[DCP-20] 🍣 SushiSwap V2 Rewards Extension and Optimization Proposal

[vandynathan]

Co-authored by: the Tokenomics Workstream @dragos @SkirmantasJ @bayar @vandynathan

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Summary

In alignment with RADAR’s evolving liquidity context and the dynamic cryptocurrency market, this proposal seeks to adapt and enhance RADAR’s liquidity management strategy on SushiSwap V2. Considering the successful execution of prior proposals that significantly improved liquidity depth, and amidst a bullish market trend, we recognize the need for a strategic adjustment in liquidity rewards. This proposal aims to:

(1) remain on SushiSwap V2 and continue optimizing liquidity incentives by reducing the V2 rewards by 15% to 120,889 RADAR per day and a total of 10,879,983 RADAR over a period of three (3) months and

(2) shorten the rewards timeframe of rewards to allow us to act quickly within more volatile bull-market conditions

(3) to continue to review the feasibility of moving from V2 to V3, and/or utilizing protocol-owned-liquidity on Ethereum.

Motivation

This proposal is motivated by the objective to balance enhancing RADAR’s liquidity and addressing the challenges of liquidity incentivization, including impermanent loss risks to Liquidity Providers (LPs). By refining the reward structure on SushiSwap V2, we aim to sustain appealing APRs for LPs, thus supporting RADAR’s price stability and mitigating inflationary pressures on the RADAR token.

Abstract

Introduction

Our previous successful liquidity initiatives, combined with the market’s bullish trajectory, call for a careful redistribution of rewards, ensuring sustained support for RADAR’s liquidity without jeopardizing market stability.

With other continued liquidity initiatives such as the current rewards on Quickswap through our partnership with Gamma and future initiatives with Apebond which have raised the volume of protocol-owned-liquidity under management, we are adding more rewards onto the market whilst balancing growing in liquidity and the number of RADAR holders and PRO members. This data shows belief in our vision and confidence in our execution over the last months.

Optimization of RADAR liquidity incentives

That being said, balancing costs of liquidity with liquidity growth is important for our token, and also product growth. Given the potential complexities of new pool launches and the risk of impermanent loss, our proposal emphasizes the importance of maintaining our stance on SushiSwap V2 while sustainably reducing rewards.

Over the past six months, the increase price of RADAR has meant that the LPs are being duly rewarded and the team has more value to distribute. We therefore propose to balance the rewards with a 15% reduction and reducing the reward duration to three (3) months. This will provide us more flexibility in a very dynamic market, whilst still maintaining significant APR rewards to current and new LPs.

The current APR is somewhere around 46.2% (comprised of fees and rewards), and by reducing the RADAR rewards by 15%, we will only see a ~6% decrease in APR fo our LPs. Despite this reduction, our rewards remain competitive, reflecting our dedication to achieving our mission, broadening the RADAR holder base, and increasing the number of PRO users. Overall, the savings stand to be 1,919,997 RADAR.

Future liquidity improvements

To strengthen our Ethereum liquidity further, the Tokenomics Workstream will continue to review the feasibility of moving from V2 to V3, and/or utilizing protocol-owned-liquidity on Ethereum, when the market dynamics is in better conditions and liquidity is consolidated on the other chains.

We invite community feedback and engagement to refine how to execute this Proposal.

Benefits

• Liquidity Optimization and Cost Reduction: Maintain sticky liquidity on SushiSwap V2 and optimize liquidity incentives for liquidity providers (LPs) while transitioning to a more cost-efficient strategy.

Drawbacks

• Reduced Rewards: Lowering rewards on SushiSwap V2 may discourage some LPs, especially those who were attracted by the high APRs. This could result in a reduction in liquidity on the platform, but based on our analysis and the resilience of the pool, this should not have a material impact as the rewards are still competitive industry-wide.

Vote

• • FOR: Accept the proposed adjustments to SushiSwap V2 rewards, supporting RADAR’s strategic liquidity plans.
• • AGAINST: Oppose the adjustments to SushiSwap V2 rewards, favoring the retention of the current reward scheme.

[dragos]

Given the current market volatility compared to 6 months ago, it makes a lot of sense to go just with 3 months for now and then reassess where we stand 3 months from now, this gives the DAO more granular control over the liquidity initiatives and control over inflation.

Additionally, with the extension of the liquidity programs on Polygon and the potential of a bonding program with Apebond, I believe the reduction of the rewards on Sushi is more than welcome.

I am in favor of going forward with this change. Appreciate the effort @vandynathan.
Looking forward to hear more opinions.

[nederob]

I’m in favor of the proposal, but I also think there’s something we should be considering. Now RADAR is getting more liquidity on Polygon and BNB Chain, where users have access to DeFi ecosystems that are cheap to operator.

The biggest reason for the majority of people out there to buy RADAR, would be the PRO membership. Buyinf 30,000 RADAR ($300) on Ethereum is quite silly, and should not be motivated by a consumer oriented product. Therefore we should expect that purchases to move to Polygon and BNB Chain.

Than my major question would become: what are we going to do to push demand on Ethereum? These liquidity pools can only thrive by big purchases: whales, DAOs or other organizations. But - aside from the generic investment - what are we doing to motivate them to buy into RADAR?

We did the Optimism airdrop? Will the Optimism Foundation buy into DappRadar DAO and purchase 1 million RADAR from Sushi? Will we see more organization make this move? I hope so, or else the liquidity on Ethereum will become less relevant very fast.

For now, I will keep mine on Ethereum. Because I am lazy. But I will keep my eyes on the trading volumes on each chain, and see where and how I want to redeploy my capital this summer.

cheers!

[madeafterdeath]

its gonna be hard to push ETH buys on people because of the price of the fees, staking unstaking ect.

what are we going to do to push demand on Ethereum? (me personally nothing i tell em if they wanna keep it cheap they best off buying on the other chains eth needs to sort its fee’s out hopefully as more L2’s roll out and people migrate to them the costs lower but still the price of eth its self means its going to be expensive)

I have a question. you said this

Will the Optimism Foundation buy into DappRadar DAO and purchase 1 million RADAR from Sushi? Will we see more organization make this move?

My question is why would they buy and hold 1,000,000 radar from sushi?

I mean i need to write up a proposal for the DappRadar DAO league but at moment there is no real need to hold that much? (obv there will be in future was a smart move but again why? right now? and for what reasons?)

There’s DAO’s on ETH so i doubt it will become less relevant fast unless we leave it like 6 years to roll out this DAO league.

me personally id suggest radar bridges some of the ETH radar to the polygon and BNB chains so people can buy more of it on them chains with less price impact but that’s me, What would u suggest ?

[jpcmr]

I agree with the proposal and with what @nederob said. I have recently closed my small position in sushi that I had for a year and although I got profits from it, the gas fees took most away (got profit mostly from appreciation in price).
When I created the position gas was way cheaper and I wanted to support and “play around”, but ETH is definitely for whales only.

My question is, how much liquidity would we have in ETH without this campaign?

It would be great to have some CEX start to support RADAR in Polygon or BnB too