Inferno 2 - Continuing Forge LP incentives with Revert Finance
Authors
Summary
Inferno 2 - a second round of a 12 week long incentive program on Forge, the community owned DEX of Evmos. The Forge team is requesting 3,000,000 EVMOS to fund this second initiative, which will run in parallel with the Steer incentive program. This proposal aims to continue the success and growth of Forge, which as processed over $20,000,000 in trading volume since Inferno began.
Goal
Create sustainable liquidity and volume on Forge but also raise awareness about DeFi on Cosmos with solidity-based applications.
Abstract
Motivation
The Evmos blockchain has the potential to become a unique environment for DeFi in the IBC ecosystem, but it has had its fair share of roadblocks that have slowed down and limited growth. By incentivizing staked assets (such as stEVMOS, stATOM, rETH) people will earn staking rewards while providing liquidity and participate in the incentive program; no DEX on Cosmos has done this yet which is a unique value proposition of Forge. On top of that highly concentrated pools can be created between the native and staked asset (such as stATOM/ATOM) with limited impermanent loss risks but lot of revenue potential.
Action plan and Pools
The full incentive program has a duration of 84 days - divided into 2 periods of 42 days. Before each period the incentive rewards will be liquid staked to stEVMOS and rolled into the 42 day program. The Stride DAO has committed to providing 250 STRD per day as external incentives for the first half of the program and will re-evaluate this commitment leading up to the second half!
We selected 6 pools in total and put them into two different incentive tiers. Our goal is to avoid fragmentation and get deep base liquidity on Evmos. Initial reward distribution between pools has yet to be finalized, the proposal will be updated when ready!
Tier 1 - 31,414 EVMOS total daily emission
- stEVMOS/stATOM
- stEVMOS/axlUSDC
- stEVMOS/axlRETH
- stEVMOS/STRD
Tier 2 - 4,300 EVMOS total daily emission
- stATOM/ATOM
- axlRETH/axlWETH
Vesting
For this round of incentives, we are proposing an increase in the vesting period to 7 days across all pools.
The time-vesting uniswap staker is a fork of the Uniswap v3 staker that adds a linear vesting period for positions to receive the full amounts of the accrued rewards. Linear vesing of rewards is intended to prevent ultra-concentrated liquidity from gaming the incentives and extract most of the rewards. You can read more about it on this post.
Rewards claiming
Vesting is calculated when you unstake the position. So, when you unstake the position, the contract checks if the liquidity was active for longer than the vesting period. If it is, you get all rewards for the amount of active liquidity you provided in the time period. if it's not it gives you the ratio of timespent/vesting period*(rewards received if there was no vesting period). The unallocated tokens are then refunded to the deployer once the incentive contract expires. These refunded tokens will be rolled into the next period or extend the length of the program.
Adjustments
If the liquidity of a pool does not match our expectation we might make adjustments on the allocation per pool or the vesting period as we learn during this program. Each change will be discussed on Forge’s social channel and communicated upfront.
Multisig 3/5
All the funds will eventually flow to the liquidity providers.
- LPX | DAO
- CtrlAltApe | OrbitalApes
- John | Stride
- Rok | Qubelabs
- Luis | Interbloc
Highlighting Engaged Community Members
Special thanks for input & feedback on this program from Luis (Interbloc), and _Nick (active community member)
UPDATE 10/23/2022
Inferno 2.0 Incentive Migration of axlUSDC to native USDC (Noble)
Effective November 1st, the Evmos DAO will formally transition from incentivizing axlUSDC pools to exclusively supporting the native USDC offered by Noble. It is pertinent to note that axlUSDC, as a bridged asset, inherently carries a higher risk profile compared to native USDC. As part of this transitional phase, a nominal incentive will be allocated to the axlUSDC/USDC pool, enabling seamless conversions between the two. This interim measure ensures fluidity for participants during this shift, while also facilitating the robust establishment of native USDC within the Evmos ecosystem.
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I've already expressed it in detail on Telegram and Discord, but for completeness sake; I'm very much in favor of an increase of the vesting period for all stEVMOS/external pairs. We've seen the negative effects the overall very tight ranges introduced for a low liquid volatile asset such as EVMOS.
For stable pairs such as stATOM/ATOM and axlrETH/ETH I think the vesting should stay as is or even be reduced or removed entirely. Here liquidity cliffs are not a concern since there is a lot of liquidity available outside of Forge/Evmos.
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No response from anyone in regard of different vesting periods for stable pairs?
"Rewards claiming
Vesting is calculated when you unstake the position. So, when you unstake the position, the contract checks if the liquidity was active for longer than the vesting period. If it is, you get all rewards for the amount of active liquidity you provided in the time period. if it's not it gives you the ratio of timespent/vesting period*(rewards received if there was no vesting period). The unallocated tokens are then refunded to the deployer once the incentive contract expires. These refunded tokens will be rolled into the next period or extend the length of the program."
can some one explain/share what the 7 days contract lock time will provide, since at any given time if you unstake you will get rewards ( Time spent/vesting period ) ?
is the ratio proposed ( 100 evmos estimated rewards for 7 days/vesting ) ( Some one unstake after 3.5 days ) = 50 evmos for the 3.5 days / 2 ( half of vesting time line ) = 25 evmos ?
Thanks
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Yes, your assumption is correct.
Let me add though, that it's not only about the time the position is staked but about the time the position is staked and in range.
What the vesting period does is already mentioned in short in the proposal. It prevents very tight positions. For anyone that followed the liquidity distribution of stEVMOS pairs on Forge will have noticed that it got more concentrated by the day, up until the point where most of the liquidity was placed within a sub 10% price range. That's not healthy for a volatile low-liquid asset like EVMOS, that has little liquidity outside of Forge/Evmos. It mainly ends in liquidity cliffs and disincentives more risk averse LPs, resulting in overall less liquidity for EVMOS pairs.
I am 100 % backing your comment/explanation, I am concerned that contracts won't be implementing rewards correct,
since ( I might be wrong ) if you unstake before the 3 days you still get rewards without a cut , like to be sure that staking into a contract / unstaking before the 7 days is calculated correct , I assume based on your comment that Auto exit / auto range won't be available after staking in the rewards contract ( staying in range comment )
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Why would it not be calculated correctly?
Currently there is a 3d vesting period. If you unstake and claim rewards before you've been in range for >= 3d you'll not get full rewards. The change to 7d vesting is just a simple parameter change. I don't see where your concern is coming from.
Yes that's correct. Those feature are incompatible with staking the position and in light of a 7d vesting period those feature are not attractive for LPs that wants to stake their position in the first place. Reason: To (auto)adjust the range you'd have to create a new position, thus you'd loose incentives if you haven't been in range for >=7d.
Nick
The stability of the price increases the risk of getting within the 7 days out of range , and if you increase your range
we become closer to v2 then v3 , what is your thoughts for stabilizing the range within the 7 days
Amr
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I don't totally understand your question, you might need to clarify.
The liquidity will surely be significantly more concentrated than on UniV2 pools, even with potentially more than 7d vesting.
That being said, it's healthier for EVMOS to have its liquidity distributed in a wider range for the already mentioned reasons.
If we're talking about non-EVMOS pools this is a different discussion of course. There is little reason for liquidity in for example the ATOM/stATOM to be in wide ranges.
(One reason would be to increase the cost of oracle manipulation in case the pool is used for oracle prices.)
Sorry, I have Dyspraxia. My own experience in the last 60 days is that evmos prices held barely stable for 3 days , which brings my question that 7 days vesting, as you mentioned, would be invalidated if you went out of range, so the workaround would be a wider range to handle price changes in 7 days , wouldn't the wider range kill the whole idea of v3 ?
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You're absolutely correct in the assumption that wider ranges stand in contrast to the ethos of v3.
That being said, I'm not talking about v3 capital-efficiency here but rather about what's needed and best for EVMOS as an asset and incentive-efficiency. Governance wants to spend incentives as best as possible, and incentive-wise the super tight stEVMOS/external positions are quite unfavorable.
If an LP thinks they can outperform the market by acting like a market maker, they could just place very tight positions and ignore the vesting - and with it incentives. Because what IMO the incentives should not do, is to make up for all the resulting losses of arguably too tight and badly managed positions. In the end there probably is not one LP on the stEVMOS pairs that is a good market maker (that is profitable outside of incentives).
Thank you , I am on board with wider ranges