Frankly my take on this is that even with 1M liquidity and 100K/day of volume this translates to $300 of fees on even a good LP pair. Of this 1/6 might go to 1Hive ($50/day). And this is with funding in the 100-300HNY/month range.
One has to ask a question regarding incentivizing farming here given the results to the bottom line. Does the DAO want to pay for liquidity with direct and immediate inflation at a rate significantly higher than the actual volumes.
I think it makes sense to fund only one HNY pair and I think it should be the HNY-wxDAI. The reasoning behind this is to create a LP incentive that helps provide liquidity not just to trade HNY but also to provide some price support to HNY price via LP incentive. Spreading incentives over multiple HNY pairs based on what we saw is basically a waste when it comes to this goal. Heavily incentivize one single pair with a reasonable return and be done with that.
As to incentivizing other pairs and what to do about Honeyswap generally. I think we simply need to do the hard work to make xDAI easier to use via wallet support for xDAI and a more robust/reliable RPC. I honestly think it is more important at this point to throw 5-10HNY/month at work to establish a reliable RPC than at any of the trading pairs.
Now if one is looking at this farming reward not just to provide liquidity but also a HNY distribution mechanism then we just want to keep an eye on where the HNY we are distributing is going. No matter what we do, we need better analytics and data to measure the reactions to markets to this change. If there was another proposal I would support it would be some HNY to provide HNY analytics to answer some basic questions of where is the HNY and what is it doing to see what people are doing with the HNY they get. While people want HNY to flow - we also want it to stick to some extent. It migh behoove the DAO to actually create some metrics to measure the flow, and the stick to see where to maximize HNY inflation impacts on the ecosystem, interest, participation etc.
At this point after the heavy hit on farming rewards I am almost for letting these drop except for 1.
The HNY-wxDAI pair to incentivize one key liquidity pair at some rate that allows most of our expected HNY outlays to people to be sold with the least amount of slippage to help cover operating expenses. While the farming caused a spike in prices I think we need to pull back and simply incentivize one pair at a moderate level. Off the top of my head numbers here was that 300HNY/month to HNY-wxDAI basically got us 2x liquidity. Slippage isn’t that bad with 1-1.5M of liquidity and is earning what 100%. We take this away and liquidity is going to drop back to old levels. So we have to find the HNY rate that gets us decent liquidity and pays ‘reasonably’.
When I do the math I think 600HNY/yr to get us perhaps $1M of liquidity in the HNY-wxDAI pair is probably reasonable. This is something like 50HNY/month and 1 single pair that I would start with. The idea of throwing even a couple hundred HNY at these pairs - just to do it seems premature until we have a clear issuance plan as well as some clear idea of goals with respect to Honeyswap farming. Literally I think we might get more buzz for our HNY if we use it for more focused PR (buzz) and xDAI development (better redundant RPC and theGraph nodes), and probably some design/documentation while the community pushes through celeste and moves forward on other swarm projects.
When I look at this proposal and ones like it I think we can do better with 100HNY/month than just throw it at LP incentives given the response we saw.
Right now I have one single goal. Get the KEY HNY-wXDAI pair a basic level of LP incentives at say 50HNY/month and leave all the others unfunded and see where we land on liqudity and HNY price, etc. Take the other 100-400HNY we have been floating around and use it for other more focused project to improve xDAI and 1Hive generally. I think we get good Honey Flow and Stick by taking this HNY and paying it out to people who believe in the project and can get some important things done. I want to move past this whole ‘free HNY’ phase and get to the ‘HNY for work’ phase so when we are ready for capacity we can then take the HNY and ramp up buzz and PR, gimmicks, faucet, games, raffles, whatever we want to do to try to entice people into system.
Here is a flip on LP reward. Have every HNY-wxDAI LP token earn a raffle entry for like 3 -10 prizes (so if you have like 20LP you get 20 or say 20,000 tickets) and then every month raffle off say 20HNY in rewards 5,3,2,1,1,1,1,1,1,1,.5,.5,.5,.5,.5,.5,.25,.25,.25HNY on top of the 50HNY/month paid out. Do this after the new year say so we don’t overlap the 300 down to 50 and then later adding the 20HNY/month raffle off in combination with some other offer (i.e. be BrightID verified to level N, or whatever combination of win metrics we want that incentivizes the behaviors we want)
There are a lot of better ways to get people to do things here that don’t have to fit a single model, nor be hugely expensive. We just need proper behavioral repsonse metric measurement tools and frankly I want the measurement tools before we go whole hog here spending 150-500HNY/month on things.