I agree. Let’s keep our AMM fee competitive always!
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When SIP-30 and SIP-31 will be up for vote?
I feel conflicted with this SIP at the moment.
For one, I think the sharp price movement upwards for SOV recently made me incur a huge impermanent loss on the yield farming which was only partially offset by the liquidity reward mining. Another 80% of my SOVs are locked into Staking, and is barely making anything over the time since I started staking.
Looking at it objectively, I definitely think that some revenue should be shared with stakers to make it a bit more attractive to stay in for the long haul and participate in bitocracy, at the same time I feel that if the rewards for AMM cannot offset large swing movements in SOV prices, it would really affect the stability of the LP. I hold equal amounts of RBTC in all the pools and I can vouch for @Jonezee comment that the SOV/RBTC pool is definitely the one with the most impermanent loss. I think we should start this lower, or have a mechanism to reduce the staker fees when impermanent loss is high/extreme due to one asset being drained rapidly.
TLDR: I support AMM fees being split with stakers, it just has to be a fair amount, and LPs remain well incentivised to keep yield farming despite the impermanent loss (mostly affecting SOV/RBTC).
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LPs have loot drops rewards (biggeston the market) and fees. Conceiding 0.05% is not much at all vs 0.25% . Impermanent loss should be monitored , managed so that you incur minimum permanent losses.
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Hi everyone! I think we have had enough time for everyone to express their views here, I think it is time for voting now.
Agreed or not?
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I believe there will be a updated version proposed.(w/e that is). We digest it. Then vote.
Way it usually goes.
I do agree that we can fast track/ vote soon on said propasal.
Seems like the implications are well understood.
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I concur with this. However, I’d also take the opportunity to re-iterate here—as per your own thread of some weeks ago, with which I still agree—that given the 0.2% bridging fee for conversions of BTC to rBTC, our de facto ‘price of admission’ to Bitcoiners looking to participate in liquidity mining already stands at a relatively exorbitant 0.5%.
Considering this demographic are Sovryn’s most sought-after (for obvious reasons), yet also the most traditionally sceptical of ‘mainstream’ defi, I remain unconvinced that we aren’t therefore overlooking a more fundamental problem of incentive alignment as regards on-boarding those users best-qualified not only to provide liquidity, but also to become long-term stakeholders in the protocol itself.
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I think your point is well taken for onboarding new bitcoin defi users, maybe a fee credit of 0.2% towards first trade or something could alleviate. On the flipside, there are an increasing number of on-ramps to Sovryn, so maybe the necessity is becoming less by the day, I don’t know.
One point of nuance. As someone that’s liquidity mined on quite a few platforms, I would argue that the fees are irrelevant to my decision to liquidity mine. In today’s environment, the economics of liquidity mining are driven by 1) expected underlying asset performance, 2) expected correlation of the asset pair, 3) pool incentives offered, 4) smart contract/platform risk and 5) expected trading fee income. These factors individually and collectively are all much higher than the fees any of the platforms charge, so quite honestly, they don’t much matter, at least to me. (When the market changes and the AMMs have to stand on their own, it will be more important and the fees can be adapted to the market if need be.)
But for sure, anything that potentially hinders the speed at which we can build the network should be considered as there is a lot of competition and we need every edge we can afford right now.
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When this SIP will be up for vote?
I believe this SIP, if passed, will bring a lot more long term stakers to the platform.
wondering the same. what’s holding it back?
I’m wondering whether this SIP is still needed.
I saw two reasons in support for this SIP: one is to further incentivize staking, the other is for stakers to have a financial incentive to govern the AMM properly. But staking seems to me to have become far more attractive in the meantime and will continue to do so (e.g. through a share of Origins revenue). And stakers already have a financial incentive to take care of the AMM, because that’s central to a quality DEX and hence important to maintain the value of the staked SOV.
Against doing this: we need deep and liquid pools for a healthy DEX, and we need the Yield Farming to stay attractive during volatile times. The AMM fees for liquidity providers help with that.
This SIP is definitely still needed. Revenue has improved but is still lacking to stakers IMO and will perpetually decrease as more people stake. Frankly, we can never have enough to stakers as that’s the base value proposition of the entire system.
With regards to having deep Liquidity I’m working on brainstorming a protocol owned liquidity model similar to Olympus Pro that we can fork into Sovryn. This will allow SOV and all sub DAO’s to buy the LP tokens from individuals so there is no risk the liquidity will leave.
We should pass this SIP as soon as up for vote.
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Appreciate your work dseroy, look forward to it.
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I think you’re right. My mistake was to look at the absolute incentives: “is staking attractive, yes or no?” It’s the wrong question. The relevant point here is comparative incentives: “is staking attractive enough for someone who supports the vision of Sovryn?” here it’s a simply fact that someone who values SOV, gets way more from Yield Farming than from Staking, and that’s the misalignment. Thanks for setting me straight. Looking forward to see the SIP on the protocol-owned liquidity!
I’d actually love some help on brainstorming it. This would be a good start for anyone interested: A Primer on Bonding. Olympus does everything a bit… | by OlympusDAO | Medium
The basic idea is instead of giving perpetual LM rewards we allow Sovryn (and all sub-protocols) to buy and liquidity from the users. So, the protocol buy the liquidity, therefore would own a larger percentage of the AMM pool, therefore reducing the risk of losing tons of liquidity.
For example, if a user owns any sort of LP position such as: $100 of SOV/rBTC, then very likely you are receiving SOV rewards as incentive, aka yield farming. Instead, Sovryn can say we’ll offer a bond where you as the user sell us $100 of that LP (the rBTC/SOV in the AMM) and we offer you $110 of SOV that bonds over a small timeframe, like 7 days. The protocol now owns the liquidity and the user gets discounted tokens but cannot immediately dump them on the market, so it’s a win-win.
This model can be expanded to all sub-protocols and it’s a service that we can earn revenue on by charging a fee on every bond that is sold.
To recap:
- Protocol buys liquidity
- Users get discounted tokens
- Protocol earns revenue as a service
What I am trying to sort through is what are the feedback loops and economic incentives?
For example, if we offer this bonding model to Origins platform and Origins wants to buy OG/rBTC LP tokens, then they have to offer OG tokens at a discount via a bond. So $100 of OG tokens to buy $95 of OG/rBTC LP or whatever. The question is how does this impact SOV token? Maybe it means Origins has to mint more OG by locking SOV into the bonding curve. Or does it mean the receivers of the OG token will sell those into the bonding curve and thus lowering SOV price. Or maybe that doesn’t matter because we earn revenue every time they redeem OG for SOV?
Long story short. Bonding is a great model but what are the un forseen risks or beneifts of adding it.
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@dseroy I think Sovryn, rather than any of the subprotocols is best positioned to offer subprotocol token bonds. Let’s say OG tokens are offered at a 5% discount. That discount would need to come in the form of SOV being spent to purchase OG token by someone. The exchequer is probably best placed to do that, as an extension of the logic of liquidity mining rewards.
This would also mean that the Sovryn mother protocol would come to be the owner of the protocol owned liquidity.
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I would also tend towards Sovryn being the one that offers the bonds. Makes the most sense.
I like the Olympus model, and am following how it works out in a few of the projects that have cloned it, like Klima and smaller Ohm forks. Feels like a great way to move towards protocol owned liquidity, and not be forced to dilute yourself endlessly with sizable LP rewards.
The article you linked is a great read. I’m still wrapping my mind around some of the technical aspects, like;
Dynamics of a Bond
The protocol quotes bond prices based on the protocol’s risk-free value (RFV). The Bond Premium is a protocol-governed policy tool that controls the premium charged for bonds. A lower premium means a higher discount and a higher incentive to bond.
Executing Price = RFV / Premium {Premium ≥ 1}
The premium is determined by the total debt of the system and a scaling variable. This ties the price of bonds to the number of bonds outstanding; the fewer bonds outstanding, the lower the premium and the higher the discount.
Premium = 1 + (Debt Ratio * BCV)
Debt Ratio = Bonds Outstanding / OHM Supply
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Please keep this thread focused on SIP-0031 – you are welcome to start a new thread about your protocol owned liquidity proposal 
Most likely this week or next. Putting some final touches on the technical implementation. I will also be publishing an update to the SIP that I think stakers will appreciate: we decided to go ahead with the full implementation so that stakers will receive fees from all swaps, not only the limited set defined in the current/previous version of the SIP.
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