Kickstart Liquidity Mining Incentives for cSwap pools (Discussion)
Overview:
cSwap DEX has been launched on the Mainnet. With strong frameworks, good mechanisms, and a robust build, a good but healthy incentive system is imperative for the growth of the DEX. Keeping this in mind, we open the discussion to the community on an upcoming proposal to kickstart the liquidity on cSwap DEX by allocating 600,000 $CMDX - to be distributed as per the model for liquidity rewards.
Let’s have a quick look at the rewards mechanism before proceeding further:
There are two types of pools on cSwap DEX: Master Pool and Child Pool. The Master Pool would be used on cSwap and other apps as a prerequisite for earning token incentives.
cSwap has two types of incentive distribution parameters; the ‘Master Pool/Child Pool Rewards System’ mechanism and the ‘External Incentives’ mechanism.
There are multiple combinations for the rewards mechanics. Still, in a nutshell, any liquidity provider will earn maximum rewards only if they provide liquidity in both the master pool and one or more of the child pools. A better understanding of the reward mechanism can be gained from cSwap docs.
At launch, we have four pools that are planned to be incentivized, which are:
CMDX/ATOM
CMDX/CMST
CMDX/OSMO
CMDX/axlUSDC
The breakup of rewards for each pool is as follows:
We intend to run the incentives until the protocol matures. Post maturity, these incentives will be optimized again after discussion with the community.
Interesting way to encourage loyal users and discourage farmers. Comdex should at least try this approach but it will probably need some tweaking in the first stage to have a good balance between the amount of paid incentives and the balance between TVL on the master and child pool. We shouldn’t be cautious with changing the parameters, there’s nothing wrong with that. Because it’s hard to say what the best balance between the master and child pool should be. It depends on a few things, I think:
1: it’s important to know how much TVL we want in the masterpool compared to the child pools (assuming the master pool is the most important pool)
2: we want the master pool rewards, if you provide liquidity to ONLY the master pool, as low as possible.
1 and 2 should meet an equilibrium somewhere.
I think there should also be a plan to sustain incentives. Maybe pay a part of all the fees to the most important pools on cSwap. For example, 1% of all fees earned will go to incentives for liquidity. Hopefully, this, or any other idea, will make incentives more sustainable. Because in its current form, crypto incentives aren’t sustainable. But I bet you guys are smart enough to come up with a good idea ;), you’re doing a great job!
This is great idea shared right here and holders of CMDX now have diverse ways to make there assets work for them.
The ending phrase talk about the changes incentive would have after the maturity period of the DEX. My question is what is do you use to measure the level of maturity of the DEX?
You are guys are doing a fantansic work … Keep it up
However will recommend to have a longer initial duration of rewards (min 30days) to have a stable & loyal users. 14 days is too low for onboarding serious users.
Also to note that there are unclaimed CMDX from the airdrop which can be used for incentivizing the pools, there should be no issues with rewarding the cSwap pools for a longer duration initially to properly bootstrap its pools by attracting enough liquidity.
In essence, this is an amazing step to create more utilising effect of $CMDX and thus, grow the Defi hub and visions.
In the aspect of earning maximum rewards from both master and child pool, I just want to believe that the master pool LPs (only) will earn some amazing rewards too even though not compared to LPs on both pools.
Also, are there plans to initiate other pool pairs across the ecosystem in future?
Thank you and more efforts in achieving the vision of Comdex
I support this. Bootstrapping TVL is a must-have in the end.
I am not sure on the master / child setup though. It feels a bit complex and harder to understand, which is not good for UX. So this has to be monitored how things progress and if simplification might be required.
I also would love to spar a bit on the documentation (cSwap). Looking at the scenario’s it feels that depositing only in the child pool reaps 250% APR, which is higher than in any other scenario. So people reading this will wonder why they should deposit in the master pool, since the scenarios indicate that your APR will be lower.
@Leonoors_Cryptoman The 250% APR shown in the example in the Child pool is the "external’ APR that is closer to how external incentives work on Osmosis pools. The APR % in the docs are just for example purposes and do not mean actual numbers.
Let me break down how rewards work for a better understanding:
There are two mechanisms for distributing tips:
Master/child pool mechanism
External incentives
There are three different ways the rewards are getting distributed in the example:
Master pool mechanism incentives, i.e., 80%
Master pool external incentives, i.e., 120%
Child pool external incentives, i.e., 250%
The figures for the child pool APRs are higher because, hypothetically, TVL in the master pool would always be higher, and due to high TVL, the APRs will be lower.
If a user deposits only in the Child pools, he receives a higher APR but earns a bonus/ extra APRs from the Master pool concept.
The idea is that the external incentives on other pools would come from tokens other than CMDX, and CMDX incentives go to people who are a part of the master pool to avoid the mercenary capital.
The mechanism seems strange. If it’s about avoiding reward hunters. Why not endorse child pool rewards with two tiers.
1 first level if the user does not provide liquidity in the parent pool.
2. An additional reward if it brings liquidity to the parent pool.
In the documentation, it is completely the opposite! Did I misunderstand something? What do you think ?
Thanks
Or7ando
ps : in the doc of cswap, i think there is an error between 1000 and 500 in the formula [($500 * 80% APR) +($500 * 120% APR) + ($1000 * 250% APR)]
For me it’s [($500 * 80% APR) +($1000 120% APR) + ($500 * 250% APR)]*
The mechanism works this way because there won’t be external/traditional incentives on pools all the time. These external incentives would be pools incentivized by other protocols or tokens.
The master pool is supposed to be the central pool for liquidity incentives being given out in the token of the pool. For example, if $CMDX token is given out as incentive, the master pool should have $CMDX as pair token. Not all pools would have external incentives, so to earn $CMDX rewards on the master pool, they must provide equivalent amounts of liquidity in the child pool. What this does is it creates a net neutral effect and increases the incentive token liquidity that is $CMDX token, and also avoids mercenary farmers.
As for the documentation, we appreciate you pointing out that the formula you mentioned is incorrect and that there was an error in the documentation. This error has been fixed.
Thanks for the answer! Gonna have a re-read later this week to see if with this new knowledge I get the point better.
I think you want to get to a point where providing liquidity in both a master pool and a child pool has a higher APR than only in a child pool. Being in both benefits the DEX better imo.
But the example reads like only a child pool maybe has a bit more risk, but a higher APR. And since people chase APR you might not achieve what you want completely (at least, that is what I read in it now).
