Liquidity mining brainstorming

Discussion
1

While the current liquidity mining program has helped grow the ETH, DAI, and USDT markets, liquidity is still relatively low and utilization has frequently gone above 80%. Now that the current program is about 50% completed, I wanted to consider some future ideas for the next epoch.

KPI based liquidity mining
Introduce a multiplier for the epoch if the protocol hits a certain goal (e.g. all rewards for the epoch are multiplied by 1.5x if the protocol averages over $50m TVL for at least one month). This could also be done on a sliding scale as opposed to a binary KPI.

Pros

  • Creates a shared goal among the community
  • Incentivizes users to promote Sturdy

Cons

  • Can potentially be gamed, for example if a user deposits just enough to hit the KPI goal and then immediately withdraws

Liquidity locking
Users can lock their liquidity for a fixed period of time (e.g. 6 months) and receive boosted incentives.

Pros

  • Guarantees sticky liquidity
  • Aligns incentives between the protocol and users since they’re committed long-term

Cons

  • Rigid and difficult to adapt. For example if the protocol offered incentives to lock USDC but suddenly saw an influx in organic USDC supply, the DAO would be needlessly paying out emissions

Note that these ideas could be combined, i.e. the rewards for locking USDC could be dependent on a KPI. Would love to get feedback on these ideas and hear any other possible options!

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I think we need to incentivize the sticky liquidity, and boosts through locking would be a good way to do it. Or you could go the route of some DEX’s and don’t lock, but the mining rewards increase the longer the position is open. You can withdraw at any time, but that resets the rewards. This can even be represented as an NFT where a long-term “sticky” liquidity position that is earning high rewards can be traded (at a premium) so the liquidity never leaves Sturdy.

Or something like that.

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Low liquidity makes me wonder if we could partner with other protocols with low utilization. However, since the token does not have any tangible value atm, it might be a challenge.

As far as the KPI-based structure, the emissions could be tied to both TVL and utilization. There could be multipliers based on the ratio of the TVL and utilization through a tiered structure above a certain defined TVL.

For example, TVL above $50m
TVL/Utilization between 50-60% - Multiplier of 1.1
TVL/Utilization between 60-70% - Multiplier of 1.2

Likewise, TVL above $60m
TVL/Utilization between 50-60% - Multiplier of 1.2
TVL/Utilization between 60-70% - Multiplier of 1.3

This could help bring in liquidity while also ensuring healthy utilization.

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