Proposal: Deploy and incentivize the new SWISE-osETH liquidity pool

Proposals
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Executive summary

In this proposal, we outline the plan to deploy a new liquidity pool for SWISE, paired against osETH instead of ETH, in order to increase the usage of protocol’s tokens in StakeWise pools and allow LPs to generate additional yield.

Should this proposal receive DAO approval, the incentives currently directed towards the SWISE-ETH pool, as well as the osETH-ETH pool on Arbitrum, would be reallocated towards the new SWISE-osETH pool.

Motivation

It perhaps goes without saying that SWISE liquidity is very important for the success of the protocol.

No matter the trade, investors interested in acquiring or selling SWISE tokens want to do so with low slippage to avoid leaving money on the table.

Large price movements from small trades deter buyers looking to establish large positions without jeopardizing their own upside.

In short, it is very important that SWISE liquidity remains as deep as possible.

In recent weeks, SWISE liquidity has deteriorated to the point where purchasing even $5K worth of tokens moves the price by more than 2%. This falls significantly below expectations for even such low market cap tokens like ours. It’s clear that SWISE liquidity needs an urgent reboot.

We propose that a new liquidity pool for SWISE, paired against osETH instead of ETH, be deployed on Uniswap or Balancer. Using osETH instead of ETH within the pair means that LPs for our protocol will no longer be forced to sacrifice the staking yield when keeping their assets in ETH instead of osETH. A new pool also allows us to promote the opportunity more heavily, and start fresh.

To ensure that the depth of SWISE liquidity is quickly and significantly improved, we propose reallocating existing 0.89 osETH in weekly incentives towards the new pool, away from the old one.

We also propose halting 0.42 osETH in weekly incentives for the osETH-ETH pool on Arbitrum, where we observe low volume and low usage of osETH, and reallocating them towards the new SWISE-osETH pool.

This way, $400,000 worth of incentives would be directed towards building up SWISE liquidity per year, targeting an APY of 20-25%.

Such liquidity depth would allow trades worth up to $20,000 to experience sub-2% slippage, improving the UX of trading SWISE for investors.

Considerations

There is an argument to be made that deploying protocol-owned liquidity could be cheaper for the DAO, as fewer incentives would need to be spent given our Treasury could deploy both osETH and SWISE into the pool.

While we acknowledge this argument, we believe that the two approaches (direct incentives and protocol-owned liquidity) are not mutually exclusive. Protocol-owned liquidity can always be added at a later stage to increase the depth of SWISE liquidity in the market.

Specification

Should this proposal pass, the new SWISE-osETH pool would be deployed and seeded by the team using its own funds. The incentives committee would add support for the pool in the Merkle Distributor, allowing for incentives to start flowing ASAP. Rewards earned by LPs would be claimable via the StakeWise app’s UI.

Discussion & voting

The Snapshot vote is now live: Snapshot

We invite all SWISE holders and LPs to opine on the proposal!

1 Like
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Thank you for the proposal. I would like to clarify a few points.

  1. Can we assume that we are abandoning Arbitrum for now? With the current mainnet fees, it makes sense, but isn’t it a bit risky to cut ourselves off from retail ?
  2. Will the mainnet osETH/Eth mainnet pool continue to be incentivized? I understand that it will.
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Hey thanks for dropping your questions here!

  1. The Arbitrum decision is not an easy one but ultimately we see high sensitivity of liquidity there to APYs, and low bridging volumes. This means we’re throwing incentives away on a pool that serves little purpose in the current ecosystem, yet if we stopped and later changed our mind, liquidity could quickly be gained back. So ultimately we don’t see it as abandoning Arbitrum, more of a temporary shift in priorities.

  2. There shall be no changes to our support of other osETH pools on mainnet.

2 Likes
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Thanks, Kiriyha!

I’ve been using StakeWise for a long time and planned to add SWISE liquidity. While I understand that incentives are available for LPs, it took me quite a while to figure out the actual yield.

On the Uniswap side, as you noted in the guidance, there isn’t a native mechanism to distribute incentives to liquidity providers, nor a clear presentation for the attractive APY.

On the StakeWise app side, the UI/UX also doesn’t provide a clear interface (similar to “Stake” or “Boost”) to guide potential LPs.

Suggestions:
Please consider changing the “Ecosystem” tab to “Earn” to better guide users toward providing liquidity. “Ecosystem” is a very broad term in Web3 including related or not that related projects, and a more action-oriented label “Earn” could help. Alternatively, adding a new first-level menu specifically for liquidity provision is welcomed.

If display the incentive APY just below the total APY, users can immediately see the incentive being offered. Dao pays the fund and would like to highlight the contribution. Presenting the incentive APY directly beneath the total APY could make the opportunity more attractive and transparent.

The links in “Earn” are expected to be updated. Most of them currently point directly to Medium. if revising some links directly to the pool with preset range, it would make the process more straightforward.

2 Likes
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You are currently considering Uniswap or Balancer for the new SWISE-osETH pool and incentives, but I’d also like to suggest adding Ekubo to the discussion.

If the new SWISE-osETH pool and incentives are deployed on Ekubo Ethereum, I’m ready to lead a proposal for co-incentives (funded by the Ekubo DAO) to help deepen overall SWISE liquidity. You can look at how we partnered with Liquity as a reference.

On the social side, I’ll also make an effort to ping some active Ekubo community members on X to help amplify distribution.

1 Like