SIP-28: gDAI - USDs Demeter Farm Incentive Request

Governance proposals (discussed) Approved SIPs
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Voting is live HERE

Voting will be open from 1/8/23 - 1/11/23

SIP-28: Gains Network x Sperax Demeter Pool

Title: gDAI / USDs Demeter Farm Incentive Request

Author(s): Gains Network Team

Created: 01/06/23

Labels: #LiquidityMining

Simple Summary

gTrade by Gains Network, a synthetic derivative trading platform launching on Arbitrum, is launching a gDAI / USDs Demeter Farm. The Demeter Genesis structure was approved via SIP-17, gTrade by Gains Network is requesting a SPA incentive match for their gDAI / USDs Demeter Farm.

Abstract

gTrade is launching a gDAI / USDs Demeter Farm and are looking for a SPA incentive match for the amount that gDAI increases each month.

$gDAI is an ERC-4626 receipt token that:

  • Is given when users supply $DAI into the gTrade $gDAI vault
  • Servers as a counterparty to all trades made on the platform
  • In exchange, receives a portion of trading fees which is proportionally split among all $gDAI

The Gains Network team is asking Sperax DAO for a SPA incentive to match the dollar value of $gDAI at every rebalance period, paid in SPA.

Historically this rate has been 10-12% APY but can vary based on trading volume. This was also prior to our launch on Abritrum and with our previous vault architecture. You can see the current $gDAI price here.

With a 10-12% APY the value of $gDAI would grow 1% per month so we ask that Sperax DAO match that .8%-1% growth per month in SPA incentives. A simple mental model would be to incentivize ~.8%-1% of the $USDs liquidity in the $gDAI-$USDs pool per month

For example, if there is $1M of liquidity in the $gDAI-$USDs pool ($500k of each asset), and we expect to see $gDAI grow by 10% APY to be worth $550k, we would ask that Sperax DAO match the $50K growth by contributing $50k SPA per year.

Motivation

gTrade is seeking liquidity for gDAI for our launch on Arbitrum. By launching a gDAI / USDs Demeter farm, gTrade will have an instant liquidity solution and also take advantage of pairing against USDs for deep liquidity and receive some matching incentives.

Strong liquidity for gDAI will help create a strong, composable building block for all of Arbitrum DeFi. Pairing with USDs via Demeter will benefit the Sperax community by increasing USDs TVL, improving Univ3 routing for Arbitrum token pairs, and will start a partnership between Gains Network and Sperax.

Overview

Launching liquidity incentives for the gDAI pool will not only kickstart the relationship between Sperax and Gains Network, but it will also help create liquidity for gDAI as a strong, compositional building block throughout the Arbitrum ecosystem.

The gDAI/USDs farm will be incentivized by the growth of gTrade and the trading fees accumulating and compounding within $gDAI and seek 1:1 matching in SPA.

Technical Specification

Farm: gDAI / USDs

Incentives: Monthly growth of $gDAI due to trading fees accumulated + Trade PNL

SPA match: 1:1 SPA match in dollar terms from the bootstrap liquidity budget to be rebalanced in dollar value on a 7 day TWAP every 2 weeks

Duration: Match guaranteed for balance of 90 days from Demeter launch unless altered via governance proposal. Demeter v2 logic will determine incentives following Demeter Genesis Campaign.

Farm Launch Date: As soon as the proposal is officially accepted by the DAO

Risk Management: If the gDAI / USDs farm goes out of price range SPA emissions will be halted until the farm is relaunched or it goes back in range.

Voting

For:

Approve SPA Rewards and Launch gDAI / USDs Demeter Farm

Against:

Deny SPA Rewards for gDAI / USDs Demeter Farm

  • Yes
  • No

0 voters

2 Likes
2

Hi guys

I’m just trying to figure out if it’s a profitable strategy to incentivize this, looking at it from a veSPA/SPA holders perspective.

From my understanding, we earn ~0.6-0.8% per month on underlying balance (Please correct me if I’m wrong, I’m just assuming this as the avg mkt APR)
If we incentivize more than that, aren’t we incentivizing liquidity at a net loss for us?

Assuming these incentives as mentioned:
“~.8%-1% of the $USDs liquidity in the $gDAI-$USDs pool per month”

1 Like
3

Great proposal! Partnerships like this one are very important for future.

4 Likes
4

From the Gains Network Team: (apologies, they tried to post this but it wasnt working)

"Great point, current arbitrum APY on gDAI is 13.3%, USDs 10.8% ( gTrade | Vault ).

It will be first gDAI pool on Arbitrum that will offer instant gDAI redemption, strong use case since existing vault epoch withdraw system, depending on collateralization ratio, will take 3 - 9 days to redeem gDAI back to DAI.

gDai vault TVL on Arbitrum increased by $2m in last 7 days, displaying strong demand and organic growth.

We are starting a trading competition on Arbitrum in 8 days and we expect APY to increase on gDAI by a big margin given more trading fees, PnL will accrue more value to gDAI. Considering both points above we believe current incentivizes structure is fair but with time it can always be revisited and adjusted, factoring dynamic gDAI APY to provide constant and fair distribution of incentivizes for both parties. I hope that clarifies better"

3 Likes