I propose to launch a liquidity mining program (LM) on Polygon, for jEUR-USDC, jCHF-USDC and jGBP-USDC liquidity pools, referred hereafter as Forex (FX) pools and for our AUR-USDC liquidity pool, referred hereafter as AUR pool, on Kyber’s DMM exchange and using their amplified liquidity pools design.
I also propose to apply to Kyber’s Rainmaker program, in order to register the FX pools into their yield program to receive KNC incentives, and to request $150k of incentives ($50k per pool).
FX pools allow for multiple use cases like risk-reduced Long and Short Fx trading and enable a secondary source of liquidity. FX pools need arbitrages in order to maintain their peg, which will generate trading fees for both the Synthereum’s protocol and its LPs.
I propose to launch a new AUREUS token contract on Polygon:
- seeded with 7k UMA tokens (around $90k) and 1.2M JRT (around $110k);
- with a duration of 8 weeks;
- for rewarding the amplified FX pools and AUR pool;
- with a distribution coefficient of respectively 2 and 1;
- 100 AUR tokens will be minted, 98 will be distributed during the program, and 2 will be kept by the treasury.
The treasury will seed the initial AUR pool with 2 AUR and 4k USDC (or 6k USDC if our application to the Kyber’s Rainmaker program is accepted). We can decide what to do with the LP token later (to keep it, to wrap it into a NFT that will be solf, or to give it to the winner of a trading contest for example).
About using the AUR token: even though the previous program did not attract as much liquidity as we would have liked, it has gathered more than $2M of liquidity; it helped our treasury to grow; it reduces the selling pressure of the JRT distributed as a reward, since short term LP have sold their AUR tokens, and could not sell the JRT associated to them. It also allowed a few interesting arbitrages the last day, which benefited some of us.
About Kyber’s DMM: to my knowledge, Kyber is the only AMM allowing concentrated liquidity on Polygon, and which provides a convenient UI (Balancer allows the creation of such a pool but there is UI and it is not an out-of-the-box solution). We have launched a liquidity pool on Kyber’s AMM (https://polygon-info.dmm.exchange/pool/0xC96F421b34C24F9715cBC98D5c718DdfedC9cc5a) which generated $4k of arbitrage on a liquidity of $50k; in the same time on Sushiswap, for the same liquidity, only $583 of arbitrage have been performed. Concentrated liquidity will generate more income for the treasury and the LP than a normal AMM. In addition to that, Kyber is running a LM program to which we can apply.
About seeding the reserve contract of AUR: unlike the previous FX LM, the treasury now holds a decent amount of UMA (around 13,000 tokens, worth around $170k at today’s rate). Instead of adding UMA tokens every wednesday (which makes it more complicated to follow, understand and estimate) I suggest using some of the UMA tokens of the treasury to seed the contract. The protocol will still receive UMA tokens every week based on the total collateral value (not anymore based on the value of the synthetic assets minted). Here we make the bet that we will receive at least the same amount of UMA tokens that we are providing as a reward, during these 8 weeks.
- Last week we received 710 UMA for around $1M of jFIAT ($1.25M of collateral in USDC and $160k in UMA, so $1.4M in total).
- 20% goes to LP (proposal #p2), which left 568 UMA for the treasury.
- So roughly, each 2500 USD of collateral brings 1 UMA to the protocol’s treasury.
- To recover these 7k tokens, it would require to receive at least 1093.75 UMA each week for 8 weeks (875 for the treasury and 218.75 for the LP).
- This equals having $2.6M of collateral, or $2.1M of jFIAT. This is assuming nothing changes in their calculation, and in the TVL of other protocols built on UMA.
Keep in mind also that we will have other LM which could boost the amount of jFIAT and of course the collateral value.
About the duration: $200k worth of rewards for 8 weeks would generate an APR 1.5x higher than a program on a 12 weeks period. A shorter period also increases the flexibility of the program.
About the coefficient: coefficients determine the quantity of rewards in AUR token that a pool receives. In this proposal, the FX pools will receive 28 AUR tokens, and the AUR pool 14. Each FX pool will therefore receive, at today’s price, $56k (or $98k if we were to be approved in the Rainmaker program), which provides an APR of around 36% (or 63% with the KNC rewards) for $1M deposited; $3M of liquidity in the FX pools will require $1.5M of jFIAT, and 375k USDC of liquidity in Synthereum. The APR for AUR pool would be 91% on a liquidity of $200k. You can play with the variable here: Calculations for AUR program - Google Sheets
YES: this program will be launched when everything will be ready (yield app on Polygon, liquidity on Polygon, Kyber’s DAO answer, etc.), a proposal will be formed to the Kyber’s DAO, and the treasury will deploy a new AUREUS token on Polygon, will deposit wrapped JRT and UMA, and will seed the AUR-USDC liquidity pool on Kyber.
NO: this program won’t be launched.