As the subject suggests, I am proposing that either Sovryn or perhaps a sub-protocol under Sovryn could adopt the concept of Protocol Owned Liquidity (POL) which has been a successful and financially sound Defi 2.0 model spearhead by OlympusDao.
Reference link: Introduction - Olympus
The Problem Statement
Attracting liquidity and retaining liquidity to ensure deep liquidity is a constant problem that all defi platforms face. The formula for this has always been the same. Attract liquidity by providing attractive rewards so that there is sufficient liquidity for the platform to function. Ideally, the volume of the platform should increase to the point which the revenue generated from transaction fees is attractive enough to retain Liquidity Providers (LPs) before the reward from treasury runs out.
The Ongoing Risk
There is no guarantee that major LPs will not withdraw their liquidity one day, regardless of how attractive the fees or rewards might be. In the event when this happens, the major of liquidity will render the platform un-usable and eventually leads to the death of the project.
The Solution
The idea is to have POL. Many who are familiar with this POL models will know that these projects often demonstrate an insanely high APY that makes one skeptical and often associate it with ponzi-related schemes/scams. Let us ignore the APY for a moment and look at how POL works.
For POL models, the supply of token is not fixed. The protocol is able to mint new tokens and sell it at a discount from the market price in exchange for LP tokens. For example, if the discount is 20% for SOV-XUSD LP, and the market price is $1,000, one must provide $800 worth of LP ($400 SOV:$400 XUSD) in exchange for 1 freshly minted token. Over time, the protocol will be the major LP and will be able to protect its own liquidity.
1) Why will anybody wish to sell their LP for the token?
The reason is because of the insane APY the protocol can provide. In POL, every token is backed by an asset, usually a stablecoin. For example, 1 token = 1 XUSD. If the market price of token is $1,000, with 20% discount, the protocol will receive $800 worth of LP in exchange of 1 token. Since 1 token = 1 XUSD, the protocol makes a profit of $799. Since 1 token is backed by 1 XUSD, $799 = 799 additional tokens to be re-distributed to existing stakers.
People buy for high APY = price increases = more stakers = lower APY = people sell for profit = less stakers = higher APY.
Note that the price floor of the token will increase beyond 1 XUSD over time. While the protocol mints an equivalent number of tokens with the amount of profit made, the LP owned by protocol can generate revenue from the fees to increase further backing of its native token.
Summary
Sovryn token has a fixed token supply, so I am not sure if its technically possible for Sovryn to adopt this POL format. If not, I think a sub protocol can be created to help Sovryn platform grow in the grander scheme of things. I am aware the above is just a very brief explanation of how POL is, hence I have provided the reference link for those who wish to understand better on the concept.
Signing off,
Octopus