SLURP-10b | Mainnet Liquidity Mining Incentives and Optimism Grants and Liquidity Mining Incentives

Abstract

Presuming the successful acceptance and ratification of SLURP-9, SLURP-11 for the deployment of the Priority Pool, and a forthcoming Optimism Growth Experiment Grant conferring OP tokens, we propose modifications to the current liquidity mining incentives on Ethereum Mainnet, with a shift to direct a substantial portion of the current SDL rewards to incentivize the creation and growth of liquidity pools on Optimism based DEX Velodrome.

Additionally, we propose the deprecation of liquidity mining incentives for ixETH, and propose directing SDL and a portion of the possible OP token grant as incentives towards incentivizing an ETH/LINK pool on Velodrome, which would connect the proposed SDL/ETH and wstLINK/LINK pools on Velodrome to the rest of the liquidity on Velodrome.

We also propose the cessation of SDL incentives directed to the SushiSwap liquidity pool, and propose directing future incentives to a to-be-established Uniswap v2 liquidity pool.

Rationale

The future of interacting with Ethereum is Layer 2 based, and gas costs on Ethereum Mainnet will likely only grow as time goes on. The deployment of stake.link to Optimism (as proposed by SLURP-9) and the incentivization of users to migrate their interactions with stake.link as a protocol to Optimism (and in the future other Layer 2s) enables increased interaction with the protocol, and opens the protocol up to Layer 2 native users. Additionally, moving a substantial portion of the existing liquidity to a Velodrome will allow for lower gas fees for trading, and may lead to higher trading volume, benefitting LPers.

By directing a portion of the current incentive structure to incentives to veVELO holders we unlock a possible flywheel where LPers receive VELO tokens, lock them, and vote for increased incentives for these same pools. Velodrome indicates that for every dollar spent on incentives for an individual liquidity pool, $3 in VELO emissions are directed to LPers for that pool.

Our proposed pools are: wstLINK/LINK, SDL/ETH, and ETH/LINK. Additionally, we propose the deprecation of liquidity mining rewards to the ixETH/ETH pool.

Motivation

Establishing deep liquidity pools on Optimism provides new users with access to the fundamental stake.link protocol tokens, reducing the friction for them to begin to interact with the protocol. We believe that focusing development efforts and incentives here will represent a substantial growth opportunity for stake.link as a whole.

With respect to the existing liquidity pools and incentive structures on Ethereum Mainnet, the growth and fee generation opportunities for ixETH are limited in comparison to the stake.link deployment to Optimism. Liquidity Mining emissions to the Curve stLINK/LINK pool will continue, at a reduced rate.

Liquidity Mining incentives for the SDL/LINK pool will be directed to a yet-to-be established Uniswap v2 SDL/LINK pool. While the SushiSwap team has been attentive and helpful, several issues have arisen during the period of time the SDL/LINK pool has been hosted there. Routing to DEX aggregators has never been established, and we’ve attempted to address the issue of only being able to trade SDL against LINK twice, once to good effect. A simple Uniswap v2 pool will allow current LPers to enjoy the same set and forget liquidity provision, and they’ll be able to earn and claim their SDL rewards on mainnet with (hopefully) increased trading volume.

Specification

Note

There are multiple dependencies for the entirety of this SLURP to be enacted, including additional SLURPs, grant proposals, and technical deployments. At this time, there are technical blockers around the bridging of LINK to Optimism by leveraging CCIP. As such, in lieu of an SDL/LINK pool's deployment on Velodrome, it is proposed that an SDL/ETH pool be established and bribes directed towards this pool on Velodrome. This will enable prospective stake.link users to acquire the fundamental protocol token for stake.link in advance of a full deployment.

Upon remediation of the aforementioned technical blockers, an ETH/LINK pool and wstLINK/LINK pool will be created using the newly CCIP-enabled LINK token. The ETH/LINK pair will serve as a public good, enabling users to readily acquire both SDL and wstLINK on Velodrome.

The following sequence is proposed:

1. Allow ixETH/ETH Curve liquidity mining rewards to run out.
2. The migration of liquidity mining incentives for the SDL/LINK SushiSwap pool to a to-be-established SDL/LINK Uniswap v2 pool. This allows for the same low friction, set-and-forget liquidity provision and remediates the issues experienced with the current SushiSwap pool including inconsistently effective routing, enabling users to exchange SDL with tokens other than LINK. Until such a time as LINK is able to be freely bridged to Optimism using CCIP, the current amounts of SDL LM incentives will be directed to the new SDL/LINK Uniswap Pool.
3. Dependent upon the SDL token's CCIP integration: the establishment of SDL incentives for the to-be-established SDL/ETH liquidity pool on Velodrome.
4. Dependent upon the remediation of technical blockers around bridging the LINK token using CCIP: reduction of future liquidity mining rewards to the SDL/LINK Uniswap pool and the stLINK/LINK Curve pool. Begin directing SDL incentives to the to-be-established ETH/LINK and wstLINK/LINK Velodrome pools.

The following current liquidity and target APR values are calculated using the current liquidity amounts and SDL price from 09/07/2023.

Duration of Incentives

All incentives are to be run for a period of 12 weeks, then publicly reassessed via talk.stake.link. Should it be decided major changes are required (e.g. new pairs, or new DEXes), or should it be proposed to substantially increase any amounts, a new SLURP will be required.

Ethereum Mainnet Incentives, Current and Proposed

	SDL/LINK Sushi	stLINK/LINK Curve	ixETH/ETH Curve	SDL/LINK Uniswap
Current Liquidity ($)	750,000	1,125,000	250,000
Current 1 Day SDL Emissions (tkn)	2520	1240	825	0
Proposed Target Liquidity ($)	0	500,000	N/A	330,000
Proposed Target SDL APR (%)	0	10	0	15
Proposed 1 Day SDL Emissions (tkn)	0	978.47	0	968.69

Optimism Grants and Velodrome Liquidity Mining Incentives

In a forthcoming Optimism Growth Experiments proposal, we are requesting 150,000 OP tokens to incentivize users to bridge to Optimism and engage with stake.link there. 50% of these tokens are being reserved for incentives to veVELO lockers to request VELO emissions to our proposed liquidity pools. We additionally propose directing the following SDL as incentives to veVELO lockers.

	SDL/ETH	wstLINK/LINK	ETH/LINK
Target Liquidity ($)	1,000,000	1,000,000	2,000,000
Target SDL APR (%)	15	10	5
1 Day SDL Emissions (tkn)	2,935.42	1,956.95	1,956.95
1 Day OP Emissions (tkn)	130	90	190

In summary, this represents a total increase of daily SDL spend from the current amount of approximately 4,600 SDL per day to approximately 8,800 SDL.

Copyright

Copyright and related rights waived via CC0.