As $SWISE was being listed on 1inch, it was necessary to find a good amount of $SWISE to seed the pool and offer sufficient incentives to attract deep liquidity. In the interest of time, the StakeWise team decided to allocate 1.45% (1.25% + 0.20%) of the $SWISE supply, or 14,500,000 $SWISE, from the Future Funding reserve previously earmarked for fundraising in the next rounds.
The team is now committed to replenishing the Future Fund with 12,500,000 $SWISE from the team’s token allocation, once a portion of it becomes unlocked in October (and thereafter follows a 42-month linear release schedule).
As for the other 2,000,000 $SWISE tokens that were used for the $SWISE / $1INCH farming incentives, we would like to propose to the DAO the idea of reimbursing the Future Fund with immediate effect using the community’s token allocation.
Deciding on this matter is akin to deciding on a retroactive airdrop to the LPs, hence the rest of this proposal will focus on the rationale for offering liquidity mining incentives to the $SWISE / $1INCH Pool.
If you’re new to the idea of liquidity pools and farming $1inch and $SWISE via liquidity mining, check out our Medium blogpost to learn more.
Token launches can be volatile - there are countless examples of liquidity providers suffering from IL, price dropping on low liquidity, liquidity mining APY’s suffering from price drops and so forth. The recipe to making the token launch as smooth as possible revolves around two main items:
- Give users incentives to hold and buy the token at the start (before sufficient decentralization and market awareness is achieved)
- Have deep liquidity in the token’s LP, allowing efficient price discovery and avoiding inflicting irreversible damage to the asset ratio in the pool
The one stone that can kill two birds is allocating token incentives to the providers of liquidity for the token. In case of the $SWISE / $1INCH liquidity pool, this would mean incentivizing LPs with $SWISE.
Here are the advantages of doing it:
- $SWISE holders can put their capital to good use, earning more $SWISE (and $1INCH)
- More $SWISE is deployed as liquidity instead of inactively sitting in the wallet or being sold
- Deeper liquidity leads to a more stable $SWISE price
- Outsiders and $1INCH holders who want to generate yield will buy $SWISE to LP, boosting $SWISE and contributing more liquidity
The flywheel effect that is created by incentivizing LPs with $SWISE should support the price both during the launch and for the foreseeable future.
Allocate 0.2% of the $SWISE supply, or 2,000,000 $SWISE, towards the $SWISE / $1INCH liquidity pool for the 1st month of the campaign.
Depending on the consequent market dynamics, the incentives for this liquidity pool could be adjusted upwards or downwards. The team would expect these incentives to be phased out over time, in favour of incentivizing $SWISE use elsewhere.
Abrupt ending of the incentives - without a clear plan to continue allocation of liquidity mining rewards to this pool or another pool, $SWISE could experience a rapid loss of liquidity and depreciation vis-a-vis $1INCH, undoing any prior positives from launching on 1inch.
Mitigating factors: the team has a clear plan for the next steps of liquidity mining for the $SWISE token and will execute on it in a timely manner.
Have deeper liquidity + earn APY on your $SWISE + support token price = smooth $SWISE launch.
What are your thoughts about this, our newly christened DAO members?