[DCP-30] Extension of SushiSwap V2 Liquidity Rewards Program

Proposal Discussions
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Summary

This proposal seeks to extend the SushiSwap V2 liquidity rewards program, maintaining the current reward rate of 120,889 RADAR per day (totaling 10,879,983 RADAR over three months). The extension would be retroactively applied from mid-November 2024, following the expiration of the previous rewards program (DCP-26).

Motivation

Ethereum and SushiSwap continue to serve as the primary on-chain infrastructure for DappRadar’s token economy, particularly due to their established liquidity depth and crucial role in facilitating seamless interactions with Centralized Exchanges (CEXs). Maintaining robust liquidity on Ethereum remains critical for the overall health of the RADAR token ecosystem, especially given its unique position as the only chain with direct CEX integration.

Abstract

Current State and Market Analysis

Recent data shows concerning trends in our liquidity metrics:

  • Pool liquidity decreased from ~$1M (August 1) to $634k (November 1), and further to ~$400k currently
    • This decrease is attributed to two main factors:
      1. Market depreciation of both RADAR and ETH prices
      2. Active withdrawal of liquidity by LPs from the pool
  • Trading volume August-November: $1.7M with ~$5k in LP fees
  • November alone: $5.3M in volume with ~$16k in LP fees

The significant increase in trading volume during November, coupled with decreased liquidity, highlights potential market inefficiencies and increased slippage risks. This divergence between volume and liquidity underscores the urgent need to maintain and potentially strengthen our liquidity position.

01 August 2024 - 01 November 2024 | Sushi V2 RADAR-ETH Pool Stats
01 August 2024 - 01 November 2024 | Sushi V2 RADAR-ETH Pool Stats

November 2024 | Sushi V2 RADAR-ETH Pool Stats
November 2024 | Sushi V2 RADAR-ETH Pool Stats

Strategic Considerations

While we continue progressing with liquidity consolidation efforts on Polygon and BNB Chain (including the ongoing migration from ApeSwap to PancakeSwap), Ethereum’s unique position in our ecosystem necessitates continued focus on maintaining stable liquidity levels.

The transition from V2 to V3 (potentially on Uniswap) remains a strategic objective. However, this migration faces two significant challenges:

  1. Market Conditions: The transition requires specific market conditions to ensure success and prevent potential negative cascading effects such as:
  • Mass LP withdrawals
  • Sudden RADAR token selling pressure
  • Destabilization of token price and liquidity depth
  1. Infrastructure Challenges: We are currently addressing critical infrastructure changes due to Connext Bridge discontinuing their services. This necessitates migrating the RADAR Bridge from Connext to potentially Stargate, temporarily putting any V2 to V3 transitions on hold until the bridge migration is complete.

Technical Considerations

We acknowledge the ongoing issues with SushiSwap’s UI, particularly regarding the accurate display of LP rewards. As part of our forward-looking strategy, we are exploring the possibility of launching a parallel Uniswap V3 pool while maintaining the current SushiSwap V2 infrastructure.

Proposal Details

  • Daily Reward Rate: 120,889 RADAR
  • Total Allocation: 10,879,983 RADAR
  • Duration: 3 months (retroactive from mid-November 2024)
  • Target Pool: RADAR-ETH on SushiSwap V2

Benefits

  1. Maintains critical liquidity depth on Ethereum
  2. Ensures stable token economics during market volatility
  3. Preserves existing LP relationships and infrastructure
  4. Supports efficient CEX-DEX arbitrage mechanisms
  5. Provides time for strategic V3 migration planning

Drawbacks

  1. Continued allocation of significant RADAR rewards
  2. Temporary acceptance of SushiSwap UI limitations
  3. Delayed transition to more capital-efficient V3 infrastructure

Voting

DAO members are asked to vote on maintaining the current liquidity program on SushiSwap with the specified reward structure. The voting options are:

  1. Yes - Extend the rewards program as proposed
  2. No - Do not extend the rewards program

Please consider the critical nature of maintaining stable liquidity on Ethereum while we prepare for future infrastructure improvements when casting your vote.

Vote
  • Yes - Extend the rewards program as proposed
  • No - Do not extend the rewards program
0 voters
3 Likes
2

Market depreciation of both RADAR and ETH prices,wrong just $radar depreciation.

2 Likes
3

Serious question here what happens if we get skimmed to bits and then we dont have tokens to keep topping up the liqudity??? and they contine skimming and then pull liqudity we will go to zero this constant topping of the ETH feels like we are slowely digging a grave.

I said last time i had worries over this.

ill vote yes but >.> if market contine to declines we should make this last time.
Cuz this isnt helping the price or the communitys attuitude towards radar.

Also thanks for the report dracos.

2 Likes
5

I see where you’re coming from. The proposal’s goal is to maintain critical liquidity on Ethereum while we work on long-term solutions like the V3 migration. Without this extension, we risk losing LPs, which would be far worse for the ecosystem.

The current reward rate ensures stability while we handle the bridge migration and plan for more efficient infrastructure. It’s not ideal, but it’s necessary to keep the RADAR ecosystem healthy during these transitions.

2 Likes
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I think it should be the goal for 2025 to wave farewell to this V2 liquidity. We need to get into V3, or maybe even V4 alongside Unichain. Something like Unichain - a shared liquidity layer - will solve many of our issues, I guess.

For now, V2 has too much of an impact on your market cap and price. So let’s keep it there, and incentivize liquidity.

Maybe, moving forward, we could do something like this:

  1. stake 30,000 (or preferably more) RADAR to be PRO
  2. pledge to commit for 12 months
  3. You receive a boost on your APY
  4. Pledged RADAR will be moved into liquidity positions on V3 or V4

Right now we have over 30,000,000 RADAR locked in the PRO membership. It could be nice to look at liquid staking and see if we - as a DAO - can activate those staked assets.

Benefits COULD be:
– extra DAO revenue
– financial benefits for PRO members
– deeper integration of RADAR into DeFi

4 Likes
7

sounds ok to me this ill run it by chat gpt but sounds good.

ChatGpt says:

Here’s a simplified explanation of what you’re proposing and discussing:

  1. Transition from V2 to V3 or V4 Liquidity:
    The current liquidity system (V2) is outdated and is impacting the market cap and price of RADAR negatively. Upgrading to V3 or even a potential V4, especially with an innovative approach like Unichain (a shared liquidity layer), could improve efficiency and solve existing issues.
  2. Incentivizing Liquidity in the Meantime:
    Until the upgrade happens, the goal is to keep incentivizing liquidity on V2, ensuring stability while you prepare for the transition.
  3. New PRO Membership System:
  • To enhance engagement and utility for PRO members, you propose a system where members stake at least 30,000 RADAR (preferably more).
  • Members pledge a 12-month commitment to ensure long-term participation and stability.
  • In return, they get a boost in APY (annual percentage yield) as a financial reward.
  • The pledged RADAR would be used in liquidity pools on V3 or V4, effectively contributing to the ecosystem’s liquidity.
  1. Liquid Staking:
  • The DAO could explore liquid staking, a method where staked assets remain active and usable in the DeFi ecosystem.
  • For example, RADAR staked by PRO members could generate additional revenue streams for the DAO, offer financial benefits to members, and help integrate RADAR into the broader DeFi landscape.

Key Benefits:

  • Extra DAO revenue: The DAO earns more from liquidity and staking activity.
  • Financial benefits for PRO members: PRO members gain higher APY and potentially other rewards.
  • Deeper RADAR integration into DeFi: It strengthens RADAR’s role and utility in decentralized finance.

In summary, this plan aligns incentives for the DAO, PRO members, and the broader ecosystem, creating a win-win situation while preparing for a stronger future with V3 or V4 liquidity systems.

Then i ask it risk involved in liquid staking >.>

Liquid staking is an innovative DeFi mechanism, but like any strategy, it carries risks. Here are the primary risks to consider:

1. Smart Contract Risks

  • Description: Liquid staking relies heavily on smart contracts to manage staked assets and issue liquidity tokens. These contracts could be vulnerable to bugs or exploits.
  • Mitigation:
    • Conduct thorough audits of smart contracts.
    • Use well-established, proven liquid staking protocols.

2. Slashing Risk

  • Description: If the staked assets are being used in validator roles (e.g., staking to secure a blockchain), they are subject to slashing penalties for validator misconduct (e.g., downtime or double-signing).
  • Mitigation:
    • Partner with reputable validators with strong uptime and a solid track record.
    • Diversify across multiple validators to reduce risk.

3. Liquidity Risk

  • Description: Liquid staking issues liquidity tokens (e.g., a tokenized version of the staked RADAR), which must be traded in secondary markets. If demand for these tokens drops, their value could deviate from the staked assets’ value.
  • Mitigation:
    • Incentivize liquidity pools for the staking derivative token (e.g., RADAR-LP).
    • Maintain transparency about token backing and peg mechanisms.

4. Governance Risk

  • Description: Mismanagement or poor decision-making by the DAO could affect the utility, rewards, or security of liquid staking mechanisms.
  • Mitigation:
    • Establish clear governance frameworks.
    • Regularly update the community on risks and decisions.

5. Price Volatility

  • Description: If the price of RADAR fluctuates significantly, the value of staked RADAR and its liquid staking derivative can be affected, potentially dissuading users from participating.
  • Mitigation:
    • Design attractive APY mechanisms to offset volatility concerns.
    • Develop use cases for staking derivatives to maintain demand.

6. Centralization Risks

  • Description: Concentration of staked assets in specific validators or liquid staking protocols could create centralization issues and expose the DAO to systemic risks.
  • Mitigation:
    • Distribute staked RADAR across multiple platforms and validators.
    • Monitor decentralization metrics actively.

7. Loss of Flexibility for Stakers

  • Description: While liquid staking provides liquidity, it may reduce the direct control stakers have over their assets, especially if staked tokens are used in complex DeFi strategies.
  • Mitigation:
    • Provide clear terms about the staking mechanics.
    • Offer stakers optionality in how their assets are utilized.

8. Regulatory Risks

  • Description: Regulatory scrutiny on staking and liquid staking mechanisms could create compliance issues for the DAO and its members.
  • Mitigation:
    • Stay updated on regulatory developments.
    • Consider decentralized and jurisdiction-agnostic implementations.

Weighing the Risks vs. Benefits

While liquid staking introduces risks, careful design, transparency, and mitigation strategies can make it a valuable tool for increasing utility and revenue for the DAO and PRO members. Conducting a risk-benefit analysis and thorough testing before deployment is essential.

So what examples of liquid staking have been good ones im not against it but 8 full risks is alot >.>

Ill ask it the pros.

Liquid staking offers several advantages that make it an appealing mechanism for DAOs and DeFi ecosystems. Here are the key pros:

1. Asset Liquidity

  • Description: Traditional staking locks assets, making them inaccessible until the lock-up period ends. Liquid staking allows users to stake their tokens and simultaneously receive a liquid derivative token representing their staked assets.
  • Benefit: Stakers can use these derivative tokens in DeFi for lending, trading, or liquidity provision without forfeiting staking rewards.

2. Increased Capital Efficiency

  • Description: Stakers can “double-dip” by earning staking rewards and utilizing their liquid staking tokens in other DeFi activities to generate additional yield.
  • Benefit: This maximizes the earning potential of staked assets.

3. Enhanced DAO Revenue

  • Description: If the DAO manages the liquid staking mechanism or earns fees from it, it can create a new revenue stream from staking fees, transaction fees, or other staking-related activities.
  • Benefit: This helps fund DAO operations, growth initiatives, or reward mechanisms.

4. Incentivizes Liquidity in DeFi

  • Description: Liquid staking tokens can be paired with other assets to create liquidity pools or participate in lending protocols.
  • Benefit: This boosts the liquidity and trading volume of the staked token, like RADAR, and its derivative, making the ecosystem more robust.

5. Attracts More Participants

  • Description: Liquid staking lowers the barrier to entry for staking by offering flexibility and liquidity.
  • Benefit: This could attract more participants to stake RADAR, increasing the total staked amount and strengthening the DAO’s ecosystem.

6. Strengthens Token Utility

  • Description: Liquid staking creates a secondary token that has use cases in DeFi (e.g., collateral, yield farming).
  • Benefit: This increases the overall utility and demand for RADAR, potentially boosting its value and adoption.

7. Deeper Integration with DeFi

  • Description: Staked assets become an active part of the DeFi ecosystem rather than being locked away.
  • Benefit: This fosters closer integration of RADAR into DeFi protocols, enhancing its visibility and relevance.

8. Flexibility for Stakers

  • Description: Unlike traditional staking, liquid staking allows stakers to exit their positions by selling their derivative tokens, bypassing unbonding periods.
  • Benefit: This flexibility makes staking more attractive to users who may need liquidity quickly.

9. Encourages Long-Term Staking

  • Description: Since liquid staking provides immediate liquidity, users are more likely to stake for longer periods without concerns about lock-up restrictions.
  • Benefit: This ensures a steady and predictable staking pool, improving the security and reliability of the ecosystem.

10. Boosts DAO’s Decentralization

  • Description: Liquid staking can distribute staked assets across multiple validators or protocols.
  • Benefit: This reduces centralization risks and strengthens the underlying blockchain’s security.

11. Alignment of Incentives

  • Description: Both the DAO and its members benefit from liquid staking. Stakers earn additional yield opportunities, and the DAO gains deeper integration into DeFi and more revenue streams.
  • Benefit: This creates a win-win situation, fostering long-term engagement and ecosystem growth.

In summary, liquid staking unlocks the full potential of staked assets, driving liquidity, utility, and revenue for both the DAO and its participants while making staking more flexible and attractive. These benefits can outweigh the associated risks with proper design and mitigation strategies.

11 full pros so:

Something for us to talk about.

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This sounds promising, thanks for the feedback.

Actually after I posted the proposal above, I did a deep dive into Uniswap V4 which should be launched soon. I think we should jump on Uni V4 which is using the same concentrated liquidity for pools as V3, but it comes with a lot of improvements in terms of trading efficiency (lower gas, faster, etc.) and it also adds Hooks.

Hooks can be deployed for each pool during pool creation and we can program the hooks based on our interests. I have some early thoughts about this and what you are sharing helps with this thinking.

I will share more and maybe I will write a proposal as soon as I have a very educated vision about where this could go.

I have also just posted some thoughts about cross chain liquidity on my X account, which looks very interesting.

LFG! :fire:

2 Likes
9

That’s not exactly how it works. Since July-August, ETH dropped from around $3.3k to approximately $2.2k, and when I took the snapshot of the data, it was at about $3.5k. However, over these months, many aspects of a liquidity pool can be affected by this price decrease over time. It leads to impermanent loss, and many LPs have withdrawn their liquidity.

The depreciation of RADAR’s value also has a significant impact in this scenario, but my analysis remains accurate.

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The proposal to extend SushiSwap V2 liquidity rewards (DCP-30) has successfully passed with:

  • 71.83% (18M RADAR) voting in favor
  • 28.17% (7M RADAR) voting against
  • Achieving quorum with 25M RADAR total votes

The rewards extension has been implemented, with funds successfully transferred to the SushiSwap rewarder contract. The rewards program is backdated to November 15th, 2024 and will run for 3 months until February 15th, 2025.

While maintaining these rewards, we’ll continue monitoring Uniswap V4 developments and plan to launch a pool there when market conditions become favorable.

Thank you to everyone who participated in the governance process!

1 Like