Reward scheme for long term LPs

I took the idea from this video: https://youtu.be/uy2Zip9KS9o, at minute 19:09.

To summarize:

  • It’s hard to create competitive advantage in Defi world. LP can easily jump from one protocol to another in a blink of an eye (as in case of Uniswap and Sushiswap)
  • Long term LPs, who provide much higher value to the protocol, get the same reward as short term LP
  • Higher reward for long term LPs could be a win-win situation: Commited LPs get higher rewards, protocol gets more stable TVL

I think this could help capture more value for Secret network.

2 Likes

I am supportive of this idea. I’ve come across other platforms (whom I shall not name) where the platform provides investment products, such as Crypto Index Funds (e.g. the fund invest in top 10 market cap funds), and so on.

When an investor purchases the funds and then further commit to it long term but staking their fund for 3,6,9,12 months, they will receive the native token as a bonus. The longer the stake commitment, the higher % is the native tokens returns.

I like this idea for locking the LP we provide for a pre-set period of time (e.g. 10 days, 20 days, 30 days, 2 months, etc) in return for higher % of SEFI and so on.

1 Like

I like the sound of this.

You could have contracts that have better interest rates but have a minimum number of days before you can withdraw to reduce complexity.

e.g.
SEFI stake normal: 30%
SEFI stake with 21 days withdrawal wait time: 50% etc

Thanks! But rather than just giving flat out amount, it’s dependent on the current SEFI staking %.

SEFI Staking % is dynamic, depending on the total amount stake.
Assuming SEFI Staking % currently is a%
Staking Locked 15 days = (a multiply by 1.01)%
Staking Locked 30 days = (a multiply by 1.02)%
Stacking Locked 60 days = (a multiply by 1.05)%
Staking Locked 90 days = (a multiply by 1.12)%

Of course, that would depend entirely on the amount of SEFI rewards allocated to the SEFI pool, and x% is calculated on the fly, taking into account all the amount currently locked and unlocked. It’s not a simple calculation. But worth it nonetheless, to incenvitize long term SEFI hodlers.

Thoughts?

Purely from a developer’s perspective, I have to lean towards simplicity.

1 Like

The calculation has to be correct. The APY is dynamic, hence the staking rewards has to be dynamic.

I’m no mathematician so I’ll be interested with what you come up with. But please have a layman’s explanation for us average folk.

Can’t escape the math if we want parity…

This is an interesting idea and I’d love to see more discussion on this. I love the creativity in this community, can’t wait to see what the future holds for SecretSwap! :heart:

1 Like

@Iowascero Will these discussions lead to anything? Any chance of implementation?

They’re working on governance functionalities for Secret swap! Get your ideas ready for proposal as there’s a few things that people are keen to propose.

1 Like

I’d say anything is possible, but I don’t speak for the developers, only to them. I do know that forum feedback is thoroughly reviewed by myself and others and I will help push for the things that gain widespread support, so these discussions are crucial to determine support of different ideas and gauge what the community thinks of different possibilities, as well as determining how high these items should be on the agenda.

Back to the calculation. A simplified version, but can be expanded upon or go into more details. This is rather static, e.g. computation to take place every 24 hours.

Suppose the distribution of SEFI to Pool A is supposedly T per day. The total amount qualified for rewards is calculated at 00:00 UTC everyday, according to the formula.
Let amount of LP with no lock-in period be a. They will be assign a weight of 1.
Let amount of LP with no lock-in period of 15 days be b. They will be assigned a weight of 1.01
Let amount of LP with no lock-in period of 30 days be c. They will be assigned a weight of 1.02
Let amount of LP with no lock-in period be 60 days be d. They will be assigned a weight of 1.05
Let amount of LP with no lock-in period be 90 days be e. They will be assigned a weight of 1.12.
Total rated amount of LP = Q = a + (1.01)*b + (1.02)*c + (1.05)*d + (1.12)*e

Hence, reward per rated LP = T/Q.

For people who have no lock period in staking will be given the LP of T/Q x the amount they have put in.
For people who have lock period of 15 days in staking will be given the LP of T/Q x 1.01 x the amount they have put in.

The above is highly simplified, and the APR is only applicable for 24 hours, and has to be recalculated the next day at 00:00 UTC.

For more dynamic computation (e.g. everytime someone stake in the pool, or withdraw from the pool), computation is to be made whenever a contract is executed. The above can be adapted to take that into account.

This idea can be proposed and voted on when SEFI governance goes live.
Will discuss development implications and share details

3 Likes

Ok sounds like a plan. Appreciate it.

1 Like

I’m supportive of this idea. A small fees should also be imposed on LPs who exit their position (Balancer is currently doing that).

1 Like