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

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

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.