June 07, 2023
Simple Summary [TL;DR]
With optimal incentive encourage veSPA holders to hold USDs and USDs holders to stake SPA.
Basic conditions - deep SPA liquidity and healthy inflation
- Comment about SPA liquidity:
Not so long time ago (year 2022) community complained about low liquidity on SPA pairs, $4000 buy or sell would make price +2% or -2% on the most liquid CEX with SPA pair, and on DEX we had around $100k-$300k in total in SPA/USDC or SPA/USDS pools around SPA price at $0.005 - $0.010.
I made a small analysis of current data. It’s impressive growth:
On DEX the biggest 4 pools are:
SPA/USDS Uniswap 0.3%: 26M SPA / 193k USDS ($369k)
SPA/USDC Uniswap 1%: 36M SPA / 48K USDC (total $294k)
SPA/USDS Camelot 0.3%: 11M SPA / 73k USDS ($146k)
SPA/wETH Uniswap 1%: 9M SPA / 9 ETH ($79k)
In total $888k on chain liquidity ($332k in downside in $ ).
And to move price for 2% on CEXes liquidity is:
2% up = $49k
2% down = $60k.
For project currently valued at $10m MC it’s fine, and it’s big improvement from earlier.
- Comment about SPA inflation
Inflation of SPA in relatively small at the moment, compared to different stats, and it’s already decreasing:
August 2022: 1200M SPA in circ., 50M staked
June 2023: 1600M SPA in circ., 300M staked
If we stay at current numbers for another year around 20M spa would be shared to veSPA holders, and emissions from gauges are around 150M spa. Team’s newly released tokens are mostly locked on 2 years according to last change, so expected inflation in circ. supply from that source is around 10M spa max.
So expected numbers (in my research) for
June 2024 are: max around 1780M SPA in circ. and xyz staked.
There are reasons to decrease gauge budget, but also for increasing it if it can be used well.
At the moment, for current bear, even for current low USDS MC and low burn number, inflation is healthy in my opinion (I often heard from people around - “ah, SPA is extremely inflationary token”, no it’s not.)
Implementation: How to connect veSPA & USDS holders and why?
So, after stating that DEX&CEX liquidity of SPA is deep enough, and current inflation of SPA is acceptable, maybe it’s time to connect somehow
A) veSPA holders &
B) USDS holders.
Idea is to give more incentive to wallets who have veSPA (locked SPA) and some amounts of USDS.
Wallet with 1000 USDS and 50000 veSPA (12500 SPA locked on 4 years = $87.5 at current price $0.007 per SPA) would be able to claim 50 SPA weekly.
At the moment he is receiving 2.11 USDS ($2.11) weekly from 11% APY from holding USDS and some SPA / sth else from bribes.
With this incentive he would addittionally receive 50 SPA weekly which has value around $0.35 at current price $0.007.
Wallet with 100k USDS and 5M veSPA (1.25M SPA locked on 4 years = $8700 at current price $0.007 per SPA) would be able to claim 5000 SPA weekly.
At the moment he is receiving 211 USDS ($211) weekly from 11% APY from holding USDS and some SPA / sth else from bribes.
With this incentive he would addittionally receive 5000 SPA weekly which has value around $35 at current price $0.007.
Let’s say we have 100 wallets with 100k USDS and 5M veSPA. To Sperax ecosystem they would give value of 10M USDS and 500M veSPA (125M SPA locked on 4 years) and total yearly inflation from this source would be 26M SPA.
How much would be locked because of this implementation? How much 10M USDS could bring value to Sperax ecosystem?
Think about it.
To compare: At the moment yearly inflation of ~150M SPA is supporting ~2M USDS.
Implementing this idea could bring complex adoption and better longterm view on holding SPA, veSPA and USDS.
It would give one more usecase of veSPA (and SPA) and more income from holding USDS in a sustainable way and it would directly give more shortterm and longterm value to SPA tokens and it could be spark that would make flywheel easier.
If I receive positive comments I can make more complex math formulas for ratios “how much additional SPA rewards” if you hold x USDS (min 1 000, max 100 000) and y veSPA (min 50 000, max 5 000 000) and also I can adjust min/max for x and y if you think this is good idea in general. Of course these numbers are adjustable and there is probably “optimal” ratio for Sperax protocol’s revenue & SPA holders & veSPA holders & USDS holders, I am math ing. so I can find it but it’ll take some time.
Tehnically it is most probably easy to implement.