Prolong the incentives for sETH2/ETH and sETH2/rETH2 pools [November 2021]

Prolong the incentives for sETH2/ETH and sETH2/rETH2 pools on Uniswap v3 for 30 days (199385 blocks):

  • 6,000,000 SWISE goes to the sETH2/ETH pool
  • 500,000 SWISE goes to the sETH2/rETH2 pool

Link to the proposal snapshot: https://vote.stakewise.io/#/proposal/QmfEpHxGzq2LoVHB3TWtP3wwc2Q21GxtT1L1aLXNzbufKB

2 Likes

I’m starting to wonder if this SWISE could be better spent elsewhere. Pools seem pretty deep with the current volume. Maybe reducing the amount next month and see how it affects the pool?

2 Likes

As SWISE price increases, gradually reducing monthly rewards makes sense to me. Having the incentives, however, is absolutely vital and we must to everything in our power to keep the liquidity in the pool \o/ liquidity is never deep enough.

2 Likes

Hi all,

I feel we might need to review the the amount of SWISE used for liquidity incentives, the rewards are important and LPs need to be rewarded, but I suggest to try and reduce the amounts of SWISE as 6,500,000 every 30 days seems too much and see what would be the impact of doing so as I feel the pool in uniswap for seth2 are quite deep.

3 Likes

I am definitely for keeping a level of rewards that maintains a very deep pool. I just think this level is way too high. Right now the liquidity is so high that the trading fees are non existent. I’d rather the DAO use a few million SWISE a month on boosting other initiatives.

2 Likes

I agree with the sentiments expressed above that the rewards could be reduced.

However instead of doing an across the board reduction, I think both pools need to be treated differently. Let me explain:

The ETH-sETH2 pool seems in good health to me, the trading fee is 0.3%, it generates some natural gains. The sETH2 gains staking rewards while the ETH does not. The Swise rewards need to compensate for forfeiting staking rewards on the ETH part - which could also be staked instead. From where we are now in terms of rewards, I think this leaves us quite a bit of room to play.

The rETH2-sETH2 pool on the other hand has two issues in my view, the first is that the trading fee is low at 0.05%, I doubt that claiming the trading fees is even profitable for most LP providers. The second problem is that there is no upside to owning rETH2, you can’t restake it like ETH. The only upside to owning rETH2 is to claim the rewards in this pool. Without it the price of rETH2 would collapse.

We could move the rETH2-sETH2 pool to a 0.3% fee pool as well, but I think this is rather cumbersome and requires people to move their liquidity.

This is all to say that we should tread carefully, and reduce rewards slowly.

My suggestion would be to take the following first step:

We still pass the current proposal for the coming period, but from next month on, we reduce the reward on the ETH-sETH2 pool by a third to 4,000,000 and reduce the rETH2-sETH2 pool by 20% to 400,000 (a smaller reduction).

Then see how it goes, paying careful attention to the rETH2-sETH2 pool, before deciding on future rewards.

3 Likes

I voted yes, as i think pools are vital for the protocol and should thus be supported. However, i also share the abovementioned concern of swise value dilution by providing too generous rewards.

2 Likes

Hello all,

I will vote no as I think giving 6,5 milion SWISE ~1.2M USD a month incentivies are way too much at this stage and is just devaluating the value of SWISE now and for long term.

Incentives to LPs are key but they will be more valuable if we had proper liquidity for SWISE (now a single trade of 10K USD, which is less tha 1% of what is given as rewards in just a month, moves price up or down 30% due to splippage) and fully clarify token activities as there have been rumors for SWISE holders to get fees but is not clear from when or other details like estimate for revenue generated so holders could evaluate and start speculating if it makes sense to hold SWISE rewards or not.
I saw the proposal for fee distribution but would be good to finailize this as I feel this might impact the value of SWISE and therefore the value of rewards given.

To make it short before putting milions of SWISE in the market each month that cannot be traded let us clarify and confirm the token usage (potentially governance + passive income generation through fee distribution) and provide proper liquidity.

In my opinion we should provide rewards keeping in mind potential growth as is what the team is working hard for if TVL and SWISE market cap grows 10x in the next months ( in crypto this can happen) all this would be a lot of resources given away that could have been used in a more efficient way and even at current prices I really think is still too much value provided to LPs expecially now that seth2 liquidity is deep enough.

Also continuing adding SWISE to market circulation without proper trading liquidity I feel might make SWISE price soffer a lot in the future and will soffocate any price exploration in the future; un top of that it would be good to start considering that also SWISE liquidity will need incentives in the future and if this proposal pass this will be added to current rewards if SWISE liquidity is implemented in the next 30 days (something I would hope for)

If the proposal do not pass let us take the chance to see what happens if rewrads are paused for a month take time to finalize all other activities and revaluate next months the rewards amounts, or let us come up with immediate review of the rewards I would propose to give not more than half of what is proposed now.

Incentives are important but it does not mean that we need to just distribute milions of valuable SWISE and risk to harm its value long term just because LPs needs to get rewards pools are quite deep and I am sure with lower rewards at this stage things will stay at a level good enough to support protocol needs. ( so it would be good this time to not enforce the pass of the proposal but try and evaluate feedback from community and act based on that)

Adding value to SWISE is the real incentive as people will want to accumulate SWISE and will be proactivly adding LP to get any amount of SWISE provided, otherwise people will just be getting thousands of SWISE to be dumped in the market.

3 Likes

Hi @cvrsm19, welcome to the discussion and thank you for sharing your thoughts.

Great feedback everyone - I am very happy we can receive your POV and adjust course accordingly.

I believe the suggestions to reduce the emission have solid ground, however, personally I’d rather play it safe given how important the abundance of liquidity is for the protocol’s “liquid staking” promise. Especially going forward, when we’d want to propose the creation of new pools for sETH2, I think we should have a deep main pool that supports all the other activity, and leaning on the safe side would be preferred IMO. As for the rETH2-sETH2 pool, reducing emission would be a safer bet I’d personally be comfortable with even now. @ottodv‘s suggested figures look reasonable there.

Finally, on the sETH2-SWISE pool on Uniswap v3 and incentives, many people have mentioned we need one, but never expressed their support in the relevant thread. More comments there would make it unequivocally clear that many folks support the idea, and would prompt the core team to take the proposal further. So everyone, leave your comments here: Uniswap V3 pool for $SWISE

3 Likes

I voted yes, but as of the time of writing this it is looking like the proposal may not pass, and I thought I’d also comment on everyone’s proposal to reduce the reward.

Recalibrating the reward is fine. However I am also of the opinion that any reduction needs to be done gradually so we can carefully evaluate the results. We should avoid any sudden or prolonged pause in the pool incentives at all costs as I believe this will have a severely adverse effect on the pool liquidity. If significant liquidity starts to be withdrawn it may result in a feedback effect where everyone tries to head out the door before the pool dries up, and that isn’t good for anyone.

2 Likes

Although there are people saying they think the 6.5m a month is too much, I really don’t think the current incentives are that much at all, especially compared to some other token’s inflation.
At this rate less than 8% of total supply is going towards the LP rewards per year.

With that being said, if the general consensus is to lower the LP rewards then there are some valid reasons to do that other than “it’s diluting my tokens too much”.
One is that there is a good amount of liquidity in the pool and it can already take large trades with the UNI V3 mechanics. Reducing incentives may result in some LPs leaving but that is not necessarily a bad thing as the high liquidity is main barrier to increasing TVL is the sETH2 discount. Hypothetically, if a large amount of liquidity leaves and Stakewise continues growth, then 1:1 sETH2 ETH peg will be able to be reached faster leading to new stakers increasing the TVL instead of pulling from the UNIV3 pool.

Another reason to decrease the amount would be to move them to another incentive. If these pools are reduced, I would like the reduced amount moved to something like rETH2 staking. Since there is no good reason to hold rETH2 the value should naturally decline over time. So far, the value of rETH2 has held up nicely, it will inevitably need to be incentivized to hold rETH2 sometime in the future.
The other option would be to move some to incentivize the SWISE/ETH pool.

Just my thoughts if the DAO decides to change the rewards, personally I think they are fine the way they are now.

3 Likes

When Phase 2 arrives, users will be able to burn sETH2 and rETH2 within the stakewise app to redeem ETH at a 1:1 ratio(?).

Until phase 2 arrives, it is vital that LPs are rewarded, if this vote does not pass, I would like to see a new proposal with reduced incentives.

2 Likes

The amount itself doesn’t mean nothing without proper liquidity. Is way too much with current liquidity. A couple of big market sales now and all that rewards will value nothing to LPs and just damage the protocol and swise long term. Also we need to clarify fully what is the benefit of holding swise as if these generate on top 10%apy in eth that is anyway too much value given away. Let me be clear, rewards are needed and I know that without rewards the protocol is at risk as I cannot redeem my seth2 and all my swise tokens will loos value as well, tvl and potential fees will be impacted but before distributing so many tokens every month we need to fix liquidity and swise value and usage, as in my opinion givening rewards in current situation might even bring more damage than not giving any rewards, it makes sense to at least reduce rewards and plan well amounts when all is established and clarified. The 2 topics have been discussed for months let us fix all this and then move on and give meaningful rewards. Nothing more to add from my side I just hope some actions are taken as my votes have always been overruled last minute by VCs or holders close to the team

2 Likes

yes, but until Phase 2 holding rETH2 is -ev compared to trading it for sETH2 or ETH

After much thought, I personally think the rewards work and keep the liquidity in place, therefore we should keep incentivizing it as is. The rewards do not dilute SWISE that much. If a reduction were to be voted on by the community, then I think those should be somehow moved to incentivize SWISE/sETH2 LP liquidity (once the pool is in place).

Realistically SWISE has a lot of upside, considering its extremely low TVL/Marketcap ratio in contrast to other tokens. For example, ANKR has 37% higher TVL than Stakewise and 10x the fully diluted (which it isnt even fully diluted) SWISE market cap.

4 Likes