Allocation of HNY and STAKE tokens to the HNY/STAKE liquidity pool on Honeyswap

Proposal Information

Proposal description and rationale:

This proposal is presented in order to add more liquidity into the HNY/STAKE pool on Honeyswap. HNY/STAKE current liquidity 2021-01-17T20:00:00Z is ~ 230k USD worth of tokens. It is currently the third largest pool and it has the second largest volume on Honeyswap.

The xDai team would like to provide additional liquidity to this pool to create less slippage and enhance the Honeyswap trading experience.

Public POSDAO on xDai launched on 2020-12-22T20:00:00Z, allowing the broader community to participate as delegators and thus secure the network. Since the launch we’ve seen an influx of users using Omnibridge (https://omni.xdaichain.com/) to bridge their STAKE tokens from Ethereum mainnet to xDai Chain. As of 2021-01-17T20:00:00Z there are 135 delegators staking a total of 394K STAKE https://blockscout.com/poa/xdai/validators.

It is important to incentivize new and future users to stay within the xDai Chain ecosystem as long as possible without the need to bridge their assets back to Ethereum mainnet. Providing them with more liquid pairs on Honeyswap is one way to incentivize users to stay on xDai, resulting in increased trading activity for the platform.

STAKE on xDai 2021-01-17T20:00:00Z:

Expected duration or delivery date:

Once passed, xDai team will provide the corresponding amount of STAKE tokens. These will be available immediately after the proposal is approved.

Funding Information (For Funding Proposals)

Amount of HNY requested:

400 HNY

xDai team will provide the equivalent amount of STAKE tokens (~8000 STAKE, subject to change based on price equivalent at time of transfer) to roughly double the size of the current HNY/STAKE pool.

LP tokens will be distributed in equal parts between the DAO and xDai team.

More detailed description of how funds will be handled and used:

All requested funds will be used to increase the HNY/STAKE pool on Honeyswap.

28 Likes

That’s nice @igorbarinov the more liquidity we have , the less slippage will occur and Honeyswap will be more attractive for stake and honey holders with this pair getting up. More people will bridge from Mainnet. :+1:

8 Likes

Great, I just asked on telegram. I think this imperative for the further growth of honeyswap

I think a strong relationship between xdai and 1hive is fundamental to achieve success. Having this done before a reverse bridge launch, I feel is also fundamental. The more liquid pairs the better imo and hny/stake is one of the most important.

2 Likes

Thanks Igor this is fantastic news! Love the community spirit.

this is simply amazing! :mechanical_arm: thanks for this proposal @igorbarinov

When you say DAO, presumably you are are you referring to the 1Hive DAO as opposed to the POSDAO validators?

@lkngtn Do you have any idea how 1Hive should manage LP tokens? I guess they have to go in the Vault but then managing them would take time.

I meant 1hive DAO here. Sorry for the unclear message.

As a suggestion, they can just sit in a Gnosis Safe multisig

Amazing proposal Igor!

I like this idea, the logistics need to be mapped out a little bit better before it should voted on, as @willjgriff said… exactly which DAO holds the LP tokens (maybe the Seed DAO? or does the Dandelion DAO control a vault?) or if we go with a multisig, who is on the multisig that holds the tokens… and what conditions would this DAO/multisig consider liquidating the position?

If those details emerge and seem reasonable, I would support the proposal. I love the DAO2DAO cooperation!

1 Like

I would vote yes today if we can commit to which/how DAO (both 1hive and xdai) would hold 50%LP.

I do not think we need to lock these LP tokens right now as we could potentially use them to deposit on Agaave or some other use. Also, we don’t know what adding this much stake will do to the current LP.

Consider LP in theory should grow with volume if volume doesn’t change and we substantially add liquidity the existing who have hny-stake LP will see less fees accumulated (but will we see more volume because less slippage, this is the question). It is a great experiment and I would rather us move forward and see what happens rather then study it to death.

1 Like

Nice proposal, am all in for long term.

I think we can just put them in the vault that is used for the common pool, they could be transferred or staked (to agaave) or liquidated via a administrative vote (though in general we try and avoid that), I would generally prefer that to a multisig, but don’t have super strong opinions there.

In the future I think a more formal way to structure this type of proposal where all of the LPs are held in a contract and not split might be preferable, but I think that’s something that might be interesting to explore in the future if this proposal goes well and we want to pursue similar relationships with other tokens in the future.

I would be comfortable if the proposal was put up at this point, agree with @Monstrosity that its interesting and would love to see use experiment and move forward, then analyze the results rather than study it too much.

My issues with this are as follows:

  1. This won’t enhance trading much via slippage reduction. See below.
  2. This will reduce LP returns for people in the pair perhaps by 1/3-1/2 almost instantly. Worse it sends the wrong message to LPs “that the DAOs are going to compete with them for LP returns” driving LP suppliers out of the LP pair (completely against the goal you are trying to achieve)
  3. IF one is going to do this HNY:STAKE is the wrong pair to incentivize. The STAKE:wxDAI pair is the one that actually needs liquidity and you don’t need HNY for that. Just take the STAKE and sell for wxDAI and put into LP. But again see negative LP message from (2). If you are going to do this drip it in over time so LP providers don’t see a sudden shift in their LP returns.
  4. What is going to be the measurement metric of success? I still have not seen all the Honeyswap trading data so a full analysis of pairs can be done. In particular here all the STAKE pairs should be looked at before and after such a move.

My own look at the HNY:wxDAI trading data provided by luigy lemon indicated that even when we tripled liquidity via farming the average trading size DECREASED over time instead of increasing. I can only speculate but I believe this happened because we got more traders. Volume went up but only in proportion to liquidity and no more. There was NO multiplier effect of improved liquidity on trading volumes or sizes. I believe this was because HNY price began a farming decline that over time created losses that drove people away. In the end LP went away and volumes dropped.

My own thesis regarding LP, trading volumes is as follows:

Give people reasons to trade and hence create volume. this will lead to increased LP returns, that will then be taken advantage of by LP providers creating a positive reinforcement loop. STAKE is consistently one of the higher LP return tokens as more people own STAKE, and as more people move to xDAI, the LP return will push to 40% it will drive more LPs to supply liquidity We don’t need to incentivize this and players looking for real STAKE volume can find it on the main net. A person looking to do a big STAKE trade on xDAI can literally do 10 for lower fees simply waiting for prices to readjust. I know because I have done large HNY trades in steps, same for wETH (probably the pair I’d like to see more liquidity in personally). Sure it is annoying but it doesn’t stop me from pushing 10wETH or 20HNY through and at least on WETH this is like 10-20% of the LP liquidity.

There is no magic bullet that adding liquidity solves here mostly because the real big players don’t care about main net network fees and can source significant liquidity there. Build the reasons for people to come to xDAI, increase volume here, make the RPCs and infrastructure rock solid reliable, become a HUB via bridges to all L2s, etc. build it and the volume and LP will come. The beauty here is that as volumes increase, LP returns will increase, encouraging our decentralized liquidity providers to add more liquidity further driving a positive feedback loop.

Having DAOs that are going to compete with LPs on return sends a strong message to LP providers - you have a competitor that doesn’t care about you. It sends absolutely the worst message at the wrong time to the few people who are here providing LP and may drive them away from xDAI and Honeyswap - perhaps for good.

On the basis of this I am against the DAOs becoming competitors to LP providers except to perhaps jump start a single LP, or to support their own tokens, or even to earn some return (dripping slowly in and out). HNY:STAKE for xDAI (to support STAKE) is totally the wrong pair. If anything xDAI should support STAKE:wxDAI so people can buy-in and sell-out. There is no need to tie HNY to STAKE directly (this will happen on its own) and the liquidity offered above will at best allow for a 1/3-1/2 decrease in slippage in same size HNY:STAKE trades not 10x. I think most people who want to trade either HNY or STAKE want to do this directly to xDAI and not through a second pair.

I know I will probably stand out as against pairing this but based on previous data in this regard will not achieve the goal AND will send the wrong message to LP providers at a critical time xDAI and 1Hive via Honeyswap etc. are trying to grow.

BTW: Why not consider an alternative Drip out Stake as a farming reward on probably the STAKE:wxDAI pair. you have 8000STAKE you could offer like 1000/month STAKE drip (start with 200-250 and see what happens) on the Honeyswap farm. I know this would take some work but already people have been talking about dripping out 2 pairs or other tokens possibly with a vesting component. I think these are better incentives than just dropping liquidity into the pair and possibly driving out other LP providers.

4 Likes

I fully support all the statements made by Eth_Man. It would be nice to see xDAI pairs incentivized vs any of the token pairs. People can’t buy big quantities of anything without getting gouged on price impact due to liquidity. Right now to buy 10k worth of HNY with xDAI it will cost 3.47% just in fees and 10k of Stake with xDAI would cost 13.35% of fees. Also i want to note that there is roughly 1.5M total xDAI so IMO an increase in total xdai liquidity would benefit all coins vs incentivizing a few chosen ones

1 Like

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