#Illuvium DeFi conundrum and possible solutions

1 messages · Page 1 of 1 (latest)

sand jungle
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**The problem: **

**Staking **

Staking rewards has been a growing concern of mine because the initial staking structure, was designed with the premise that the game was going to be released in 2021, and RevDis was going to keep stakers in (after staking rewards end in June 2024) with a product that had 2+ years in the hands of the public and generated enough revenue to retain them.

Even with the amazing effort and product quality that the team have managed to achieve the fact remains that the delays have greatly affected the DeFi side this DAO. As we can see SLP pool is slowly declining. Right now, APR is still attractive but once we hit December it won’t be so, I don’t know how much liquidity we need in the pool to be healthy, but if we launch in December I don’t think (conservatively speaking) that the remaining rewards will be incentive enough to keep stakers, specially SLP ones, in.

Proposed solution:

Develop 1-time additional rewards in the form of unique digital assets (ranger skins, moz4rt skins, emogis, illuvitars, illuvitars accessories, pfp borders, etc) for stakers that will be delivered for those stakers that hold stakes for 12 months starting Dec 2023 (or open beta), the quality and quantity of this rewards will be determined by the weight and the amount staked. It is my belief that this won’t take very much additional developer time because the base assets have already been created and they can be done after public launch.

I believe this has to be adressed this epoch. I hope the community finds this relevant and bring forth their points of views and ideas in here so I that I can gather enough input to move a more detailed proposal forward or if it is just a nothing burger for most, I'll just file it and hopefully it stays as just a concern I had. If the team has already something in the works, please say it and I’ll wait for more details once it is ready to be shared to the general public.

SLP_Pool.png
wide musk
# sand jungle > **The problem: ** **Staking ** Staking rewards has been a growing concern of...

This is a great initiative! Internally, this was already on the radar, but we haven't made a lot of progress in deciding on the exact way forward. (as far as i know)

I brought this up more than half a year ago, and there were a number of ideas around the lack of liquidity that would prove to be more effective than a one time reward NFT.

Blickter shared some options to provide incentive for Liquidity providers back then:
#🥩〕staking message

There are a number of ways that we can work on this. I don't believe giving away NFTs will be the best way, because it would not incentivise long-term staking. It would just be a one-time thing after all.
If you make this incentive too high, you may end up repeating the last ILV circulation crisis where the price pumped unreasonably till the 1800s. If you don't give enough rewards, there is no reason to stake for a year. It would be a difficult balancing act that would have a high likelihood of failing.

Making a new pool with increased liquidity rewards from my perspective would be the best way to go.

I think community sentiment will help bring to light some concerns and potential ways to move forward. We could use the linked chat as a basis for future discussions. 👍

sand jungle
wide musk
# sand jungle There are a couple of things here: 1) I believe long term staking incentive is ...

1> that is not a reason to stake SLP. On the contrary, it is a reason nót to stake SLP and instead stake ILV. You could have double the ILV staked for double the revdis. Rather than half ILV half Eth.

2> If we go with a new pool and better reward structure, they would be incentivised to add liquidity to said pool. Right now, i may be wrong, every transaction has a 0.25% fee to liquidity providers. If we can bump this up to 1% orso, it would 4x the liquidity yield from trading volume. With Revdis buying ILV off the market, it would move through the SLP stakers first.

I dont find "increased additional rewards from" in my text otherwise. Please be more specific. 😬

sand jungle
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Sorry for the misscuote, I was almost out of battery and had to rush this before I forgot 😅. When I'm talking about this incentives I meant it for both pools, obviously the SLP one is more vulnerable but not the sole focus.

There is a lot to unpack here but I generally like the idea of creating a new pool (if needed) to get more transactions fees for stakers. The original assumption was that we wouldn't need SLP anymore after June 2024, because the ecosystem was going to be mature enough and have enough players and money, this brings up a good question of how long do we really need it for (would love to know the team's train of thought for this structure). This is the reason why I offered a short term solution to cope with the specific gap in game delay and try to get us back on track with the original plan.

NOW:

  1. I have a couple of little problems I can think out of the top of my head with the new pool idea:

a) Aditional transaction costs for stakers (go from one pool to the other in ETH L1 assuming that we can still use the same liquidity pool token, if not, add those cost too)

b) Aditional steps that stakers need to take (SLP is a complicated enough process, as is, for a lot of people)

2)To expand on your idea I have a couple of questions:

a) How complex and time consuming will it be for devs (with audits and all) to have a new and secure pool? (It could not be, I'm just saying because I have no idea)

b) Would this new pool have locked stakes and weight too? Would old stakers loose their weight in the transition?

Thanks a lot for your Input 👍

drowsy vector
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My 2 cents for incentivising the SLP pool was always this:
When doing revdis. Split it in two (or maybe at some percentage 70/30) and then distribute by weight.

This will have a few effects:

  1. $100 dollars invested into the ILV pool will yield the same as $100 dollars invested in the SLP pool.
  2. Allow arbitrage between the 2.
  3. Provide enough liquidity for the DAO to swap ETH for ILV.
  4. This way the DAO is in control of the liquidity even though I believe the DAO tokens were removed from it.

However this does nothing until we have revdis up and running.

drowsy vector
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On a note about the DAO producing value for gamers/investors. I'll always be for it. Just give stuff away. Especially if it doesn't cost much on L2. Make the whole space more rewarding and ensure there is supply so that in 2 years it's not impossible to get into this.

wide musk
# drowsy vector My 2 cents for incentivising the SLP pool was always this: When doing revdis. Sp...

I'm curious how this split would affect the revenue going to the treasury. If the treasury only holds tokens in the ILV pool, it would then only get X% out of the part that would go to the ILV pool.
Now this is just based on a single AMA a while ago, and I have not done any research into the tokenomics after that point. So the following may be wrong info:
Since the treasury is at 1.1M tokens and Kieran shared that 1M was the minimum to make the game net-positive with the current tokenomics (according to Danny way back when), I doubt that doing any cut from the revenue going to the treasury would be beneficial for the development funding.

I do think that some kind of value-add would be necessary for SLP stakers, as ILV is not a token that will likely be traded often. The entire idea behind ILV is that you buy it and put it away for X years, while potentially accruing more or selling revdis to get your ROI.
From that perspective, I don't think we'll see millions of daily volume, because it doesn't make sense to sell your ILV if you believe in the project. And due to the lack of trading volume, you may see a lack of liquidity.
Doing revdis in Eth would circumvent that, but it would also dry up the entirety of ILV token. If nobody wants to sell anyways, and Ethereum is being paid out, there would be no volume -> No reason to add liquidity.

Like i said above, I think NFT's could be an option but those would probably be very difficult to get right. And their use case will be strange. What do you want to give these people other than a better ROI because that is why they invested in the first place? A skin? You would once again devalue the blueprints from the lands by introducing skins from other sources. Is that bad? Idk.

I will probably take a bit of a back seat in this discussion as I'm not comfortable around making definitive statements around Tokenomics myself. These were my final insights that I gained over an entire half year of letting it smoulder in the back of my mind lol.

drowsy vector
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Thanks Garf. I discussed this with Deraji way back. In his opinion a split of like 70/30 made sense, because we don't need this much into the SLP pool. But I argue that spliting the revdis before doing the weighting is the way to go.

Currently in 1 SLP there are ~7.1 ILV tokens. What happens if those drop in half. People would be highly incentivizes to move to the ILV pool. But if we do the split before hand. It would not matter.

sand jungle
sand jungle
# wide musk I'm curious how this split would affect the revenue going to the treasury. If th...

The NFT bundle I mentioned does not need to have skins, that is up for discussion, I understand the potential conflict it will have with land owners (I don't know if it will be too much as a one time deal). Remember that illuvium already did something similar (see attached picture) we can expand on that letting stakers know it is a band aid solution to give RevDis time to mature and after that we can expand on more long term SLP pool solution (again if needed)

image.png
obsidian helm
drowsy vector
rancid river
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Slp could be 5% as big as it is now and still accomodate the trickle of volume it gets

sand jungle
rancid river
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I meant size of the pool, not rewards. Look at market depth and daily volume betw slp and cefi ilv markets, you'll see slp pool is unnecessarily large. 500k daily volume on a pool with 1.5m depth vs same volume in binance and their mm supplying only 20k at 2% depth.. thats 75x smaller..

sand jungle
rancid river
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It's important to understand the problem and forecast future scenarios before finding a solution. Incentivized LP's have two functions; distribute tokens through yield and provide lower slippage for people looking to buy/sell. The first function dilutes the token value, the second is unnecessary due to arbitrage/effects on prices in low liq env.

The slp provides an automated market maker charging .3% per trade. Currently, the slippage is extremely low because the pool size is very large relative to the daily volume. This is due to the incentive.

Since more people are selling than buying, the token becomes diluted while sellers benefit from getting a better price on their sales. Lower slippage means a 50k sale is a .35% event, .3 for the slp amm fee and .05 slippage from amm mechanics. By incentivizing high liquidity through token distribution, you create an environment beneficial to sellers and bad for holders (diluted token through yield and better prices for sellers).

I realize you aren't taking tokens from the treasury in your plan, instead you're selling a product that should have gone to revdis and using that money to incentive a pool.

It's unnecessary.

If the slp size dropped in size, trades would be very expensive due to slippage. This is the market maker automatically charging more per trade in both directions to keep pool from draining. Its an automatic solution to the problem. The cost is on the buyer/seller.

In a low liq env, price moves further in both directions. I'll skip the econ here, want to go back to bed but last point:

If the slp drops in size to where slippage>1%, an arb opp will exist for someone to create a uniswap pool at 1%. If volume increases, a .3% pool will be created to capture the demand for lower slippage. There will always be a place for people to buy the token through defi.

So why does the slp exist in the first place?

Distribute tokens/provide a low slippage exit to early holders.

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I don't think this was intentional; ILV was just copying the tokenomics of other successful projects. But, 3 years of data provided fairly good optics into what incentivized pools really accomplish, and its not to the benefit of long term holders.

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How can revdis exist without slp? Low liquidity provides an env where price moves more in both directions. Large revdis pushed through a low liq env will cause price to increase dramatically. Why pay an incentive to stop this?

Arbitrage will happen. Liquidity will increase organically. As long as revdis protocol is doing its orders slowly across all platforms, slippage will be at a minimum (relative to a large, all at once order).

An okay solution would be to create an "official pool" on uniswap and have the protocol itself provide the first large deposits of eth/ilv. Do this after expiration of slp.

sand jungle
winged acorn
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I appreciate your input @rancid river

steel dragon
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Gave you a thumbs down as I believe you are trying to add incentives to SLP if iI have drawn the wrong conclusion please let me know

For the record I personally was 100% slp but recently moved 100% of my ILV into max staked (12 month) ILV only . Being a OG staker I would be 100% against anything incentivizing the SLP pool as it exists today at this stage in the game . I believe you are correct though regarding SLP dying explained below i think that was always its fate and had personally brought this up.

IMO NFA DYOR the smart move was to eventually move and MAX LOCK 100% ILV before open beta to maximize revdis profits by locking in as many ILV as possible before the game launches ( which I now have done) ( ib4 no revdis for years , but this graph but this government ,stagflation etcetc FUD IMO 🤨 . I personally think it will defy all that because of the AAA team illuvium labs has assembled.

(I also proposed max stake locking in ILV be extended to at least 5 years and double the weight but that was shot down as well.) .

If others have the same Idea and that Idea that drains SLP so be it imo that was always the eventual result due to the fact it was designed that you make 50% less REVDIS and diminishing returns as farming will eventually reach 0 when all tokens are in circulation end of June2024

Tholky you been here longer than me I believe I you know i have tried to bring up such subjects personally

One of the feedbacks i gave was this one :

#1040244853155577876 message

the above dealt with the liquidity for those not interested in maximizing revenue from revdis and would have made Current SLP dying irrelevant ( in my limited understanding) was promised an update that never came form an admin or anyone,

As you know did my best to try to be of use to the community and DAO but we all have our limits .

sand jungle
# steel dragon Gave you a thumbs down as I believe you are trying to add incentives to SLP i...

Hi Solar, I appreciate your input and point of view. You are correct in assuming this proposal looks into adding a single time incentive to the SLP pool, but it would also add said incentive (in a lower proportion) to the ILV pool to retain stakers and give RevDis a little time to grow (as I think was the original intention)

Yeah I missed your thread on Tokmak 👀 - I had forgotten about that