Proposal to create a structured and logical Balancer+MTA rewards program.
EP = EarnPool
RP = Rewards Pool
LP = Liquidity Provider
IL = Impermanent Loss
APY = Annual Percentage Yield
XYZ APY (ie BAL apy) yield on a pool for that token’s individual rewards (ie fee apy, bal apy, mta apy, total apy, etc…)
This proposal offers a solution for the current “5:95 lopsided pool allotment” while attracting new money into the mStable Liquidity Provider (LP) pools by offering the following:
⦁ Unrewarded “Staker Pool” for Staker EarnPool holdings.
⦁ Moderate yield investment pool with mitigated risk, and moderate rewards
⦁ High yield “LP Pool” for MTA LPs with maximum MTA rewards.
Here is the setup:
A) Remove the 15k/wk MTA rewards from the current 5% MTA / 95% mUSD pool. ( https://pools.balancer.exchange/#/pool/0xa5da8cc7167070b62fdcb332ef097a55a68d8824 ) [5% BAL APY].
Leave the EarnPool balance in that pool. This pool is for the EarnPool funds and providing backup $mUSD liquidity against $MTA liquidities. Since stakers earn xxx% APY via 49 week staking and those funds are the EP funds, no individual LP should be using this pool as the $4m+ EP holdings will eat up any MTA rewards that would be on it.
It would be misleading and counterproductive to the adoption of the mStable staking & LP programs to have a Reward Pool (RP) with the EarnPool (EP) in it. (Current setup and MTA price fail factor) This pool has minimal Impermanent Loss on mUSD holdings and is MTA “bear” friendly as a “safe pool”. BALapy on this pool will not be extrordinary on this pool, as the ratioFactor of 5:95 is low IL.
B) I setup a NEW 25/25/25/25 MTA:mUSD/BAL/wETH Balancer pool ( https://pools.balancer.exchange/#/pool/0x902d58a84af3ac8d9d384393be6c21449a6fd40b ) [38% BAL APY] with 0.09% swap fee. Use 5k/wk of the Pool A retired MTA rewards on this pool. (0.01%-0.02% lower than the other 2 program pools) This will give preference to this pool for swaps on the exchange and help offset the high impermanent loss on the 50:50 ratio between 6 internal pairs. This pool will be used for swaps and creates 4 currently non-existent Balancer swap pairs for the mStable ecosystem:
It also captures the BALFACTOR and ETHFACTORs from balancer and with an equal ratioFactor on all pairs, giving it the highest BALapy of the 3 pools, 0 slippage, MTA rewards, and moderate/mitigated risk.
C) I Setup a NEW 95:5 MTA:mUSD pool with 0.10% swap fee ( https://pools.balancer.exchange/#/pool/0x8b7333eb8c072523441f5eba8bf7680c0d931ddd/ ) [5% BAL APY] Use the remaining 10k/wk MTA rewards from the retired Pool A rewards HERE. This pool exposes LPs to the highest risk of price fluctiation on the MTA token, but also bears the highest MTA/wk rewards. No EarnPool funds in this pool, otherwise they will hog the MTAapy from the program, de-incentivizing the pool. With low IL on MTA/mUSD, this pool is “bull” friendly and its intent is to bring new money to the mStable LP ecosystem. However, with high price exposure risk, the rewards on this pool WITHOUT the EP funds in it will create tremendous price pressure until this pool liquidity nears the liquidity of pool A).
In an effort to provide better governance, the rewards program on pools B & C should not be changed for 91 days and then review. (13 week program, vote to continue, modify, or terminate) to give confidence to LPs.
[End proposal, begin commentary]
Here is the logic behind the plan, beyond what is mentioned above:
- EarnPool funds inside of an RewardPool causes the LiquidityProviders to earn negligible MTA rewards from the RP program. Therefore, no RP should ever have EP funds in it, as the pools are intended to hodl the EP funds while earning.
- The middle fund, 4x25 is designed to be a place for LPs to dump BAL and MTA rewards while reducing the sell pressure from such by using the 4x25 format. Capturing maximum BALapy and FEEapy is crucial to this pool. 5k/wk MTA rewards with 0 EP funds will create a great combined APY with mitigated risk. There is currently only MTA/mUSD pairs on Balancer, and the 4 NEW liquidity pairs on a rewarded pool will help with adoption.
- Pool C) - This is for the true MTA LPs and those who are bullish on MTA due to its 95% MTA weight and minimal impermanent loss on the TOKEN. With 10k/wk mta rewards and no EP funds in it, this pool offers potentially astronomical MTAapy until it gets diluted.
- By leaving the EP in Pool A) with 0 weekly MTA rewards, and having higher MTA/mUSD ratios in the other 2 pools WITH rewards, this causes BUY pressure on the coin and its underlying math from defi protocols.
- Increased price = increased MTAapy = more LP buying in = more buy pressure = higher price… (cycle)
- This could be the mStable+Balancer rewards program and close/remove any other rewards from balancer pools
- It solves the current 5:95 imbalance pinning the price down, while giving a program solution to handling RP on Balancer.