Enchantment: Create Liquidity Provider Incentives

Proposal Submitted: Snapshot

Purpose

The purpose of this proposal is to execute and implement a liquidity mining operation that consists of a means by which we can reward liquidity providers in order to incentivize more liquidity on our decentralized exchange.

Design

CLASS DEFINITIONS

The respective classes are defined below and exclude SAS for SOUL and SOUL pairs, which are both left to the discretion of the cofounders who build the Soul Protocol as doing so require careful calculations.
  • CORE: core pairs are those which are absolutely vital for a fully-functional DEX. The tokens included in this category as high market-cap tokens that one would ordinarily expect to exchange with as a base for exchanges on our exchange. CORE class include: FTM-ETH, FTM-BTC, and FTM-FUSD.

  • COMMON: common pairs are those for which most users are likely to have an interest in and thus expect to see on an exchange, though may not require these assets as a base.

  • COMMUNITY: those pair for which the community has voted to be added for projects that are not as established as those included in the “COMMON” pairs section.

  • STABLES: stable pairs are pairs that are between two stable coins pegged at $1 USD. As such, the pairs are designed to have a similar value and thus experience negligent losses.

ALLOCATION WEIGHTS

The example below highlights one way in which we may choose to allocate emissions. The voting process will enable you to use your voting power to decide how the allocation should take place, so please be sure to spread your voting power across the selections.

Explanation

  • Outcome (Raw): results ÷ 10
    ** Example: 13.6% = 1.36x

  • Adjustments: we round UP the raw result.
    ** Example: 1.36x = 2x

  • No Tied Outcomes: we round UP on tie breakers, so no 2 multipliers are identical.
    ** Example: in table 2 we have a result of 1x and 1x under ordinary rules, but we boost up to 2x on Community in order to break the tie for the 1x spot.


Example One Results Outcome
Core 54% 6x
Common 26% 3x
Community 12% 2x
Stables 8% 1x

Example Two Results Outcome
Core 64% 7x
Common 26% 3x
Community 9% 2x
Stables 1% 1x

Implementation

Voting takes place here: Snapshot

Implementing this proposal necessitates the usage of the DAO and DEV multi-sigs to launch and initialize the Soul Summoner contract with an initial staking allocation and a new set of CORE pools to kickstart the liquidity mining operation.

  • Snapshot Block: 17075000
  • Start Time UTC: Wednesday, September 16th @ 12PM (1631707200)
  • End Time UTC: Saturday, September 19th @ 12PM (1631966400)
3 Likes

It would be an interesting experiment to Jack up stables and have liquidity pour in, it would be so counter to every other platform like a 4 for core 2,2 and a 4 for stables.

2 Likes

That’s a great point. Do you think that this would also disincentivize users from exposing themselves to the risk that comes with less correlated pairs?

For example, if the returns are higher on a lower risk pair, a rational person would opt that option as we naturally risk averse and attracted to higher returns.

Perhaps you are also saying that the sheer magnitude of liquidity on stables would outweigh the higher returns multiplier.

The incentive to get into the risky pairs on new farms is nice but i’ve seen so many farms / platforms crash or rug. My learnings in yield farming have led me to a strategy,

  1. make sure there is a backdoor like vfat
  2. never buy the native (almost never) unless there is an IDO crash it its stupid cheap
  3. Pool not liquidy farm to get native as fast as possible when the APRs are high at the opening
  4. sell 1/2 the native to pair so im near cost neutral if the project fails / ruggs and can remove my ‘safe’ pool money

pretty basic but it works for me… now… consider a high incentive to provide extremely safe pairs with high returns…(comparatively speaking for stables). I’m sure people will sell the native in droves looking for that quick buck… BUT if the core pools have a high incentive well, no reason not to take some gains and get a little more from the ‘free’ money.

1 Like

That’s a fair and balanced approach, thanks for sharing. What do you mean by “pool” not “farm” (# 3)?

What do you consider a “safe” pool and “back door”? You have an interesting perspective, so I’m curious and I’m sure it’ll help others learn as well.

So the big question is - what is the point of having the liquidity pairs?

And what is the aim of soulswap …

To get onboarded onto Fantom you have to be advanced (lots of people have trouble with BSC) … so you need to send money from somewhere, in this case FTM … most likely from Binance or another CEX, since most don’t support sending anything else.

then you get here and have a few “swaps” to go to do something with your FTM. Obviously you didn’t send your FTM from a CEX to come here and buy BTC or ETH, so you are looking for FTM based projects so you:

  1. Invest in FTM only tokens (like SOUL)
  2. Look for an IDO platform, where you can spend USDT/USDC to buy new tokens
  3. Search for Farming opportunities with high rewards in FTM or some new token (eg. SOUL).

based on that logic, nobody cares about bringing their USDT/USDC here (in fact you need to buy FTM with USD to get it onto FTM, then you can swap it back)… And I don’t think anyone cares about BTC/ETH either … so the question is what benefits does SOUL Swap get from having those pools??

I think you don’t need that many pools, especially if you are rewarding SOUL … As was mentioned people will farm their soul, then invest it 50/50 for a new LP to keep farming (manual compounding).

So, I would propose:
FTM/USDT
FTM/USDC
FTM/SOUL

And that’s its … everything rewarded with SOUL, since people are going to be selling SOUL, I would give rewards highest for SOUL/FTM pool.

Then, I would create pools for “new” tokens or partner sites - if you have a new token launch, having more exposure for them is great - I wish SOUL was on SpookySwap already for example …

1 Like

I just mean liquidity pools, like if i have a a bunch of ETH on BSC ill look for a ETH pool so that i do not suffer IL… another example is im on Polygon with a ton of Matic, so i dont pair it up in an LP just find the WMATC pools and crank out the native coin and then sell 1/2 the native for some other top 10 to pair like Native-ETH and put into LP staking. So I mean ‘safe’ as just low or no exposure to rugpull or IL.

Regarding ‘backdoor’ I just mean an easy way to interact with the smart contract if the site goes down. I can do it via block explorers but vfat is just so simple.

1 Like

Interesting to see what others have said. I farm similarly. I use about 50% of my rewards to compound back into the LP (buying the other token I need with half that money) and I put about 50% into the staking/governance pool which is usually at a lower reward but in order to accumulate that basic coin, like SOUL, because impermanent loss is nasty. That said, depending on the farm (I use 4 on 3 different chains) and the choices on that farm, I do like having many different pools to choose from because I also can consider the coins in the LP as an investment so, let’s say I believe a coin is going to go up a lot in the future, VRA for example, I like to have that coin in a Farm so that as I farm it for, say, SOUL yield, I’m also getting the gains of VRA’s longer term price increase. And I do like to have the smaller coins that have a similar long term gain potential to SOUL so that they both go up 100x, instead of SOUL going up 100X and BTC going up 2X for example and I lose almost all the gains to impermanent loss.

Having multiple pools does mean I sometimes jump around, remove my LTs from this Farm and buy new ones for that farm, to chase significantly higher APR, and I like doing that to try to maximize profits but it has to be really worth it. That chasing can also be a curse and costly if the impermanent loss gets you.

I also definitely agree with the principle of more highly rewarding the fundamental coins for the ecosystem. Here it’s SOUL and FTM. The SOUL pools should be more highly rewarded than, say, BTC pools, because it encourages longer term holding of that coin and demand for it. It makes it valuable and contributes to the value and demand of Soulswap. There is a gradient scale of most important and contributing coins to the ecosystem, I think SOUL then Fantom are at the top, down to stuff that contributes nothing to the ecosystem (some arbitrary meme coin for example). It’s for the devs, probably, to determine this gradient of value because I don’t necessarily know in what way a newly listed coin is good or not for the ecosystem - they may have a partneship, be symbiotic, have development crossover, etc.

So I do like your Core, common, community and stables, gradient. I’d add fundamental or base at the top of that with the highest reward and it would be adjusted over time to remain about the highest reward.

1 Like