Honeyswap LP incentives. Initial report

#1

So over the past week or so Honeyswap Liquidity incentives have come on line.

Farming ON! YAY!

So what happened.

  • 300 HNY was added as payout on HNY-wxDAI LP
  • 200 HNY added to HNY-STAKE LP
  • 100 HNY added to HNY-WETH LP

HNY-wxDAI liquidity - https://info.honeyswap.org/pair/0x4505b262dc053998c10685dc5f9098af8ae5c8ad

HNY price was around 900-1000 Liquidity was in the 1M range. Within 3 days we got about 3x liquidity.
4 days after as return dropped and HNY price varied but overall liquidity stayed about the same at 3M.

Volume overall spiked up to match a end of september volume peak of about 2M traded and then quickly backed off to about .5M/day volume before was trending down into the .15-.2M/day with some spikes. So loosely speaking we have bumped liquidity here and trading volumes about the same amount. We will need more data to see how well this holds.

HNY-STAKE liquidity - https://info.honeyswap.org/pair/0x298c7326a6e4a6108b88520f285c7dc89403347d

Here we got about the same 3x in liquidity (in the past day this has bumped to another .5M in past day). 500K going to 1.5M in the first 3 days. and now to 2.0M

VOlume here had a similar spike at the end of september and hit a low before LP farming in the 20-40K range before climbing again. Where we now have maybe 200K/day average trading. Highest spike was 500K. Previous peak 228K. Volume is up perhaps 10x so HNY-STAKE generally showing some increased trading interest relative to HNY-wxDAI pair.

HNY-WETH pretty much had no volume or liquidity prior to farming 10K liquidity 1K volume. After farming brought on line. Liquidity grew by 100x to now about 1M this also has stayed pretty much constant after a 3 day increase. Trading volumes spiked to .35M and have tapered off to about 150K daily volume here.

General conclusions:

  1. HOneyswap liquidity incentives have increased liquidity on the primary HNY pairs by 3x. Where liquidity was the lowest HNY-WETH this increased 100x.
  2. Trading volumes increased by about the same amount on HNY-wxDAI but seems to have gotten bigger bumps from the lower liquidity pairs (HNY-STAKE, and particularly HNY-WETH) indicating those less liquid markets significantly benefitted from the incentive program.
  3. The least liquid pair actually benefitted the most HNY-WETH
  4. Actual fees from volume has gone up by (rough estimate is a factor of 3-4) I am still looking for data but are still somewhat low relative to the value of HNY being thrown as an incentive. Looking at fees (most of which are going to LP providers) we are in the 4-5K/day range and given the 600/30 = 20 HNY per day incentives is exceeding the reward to the system fees by 20x and if we go to .05% (1/6 4-5K is about 600-800xDAI) as profit to 1Hive by about 100x.
  5. As a value the LP has brought capital and attention to 1Hive,xDAI and Honeyswap. It is clear roughly 5-6M USD has moved into Honeyswap and so far appears to be staying. Returns in the farming are still in the 150% range so the incentive here is quite high. From what I am seeing money is staying in the system.

I looked at other pairs to incentivize and I consider the following to be key candidates…

  1. STAKE-wxDAI this has 160K liquidity with 31K volume. Not generating a lot of fees but since STAKE is used to validate the xDAI network I think this is a key pair to consider tossing even 50HNY for a month at to see how the markets respond.

  2. xMOON-xDAI this pair is consistently doing volume even if the liquidity is 1/2 the STAKE pair and a possible one to incentivize. I would suggest 20-25HNY for a month and see how these markets respond

  3. WETH-wxDAI is another pair with really low liquidity that I think should be considered for at least 25-50 HNY because it is a key pair that would help all the other markets. Quite frequently I find my Honeyswap swaps going through multiple pairs to get better prices. Pretty often this is the WETH-wxDAI pair at least for me.

If I was going to pick best rewards here I honestly would go with

  1. STAKE-wxDAI first with 50 HNY for a month
  2. 50:50 on WETH-wxDAI or xMOON-xDAI. My personal preference is to kick start the WETH-wxDAI pair because it is one that we really will want some decent liquidity in so that anyone going to WETH or xDAI can use WETH-wxDAI as well as HNY-WETH and HNY-wxDAI. In the loosest sense the WETH-wxDAI pair liquidity will help the HNY-WETH and HNY-wxDAI as well. I might go with 50HNY here as a start as well.

I have looked at HNY-wBTC and think this should be in the list of next targets. We started with three if we do 3 more I’d like to do the above with slightly more conservative rewards. I think we should keep in mind that as liquidity comes in we will want to sustain these rewards to keep liquidity hanging around until Honeyswap bootstraps both liquidity and trading volumes… Right now the returns for the rewards are dominated by a promotional aspect and bringing money into the ecosystem vs. an actual monetary reward.

Right now given the staying power of liquidity in the primary 3 pairs I see no reason to consider changing those rewards. I do see a good reason to pick a few other key pairs to bootstrap liquidity and the above 3 are good candidates.

17 Likes
wETH - xDAI Farm
Discussion for Farming proposals
#2

:eyes: These are the types of reports i like to see! :raised_hands:Who needs SEDAR when we have @Eth_Man

#3

Very well written report, I am wondering if you or anyone else is intereseted in writting weekly or bi-monthly reports like this.
I like reading numbers and statistics :grinning:, I think it would also add a lot to the community to have them.

#4

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Opinion

When we started the farms there was no WETH on xDAI, even less on honeyswap. right now it seems to be one of the most popular pairs relative to the amount staked in the pools. APY has lowered significantly compared to the other pairs in fact.
This leads me to conclude that traders are both bullish on Ethereum and Honey, and this also leads me to conclude that we should provide more farms for WETH holders to diversify into, from WETH-WXDAI to WETH-WBTC. To achieve this we should perhaps decrease the amount in WXDAI-HNY and HNY-STAKE slightly and redirect into those 2 new pools and WBTC-HNY.
I think now that we have cemented the 3 major pairs of Honeyswap it makes sense to incentive bringing WBTC into the exchange and give good incentives to move in sizable amounts.

Low Caps

I think we should avoid farms in any low cap currencies now and in the future because if there isn’t an arbitrage to be made elsewhere or we aren’t directly investing in the valuation of Honey and Honeyswap, there is no reason in investing in these coins to provide any sizable volume long-term or be relevant for a wider range of investors trying to find alternatives to mainnet DEX. It will always feel like some sort of selective giveaway without any rational.

4 Likes
#5

What do we think we should do with the farms we previously incentivized? It seems like we are starting to get diminishing returns on these pools since they now have relatively high liqudity compared to honeyswap as a whole… should we continue to fund them but maybe with half the funds that we did previously? And focus on lower liquidity pools for next month?

I agree with @Eth_Man that we should look at high volume/low liquidity pools as the best candidates to incentivize. This would make the xMOON-xDAI pair a good candidate even though moons have a low total market cap

1 Like
#6

Just to build on this a bit, potential pools with what I think is the most important at the top:

  • wETH / xDAI (Dual liquidity pair, 50% increase in liquidity over Honey pair)

  • wBTC / wDAI (Dual liquidity pair, 50% increase in liquidity over Honey pair)

  • wBTC / wETH (Dual liquidity pair, 50% increase in liquidity over Honey pair)

  • LINK / HNY or LINK / xDAI (ERC-677 & ERC-1155 compatible, ERC-1155 is NFTs which makes it interesting)

  • xMOON / HNY or xMOON / xDAI (Potentially huge boost in members from reddit, and even more of a boost if xdai stake wins the bake off)

2 Likes
#7

hy to all
i am not that experienced in crypto and developing but i think you will like my opinion.
the people who come to honeyswap, they come for small tx fee. and on the mainnet they are swaping the big boys: BTC, ETH, LINK,…etc
take my exaple. a few days ago i did not make a trade WETH/something because the price impact was very high and the rates where very high. so i have bought eth on uniswap
IMO these are the first tokens to boost liquidity
PS: i am still confused with this liquidity thing. i understand the swapfee 0.3%, is ok. but when volatility comes (like today) you are wrekt. i have lost 300$ in value and gained 8.7$ in fee. everybody is saying that the liquidity is ok when the price is stable:)))))) if i belive the price will be stable for 1 coin, then i would not be in this domain:))) we want the price to moon to make money but we hope to be stable to gain the swap fees:) not ok. so i have calculated the farming rewards and were ok. for how long? 2 weeks:) so…i will try once more with the farming for a longer period of time, and after that, if is not ok…just HODL:)))
i am very happy to BEE in this comunity and i think this HIVE will be very big
escuse my english please:)
i hope you are not bored with this message
is just a noob opinion. i thought it will be constructive:)

#8

Informative and useful report @Eth_Man
Took a peek at uniswap to try to a get a feel of what pairs people are most active in that might be relatable to honeyswap, and might tempt some of that traffic over. The weth-usdc and the weth-wbtc pair wouldn’t be bad to look at, although i don’t know what effect the former might have on our weth-xDai pool, i believe a clever balance in the incentivization would help mitigate it.

The current farming rewards is the main reason we are witnessing this massive inflow of liquidity, and as such, i expect any of the pools we decide to cut down its HNY yield to experience some liquidity flight.

#9

I will put my response here because after reading comments I think I most echo luigy so far.

I agree some diversification back into wETH here is prudent. WETH-xDAI pair I think really is coming to minds of most here. When I looked (I didn’t put up the current list and probably should snapshot these in current state for the report) there were not a lot of pairs I actually care to incentivize because they simply don’t have much liquidity or volume and so probably won’t add a lot of fees, but given how HNY-WETH responded we might want to look at low volume pairs. I tried to focus on the ones that ‘if’ incentivized they might add significant liquidity as well as volume/fees (i.e. ones with some interest already that might benefit from more liquidity and hence provide fees)

The next question is really how to get best bang for our HNY money here?

I would have suggested we come out lower than 300/200/100 on the HNY pairs but we are here now. I think lowering them to 1/2 would be an interesting experiment next month (go to 150/100/50). Which means if we are going to incentivize new pairs we should keep in mind rate against the liquidity. We can actually use rates to estimate how much liquidity will appear, volume may be a bit harder but rough estimates within an order of magnitude seem possible.

Example - no matter what market we throw 25HNY at it will incentivize liquidity to basically capture a 100% return (otherwise it will go to the other pairs). 25K/month(25HNY) in the WETH-wxDAI pair basically means something like .3M liquidity will enter that pair (give or take some amount). Same I expect will be true of other pairs.

The whole point here is that if we are going to lower the primary pair rewards we should have an idea of where we want to meet on the upside with regards to incentives on new pairs. I think this was a key reason I wanted to start out ‘smaller’ rather than larger because then there is still room to go up vs. wanting to go down.

So if the community wanted to adjust here but keep the amount of HNY the same or lower I would suggest we go with following next month.

HNY-wxDAI 150HNY
HNY-STAKE 100 HNY
HNY-WETH 50HNY
(or just modify these to total 300 to get to same return rate based on current LP in each)
WETH-wxDAI 50
STAKE-wxDAI 50
xMOON-xDAI 25
wBTC-wXDAI 25
… whatever else (25 or lower and allow these LPs to fill up with liquidity to match return rate for top 3)

Key thing to keep in mind is that effective return should eventually normalize between these pools because if liquidity here can earn a better return shifting from one LP to another - it will over time.

The above takes 600/mo HNY and lowers it to 450/month and distributes it into a broader range of assets.

Just one idea. I watch with interest how the community settles on the farming incentives.

With regards to this whole program I think we should discuss what ultimate goals are here.

I’d posit.

  1. Increase Honeyswap liquidity to reduce slippage to encourage volume increase.
  2. If volumes increase - LPs will earn more on top of HNY farming rewards - goal here to get enough volume so LP providers don’t need HNY incentives but since UNIswap has them I expect HONEYswap will have them for foreseeable future too.
  3. Increased use and visibility of the network and overall growth of 1Hive, xDAI ecosystem in terms of traffic and people.
  4. Grow Honeyswap fees against incentives so this doesn’t just become sustainable but profitable for 1Hive.

I think we have good Honeyswap metrics to measure volume and LP liquidity growth. I think we should get into place 1Hive, xDAI network and ecosystem growth and participation stats to measure what is driving people in or out. (i.e. BrightID graph, xDAI blockscout network tx graph, website hits, faucet hits, etc.) as additional incentive performance metrics we can use generally not just as gauges for capital moving in here but also people (via Buzz metrics). I guess we can call data like this that.

Your weekly or month Buzz-metrics.

4 Likes
#10

Awesome report dude, epic. I agree with the sentiment it will be good to bring more eth across to increase adoption so funding a weth/dai or weth/btc pair makes sense

#11

I think WETH-XDAI and XDAI-STAKE are the two most important farms that need to be funded (they can be funded with even 50 honey, as weth xdai is a stable pair compared to other crypto so less roi will do).

They should bring a fair amount of traffic to honeyswap.

#12

I don’t think this will be a good idea atm. 50 Hny on the HNY-WETH is too low. Volume is so low you barely make something from fees and also keep in mind that the risk of IL quite high.

#13

Looks like everyone is pretty close in agreement with a few exceptions…

I say stick with the basics with prolonged incentive to key players liquidity to the others will come when they see low fees.

  • wbtc,
  • weth,
  • xdai,
  • hny
    whatever mix you want between these 4