Snapshot voting is live HERE.
Voting will be live from 10/10/22 - 10/13/22.
Simple Summary
On Oct 6th, SPA/USDs trading volume did over $430K in 24 hours, 4th most among all Arbitrum native tokens only behind GMX, DPX, and rDPX. However, these three tokens each has at least $5.9M liquidity on-chain, and SPA only has around $450K at the moment. Low on-chain liquidity has been a known issue for the SPA token, many investors hesitated to invest in SPA, and low on-chain liquidity has been their main concern. This proposal suggests increasing the SPA/USDs liquidity mining incentives by 50% to deepen its liquidity on Arbitrum.
Motivation
Bring more SPA liquidity on Arbitrum, encourage on chain trading, and interacting with the Sperax protocol.
Technical Specification
Increase the total SPA rewards to the SPA/USDs farm from the current 373.33K per week to 560K. Aiming for around 120-150% no lockup APR, 225-275% lockup APR, or at least $1M liquidity on Arbitrum.
Voting
Yes: Approve increasing SPA/USDs UniV3 farm emission by 50% immediately
In my personal opinion, as far as the current buyer’s power is concerned, increasing the farm’s emissions will lead to a stronger seller’s power and further lower the price, which is not recommended
Relatively speaking, I suggest changing the proportion of SPA value and USD value of SPA/USD farms from 1:1 to 1:2 to increase the TVL of USD. At the same time, actively expand the cooperation relationship and develop USDs farms to ensure the rapid growth of the scale of USDs.
Valid point, short term inflation will increase if this proposal passes, but I do feel like building a more robust on chain SPA liquidity benefits the protocol growth in medium to long term.
Right now there are 250M SPA on CEXes, more than 7% of the total supply, but only 12.6M SPA in the SPA/USDs farm. SPA holders on CEXes are mostly short term traders and majority of them likely will never interact with Sperax protocol and this liq on CEXes barely benefit Sperax in any way. Hopefully with more SPA/USDs incentives, a percentage of these tokens on CEXes will move on chain, try out the protocol and maybe later on will lock for veSPA and participate in governance. With Detemer and gauge voting launching soon, the on chain utility of SPA is stronger than ever, having a deeper liquidity on chain means people wishing to participate in governance don’t need to buy from CEX first and then moving it on chain.
Pros:
Attract CEX liq to Arbitrum
Encourage on chain trading
Encourage governance participation
Increase USDs circulation
Reduce price volatility
Reward users providing/locking LP, aligns with the long term health/growth of the protocol
Cons:
Short term inflation, but to be honest, 50% increase in incentives is only about $2250 USD in SPA per week more inflation…
I think you put together a compelling argument. Again, your time and thought is super appreciated!
I’d be curious what proof we have that increasing emissions to this farm will actually lead to increased TVL? The APR is quite high, telling me that maybe people dont have the appetite (or dont understand so they stay away) for any IL. Personally, this farm is already super attractive to me as the APR is high and I am a believer in the long term vision of SPA (that is being paid to LP’s). Thus, I am willing to have IL risk, while it seems others are not.
With that said, I am a big fan of tweaking to optimize. Potentially a higher APR would attract more liquidity. This would benefit the protocol in all the ways you mentioned. Plus, I also support some experimentation, we dont know until we try.
One or two alternative solutions that was shared in the above discussions were quite interesting.
As @woshizhazha stated we could potentially do a SPA/ USDs incentivized Bal pool in with 1:2 weights and keep the emissions same.
APR for SPA/USDs farm is already quite decent and comparable to other incentivized farms. Then why do we not see an increase in liquidity. I presume it’s because SPA holders are currently wary of impermanent loss and are looking to ride out the storm.
Any increase in SPA emissions could put heavy pressure of SPA price which could hinder a lot of the good work that we have been trying to do over the past few months. Although making sure that SPA is liquid is also a priority.
I don’t plan to support the proposal in it’s current form. I propose two modifications to it:
Increase SPA emissions by 25% and track the TVL increase for a month. If it works then we can run a governance proposal to increase the emissions by more.
Launch a Balancer farm in the near future with unequal ratio of SPA/USDs