great direction, boss. Some comments:

  1. I believe this was v9ted in GIP-36 already, so it should be done as is. Buying tokens w/o any purpose (as suggested by some moonboys, sorry guys but it’s silly) is not a good idea NOW. Without any plan, just a useless dumb buyback. So anyway, just take DAO assets on both sides, indeed.
  2. With the curve gauge now live, it looks like APY at 750/750K liquidity is > 70% if everyone stakes. I think >35% on IL pools such as GEAR/ETH is enough for people to be interested if they want to. So no need to truly overpay by 2x. Instead, make those rewards 8 months. It makes sense imho.

3-5. This could be very interesting and is especially ballzy. Do you have some numbers which help understand this? I read somewhere that bribing indeed would be more efficient, but at least with direct LM - token holders earn instead of general participants (which is fine either way). But if the cost difference is 2x, it makes more sense. Less than that - maybe the goal doesn’t even make sense then?

14

I guess it really comes to the broad direction the DAO wants to take for its liquidity strategy.

  • If it wants to optimize for liquidity, having one very deep pool is more efficient as you will have less slippage.
  • If the goal is to accumulate other assets and make an LM campaign as efficient as possible then yes, splitting is the way to go. It also has the additional perk of creating more volume as arbitrage opportunities between the pools will appear.

Small note: to the best of my knowledge, Hidden Hands isn’t compatible with vlCVX, only Votium & Warden are.

1 Like
15

I feel a lot of people joined the project due to the initial agreement, users have committed funds in a way that was suitable at the time considering the possible rewards for the specified time. how would you feel if you want to buy something and the seller changes the product mid way ? you wont have it would you ? same works here in my perspective. Give it time and we can always reconsider… no one is going anywhere and there is no urgency to it … later perhaps treasury profits could be use to extend to and incorporate the above.

16

The cider rewards will happen as is though, so no past/current “promises” (I’d say, expectations) are changed. That would not be good. But LP rewards being made from 4 to 8 months is still in line that the APY was expected to be > 35%. And with the numbers as suggested above, it should be still.

Just saying.

1 Like
17

Everyone in the community is against LP rewards being made from 4 to 8 months…

Just saying.

1 Like
18

Sure, I was just pointing out another factor. As for numbers and %, good to see this pushback!

19

There seems to be an eagerness to join Aura / BAL and I get it… but why not consider having big ballzy and lock CRV ? we can vote our own pool for reward and later proceed with more benefits for when crvUSD comes … why do we want to ride a bicycle when the rocket is awaiting us ? I would support proposal to lock CRV in an instant… it feels like a the perfect symbiotic relationship … we are here to stay CRV is here to stay and boy wouldn’t it be nice later on to make our own locker a dieselCRV as such representing locked CRV … just saying :wink:

20

I’d also like to float the idea of doing a 80/20 pool instead 80/20 Balancer Pools. One of the main motivations behind… | by Fernando Martinelli | Balancer Protocol | Medium which would allow people to LP and still maintain significant exposure to GEAR. Right now considering the bottom on GEAR, for GEAR bulls it is the worst time to LP in 50/50 because they lose significantly to IL in possible future bull run.

Also, an interesting proposal here incentivizing 80/20 pools Snapshot. h/t to lklk#8805 from discord.

1 Like