[PROP # 4][APPROVED] AMM Incentive #1

Status

Approved

Proposal

This proposal is for the first iteration of AMM incentives to liquidity providers. This proposal is for the automated streaming of DYM tokens to liquidity providers of specified liquidity pools. The purpose of streaming DYM rewards to liquidity providers is to aggregate liquidity, reduce the slippage during trades, and thus creating the foundational liquidity layer for the Dymension ecosystem.

This proposal sets out to release 300,000 DYM from the incentive manager with tokens distributed linearly over one month from the passing of this proposal.

Context

The incentive manager (i.e. x/streamer module) holds 330,000,000 DYM. These funds are earmarked for protocol incentives namely liquidity incentives, RollApp Credit Streams, and Rolldrop seasons. Technical features that enable the automatic disbursement of these assets will gradually be released.

The tiers are broken down into what is assumed to be the most active pairs with the largest sized trades (i.e. incurring greatest amount of slippage). During the first month of incentives, information on the trading activity will be gathered and will help determine future target TVL and the respective amount of DYM rewards.

Technical implementation of the AMM requires bonding a LP token (i.e. share) in a respective perpetual gauge (see below to learn more) to earn rewards in DYM. If a user wishes to unlock their LP token they must wait for one minute until their funds will be available.

Axelar and Wormhole integrations are currently work-in-progress and are expected to happen in the near future. However, to move forward with this incentive proposal these asset have for now been excluded from incentives as the pools haven’t been created.

Updated proposed distribution

Based on community input and for the betterment of the Dymension ecosystem the following incentive proposal will go onchain:

Pool ID Base Asset Quote Asset Total DYM Rewards Daily disbursement
002 DYM USDC.noble 75,000 2500.00
003 DYM TIA 50,000 1666.67
004 DYM ATOM 50,000 1666.67
005 DYM USDT.kava 50,000 1666.67
006 DYM stTIA 50,000 1666.67
007 DYM milkTIA 25,000 833.34

References

Governance votes

The voting period for this proposal as set on genesis is 5 days beginning from the time of deposit. The following items summarize the voting options and what it means for this proposal:

  • YES
  • NO
  • NO WITH VETO - A ‘NoWithVeto’ vote indicates a proposal either (1) is deemed to be spam, i.e., irrelevant to Dymension, (2) disproportionately infringes on minority interests, or (3) violates or encourages violation of the rules of engagement as currently set out by Dymension governance. If the number of ‘NoWithVeto’ votes is greater than a third of total votes, the proposal is rejected and the deposits are burned.
  • ABSTAIN - You wish to contribute to quorum but you formally decline to vote either for or against the proposal.
86 Likes

I have a few questions:
-Why go so big on stTIA? Is it to show support to that project and hoping that Stride will add in some STRD incentives as well?
-Which elements / indicators (target TVLs, % volumes of usdc vs usdt, % volumes of eth vs atom vs sol for example) will you be observing during that first month to determine if it can be repeated as is or if some of these assets do not make sense or are in the wrong tier ?
-From your current perspective, which assets will be most effective for / needed by the first Permissioned Rollaps that will deploy ? Other than Dym obv

29 Likes

Why go so big on stTIA? Is it to show support to that project and hoping that Stride will add in some STRD incentives as well?

Indeed this is a large amount of incentives for stTIA with the assumption that the liquidity of this token will play an important role for RollApps. Since the announcement of stTIA from Stride along with their incentives we’ve noticed the demand for stTIA steadily increasing. Looking a bit into the future it is hard not to see Stride as the premier LST for IBC assets.

There are security implications in the canonicalization of certain protocol LSTs as this moves the favor to one protocol over the other. However, the Stride protocol maintains a high level of social/economic security as it is coupled with the Cosmos Hub.

The purpose of including stTIA along with TIA is due to much of TIA being staked with validators.

Which elements / indicators (target TVLs, % volumes of usdc vs usdt, % volumes of eth vs atom vs sol for example) will you be observing during that first month to determine if it can be repeated as is or if some of these assets do not make sense or are in the wrong tier ?

We are looking at metrics identified by chaos labs in their Osmosis incentives optimization program. Primarily the slippage being incurred on swaps.

From your current perspective, which assets will be most effective for / needed by the first Permissioned Rollaps that will deploy ? Other than Dym obv

Stablecoins has been the primary demand.

23 Likes

I believe dominating the stTIA market will both generate revenue, and solidify Dymension as the go-to liquidity spot for everything modular. @Fifi You do have a very good point regarding proper incentives from Stride’s side as well, we need to make sure Stride allocates and invests the maximum resources in form of their own token to stimulate the growth of this pool before we approve this proposal.

FYI,
It is easy and permissionless to incentivize pools with various tokens, reposting this link for context: Incentives | Dymension Docs

From your current perspective, which assets will be most effective for / needed by the first Permissioned Rollaps that will deploy ? Other than Dym obv

Stablecoins has been the primary demand.

I believe DA coins will be in high demand for RollApps as an operational tool, thus having a liquid TIA (and other DA’s in the future) is a high priority.

Generally I view this proposal as an initial experimentation which will allow us to examine and decide upon proper long term distribution for establishing Dymension’s liquidity layer.

22 Likes

We acknowledge the extensive work done on the distribution, culminating in the presented table. In seeking a broader perspective, we propose to discuss an alternative distribution scenario as outlined below.

Quote Asset Total DYM Rewards
USDC.noble 60,000
TIA 60,000
USDT.kava 60,000
ATOM 40,000
stTIA 30,000
wETH.axl 30,000
SOL 20,000
17 Likes

I appreciate your elaborate answers @Shaolin @Yishay
Looking forward to dissecting the results of this first experimentation!

13 Likes

Can you expand on the reasoning behind this suggested adjustment?

9 Likes

We believe that TIA and USDT liquidity are just as important for Dymension as USDC liquidity. Celestia is a crucial data layer for Dymension. And USDT is the dominant stablecoin on EVM chains. Those migrating liquidity from EVM chains may be more inclined to use USDT in the pools. It is also a native stablecoin on a Cosmos chain (Kava), like the USDC. Additionally, the DYM/USDT pool has had the highest volume to date.

ATOM is one of the most liquid assets in the Cosmos ecosystem and, as you know, it is fundamental to the ecosystem. Therefore, it may be a good idea to incentivize its liquidity.

While a large share has been allocated for TIA liquidity, we believe that half of the incentive allocated to TIA for stTIA would be sufficient.

Our proposed wETH and SOL incentives are very close to the numbers in the Draft.

14 Likes

Stable liquidity is important, but I’m curious as to if USDT should be incentivized that much? Most USDT remains on Kava and does not leave the chain to engage with many other protocols. Maybe this changes that narrative, or maybe redistributing 10-20k from that portion could be adjusted. My initial guess would be the USDT dominance for market trades is because of MM relationships and because Binance is just resuming USDC pools. Not sure that same demand would translate over to a DEX, case in point on Osmosis, unless the MMs have that desire and prefer USDT.

On another note, what about stETH & stATOM instead of their non-LSD forms? I assume this would be more beneficial liquidity to have in the long run for teams building on Dymension.

With the way Stride has been pushing the adoption of stTIA and the provision of liquidity, I think they already are doing their part and have planned for Dymension liquidity just as it did for Osmosis and Neutron.

Overall, this is a great mix of assets that allow for users from most ecosystems to bring liquidity and seamlessly traverse through the different protocols and rollapps.

15 Likes

Hey, everyone. I’m one of the core contributors to Stride, the liquid staking protocol that issues stTIA. Let me provide some insight about the inclusion of stTIA in this initial round of DYM incentives.

Looking at the big picture, it’s important that Dymension build up stTIA liquidity because stTIA is shaping up to be one of the key “monies” of Celestia’s modular ecosystem. As the ecosystem continues to take shape, you’ll see stTIA used to trade NFTs, used as collateral, paired with other tokens in liquidity pools, and held by treasuries.

TIA likely wouldn’t find traction as “money,” because everyone using it would miss out on the high 15% staking APR and the frequent airdrops. Whereas by holding and using stTIA, users still get their staking reward and airdrops. We’re already seeing deep stTIA liquidity in trading pools on Osmosis and Neutron, and stTIA is being used as collateral on Demex and Agoric.

Looking at this incentive proposal specifically, if Dymension governance passes this proposal Stride will add additional STRD incentives to the stTIA/DYM pool. But more importantly, Stride will whitelist the Dymension chain and this specific liquidity pool for the ongoing stTIA airdrop. That means that users LPing in the stTIA/DYM pool will receive: 1) swap fees, 2) DYM incentives, 3) STRD incentives, 4) an STRD allocation for the stTIA in the pool.

Based on the liquidity and volume we see in the stTIA/TIA pools on both Osmosis and Neutron, if this proposal passes we expect the stTIA/DYM pool will be very popular with users - meaning lots of fees generated and lots of burned DYM.

@Fifi and @Huginn, hope this addresses your questions (:

22 Likes

We wholeheartedly support this proposal for the first iteration of AMM incentives to liquidity providers. The gradual release of 300,000 DYM over a month from the incentive manager demonstrates a thoughtful approach to incentivizing liquidity providers. We believe this proposal strikes a balance between providing attractive incentives to liquidity providers and ensuring the sustainability of the Dymension ecosystem!

13 Likes

When we look at the current state of stablecoins across the blockchain space, we see that USDt has almost a 3.5x market cap in comparison to USDC. What this means is that there is more liquidity for USDt out there in general across chains for utilization.

What matters is onboarding user capital into the cosmos ecosystem, and when you look at the numbers, users prefer Tether’s USDt as their stablecoin of choice (refer to graphic below).

Stablecoin liquidity should be seen from a holistic market perspective, and with Tether’s USDt on Dymension already up and running, we are showing that we value Dymension’s ecosystem and want to support its growth.

Currently, there is 165M USDt issued by Tether (via Kava) on Cosmos, and usage is spreading rapidly across Cosmos chains.

Here is just a snippet of a few of the chains that support and actively use Tether’s USDt (via Kava):

-DYMENSION
-OSMOSIS
-INJECTIVE
-SEI
-COSMOS HUB
-PERSISTENCE
-EVMOS

Summary:

When we look at the incentivization for Tether USDt on Dymension, it’s a powerful tool to increase adoption and draw liquidity from outside of the cosmos ecosystem by supporting the preferred stablecoin (USDt). We need to look at the stablecoin usage and adoption as a whole across all blockchain ecosystems, in doing so we can see the clear value proposition that USDt brings to Dymension and the rest of the Cosmos ecosystem. That’s why we agree with others on this forum in favor of increasing the USDt incentives on Dymension.

Best,

Bryan (Product Manager @ Kava Chain)

16 Likes

How about stDYM? DYM/stDYM for example

14 Likes

Dear DYM Governance and Community,

The MilkyWay team is writing to propose the inclusion of our asset, milkTIA, in the DYM Incentive Program. Our conviction is rooted in the belief that MilkTIA not only aligns with the overarching goals of the Dymension ecosystem to foster liquidity, enhance trade efficiency, and support modular ecosystem growth but also brings unique advantages that will significantly benefit the Dymension community and its stakeholders.

The milkTIA distinguishes itself in the DeFi space primarily through its substantial user base, with over 146,000 holders. This extensive network of participants underscores the protocol’s widespread acceptance and trust within the community, suggesting a significant potential to contribute to the liquidity and diversity of the Dym liquidity hub. Its integration with 10 DeFi protocols, including well-regarded names like Osmosis DEX, Mars Protocol, Axelar and Squid, highlights its compatibility and utility across the DeFi landscape. The commitment of 2.6 million TIA tokens staked in milkTIA reflects strong confidence in its stability and growth prospects. This broad adoption and strategic partnerships position milkTIA as a valuable addition to any liquidity framework, promising to enhance the ecosystem with its large and active user base.

Alignment with Dymension’s Objectives

milkTIA represents a pioneering step in the Celestia ecosystem, offering a liquid staking solution that addresses the critical need for liquidity without compromising on network security or participation in DeFi activities. This liquid staking protocol is designed to facilitate seamless participation in the ecosystem, providing users with the flexibility to stake TIA tokens while retaining liquidity through milkTIA tokens. Our vision aligns with Dymension’s commitment to creating a scalable, efficient, and user-centric DeFi landscape for the modular ecosystem.

Enhanced Liquidity and Reduced Slippage

By integrating milkTIA into the DYM Incentive Program, we aim to significantly boost the liquidity available for TIA tokens. This increased liquidity will naturally lead to reduced slippage, making transactions more efficient and enhancing the overall trading experience within the Dymension ecosystem. Our protocol encourages active participation and investment, creating a robust liquidity pool that serves as a foundation for a healthy, thriving DeFi environment.

Support for a Modular Ecosystem

The design and architecture of milkTIA are inherently modular, mirroring Celestia’s approach to blockchain infrastructure. This synergy ensures that milkTIA not only contributes to the liquidity and functionality of the Dymension ecosystem but also supports its growth and adaptability. Our protocol is built to enable innovative DeFi products and services, fostering a dynamic ecosystem that evolves to meet the needs of its users.

Proposed Integration and Incentive Structure

We propose that milkTIA be included in the initial DYM incentive program. The MilkyWay team will seed the initial liquidity in the pool, and while we do not have a token to incentivize with, we will include liquidity providers in mPoint snapshots for a future airdrop of 10% of the total supply of Milk tokens.

Conclusion

The inclusion of milkTIA in the DYM Incentive Program presents a strategic opportunity to strengthen the Dymension ecosystem, driving liquidity, enhancing efficiency, and supporting the modular infrastructure that underpins our shared vision for the future of DeFi. We believe that milkTIA’s unique attributes and the alignment of our goals with those of Dymension make it a prime candidate for inclusion in the incentive program. We invite the DYM Governance and community to consider our proposal favorably and join us in this exciting journey toward a more liquid, efficient, and adaptable DeFi ecosystem.

Thank you for considering our proposal.

Warm regards,
The MilkyWay Team

48 Likes

This is your smart step, but depending on the team and also the governance. May be need voting for this. We are supporting this.

20 Likes

VNBnode voted YES for this proposal.

7 Likes

Updated proposed distribution looks much better, thank you for evaluating all feedbacks! Easy YES from Huginn.

6 Likes

Lucky Research voted yes. We think this great proposal contributes to promoting many positive long-term development activities for the ecosystem! Thank you team! DYM on top

9 Likes

hi. At HoodRun, we support the updated version of the proposal. Our vote will be YES.

6 Likes

Great DeFi on Dym will start tomorrow.

12 Likes