[Proposal] NDX <> ETH Uniswap LP Incentive Rewards

Governance
#1

TLDR: a proposal for incentivising liquidity across the NDX <> ETH pair by setting up a new liquidity mining pool for Uni-V2 NDX ETH tokens.

Motivation

The NDX token is currently available to buy on Uniswap, however, there is a low level of liquidity in the NDX <> ETH pair, this means:

The price of NDX is very volatile with a $2,500 buy or sell moving the market by 10%+
There is a lack of NDX available to buy for any community members who may want to take part in governance

The Proposal

Incentivise liquidity across the NDX <> ETH pair by rewarding a number of NDX tokens to users that stake their Uni-V2 tokens.

As far as we can tell no new tokens are able to be minted before 22nd Jan 2020. However, we would ask the team if they can use some of the current 500,000 tokens reserved for Keepers for this initiative as the contracts are not ready yet. These NDX can then be refunded when they are unlocked on the 22nd Jan 2020 and the Keeper contracts are ready to be deployed.

Incentive Design

To ensure that the NDX <> ETH pool is incentivised we suggest a daily NDX amount of two times the which is being rewarded for stakers and LPs on Index tokens.

The current reward for LP pools is 9,374 NDX per day for each pool.

For the NDX <> ETH LP pool we suggest 18,748 NDX per day for an initial period of 2 weeks.

We are keen to hear your thoughts and hope that as a community we can support this proposal to improve liquidity and distribution of NDX.

3 Likes
#2

Disincentivized Governance
This would incentivize people to not participate in governance, as LPs and stakers can not delegate their tokens. This may not ultimately matter that much, as most of the tokens have not been distributed yet, so a 2 week period or something along those lines might be ok to help bootstrap some initial liquidity. My main concern with that would be people just withdrawing all the liquidity as soon as the rewards period is over. We would probably want to extend this period so that it is long enough for it to get some momentum and help with LP confidence, but not so long that the liquidity dries up a month before the end of the distribution for index token LPs, or that it seriously depresses governance activity once there are enough circulating tokens for people to be active.

Motivation & Rewards
The main reason I see for doing this outside of making moon boys happy (which I don’t care about), would be to encourage people to provide liquidity for the index pools in order to mine NDX, since there would be an active market for the token. However, I’m not sure if we really want the kind of people who would just mine then dump on Uniswap and stop providing liquidity afterwards. I would hope that people mining the token now are those who want to actually participate in governance down the road and who will continue providing liquidity for the pools.

If we take this as the main motivation, then NDX rewards could result in the opposite effect. If we provide NDX rewards to people who put up NDX-ETH liquidity, it’s likely that they would just sell half the NDX earned, then provide the ETH they got + the other half of the mined NDX as liquidity, stake that and repeat. This would create a negative feedback loop for the price, but allow the people doing it to increase their rewards substantially. So if we did provide NDX-ETH liquidity mining options, the reward payout should be delayed until after the staking period is over.

Also, I disagree with making the rewards so high (2x any of the other pools) - what would be the reasoning for that amount?

Using NDX reserved for keepers
It’s an interesting idea to use the keeper rewards for this, and I’m not against it in principle. The keeper contract will be ready today or tomorrow though (preparing the post & snapshot vote), so we should ensure there are some NDX available for that right away. Perhaps we could take 100-250k NDX for the new rewards pool and use tokens from the January allocation for keepers as needed.

Other Options
I think we should consider all available methods for increasing market depth before we start giving NDX to liquidity providers. @pr0 suggested here that we sell some NDX from the dao for Ether, then use that + some more NDX to provide liquidity on Uniswap.

5 Likes
#3

Would note the reason for the 2w, 2x allocations usually used by garbage projects to allow hype through staking to earn then deep liquidity for devs to sell their allocation and leave. Should we use this model a very small payout to offset IL and for 6m or more would be my suggestion.

3 Likes
#4

So I’ve been thinking about this since d1llon made the post, and I was wondering if there was a way to let people who were LP’ing for NDX-ETH to vote. yam finance supposedly lets you use LP tokens to vote with.

If we were able to use something like this, then we can incentivize NDX-ETH LP, and still allow LPers to participate in governance, effectively negating any potential discentivizing of governance.

#5

We could allow it on Snapshot but we can’t for on-chain governance. The NDX token is not a typical ERC20, it is a fork of UNI (fork of COMP) which is designed to both enable delegation and to snapshot how many delegates each account had at specific blocks, which is necessary for people to not be able to vote twice on GovernorAlpha.

2 Likes
#6

What about having NDX on a DEX offering extra incentives?
That way the team wouldn’t have to increase NDX rewards for LP pools.

Uniswap doesn’t have UNI incentives anymore. So no point in being LP there because are other DEXs offering liquidity mining (get the fees + governance tokens).

#7

My experience with various projects is that the “initial” period lasts much much much longer, it feels like it lasts “in perpetuity”… :slight_smile:

I think that Incentivise liquidity across the NDX <> ETH pair is a very sensible idea that would increase the demand.

1 Like
#8

I think there’s merit to providing incentives for LP’ing ETH/NDX. Liquidity is already pretty thin, and our LP’s are probably eating quite a bit IL.

With the move of the 2m tokens to the treasury, what if we started a liquidity mining event with a small % of the treasury (very small), and either had a % of the rewards vested, or had emissions decrease linearly over time?

If liquidity mining isn’t the answer, I feel like we should find a way to encourage LP’ing at least until liquidity/volume is decent enough that the fees are compensating for the IL.

My 2c.

#9

Strongly agree, 2x the rewards of the index rewards seems way too high and shortsighted, would rather target something like 1000-2000 ndx per day for the lp liquidity providers… which would still result in decent liquidity and apy, also might reduce sell pressure of rewards and increase buy pressure for people who want to provide liquidity…

#10

Can we create a proposal for this?

#11

Yea, in retrospect it was pretty naive to suggest such a high reward, in my defence, when the proposal was written the token was worth much less and liquidity was a real issue.

Your suggestion of 1000-2000 ndx per day seems much more reasonable to incentivise LPs.

The selling pressure on the token is not that much, which is testament to the great work the team are doing on building out the product and community.

2 Likes
#12

Bumping old thread.

I think incentivising LP is a sensible and well established strategy.