[GIP-82] Partial LM Migration from V2 to V3

Voting ended over 2 years agoSucceeded

Summary

This proposal follows the GIP in Discord which can be found here. This GIP discusses the migration of some of the GEAR rewards from V2 to V3, and is related to the broader launch of Gearbox V3 (see the relevant snapshot proposal here)

The goal of this proposal is to migrate approximately 40% of the Liquidity Mining rewards from V2 passive lending pools to the new V3 passive lending pools. The rates on V2 would likely reduce due to this, but still stay pretty juicy for the next few weeks.

All the details and the logic on V3 launch steps can be found here.

User Actions: Opt-In

Passive lenders have full control over their capital. Nobody can move their funds without their consent. So if some passive lenders prefer to never withdraw from V2, then be it. However, as the proposal of migrating Liquidity Mining program + organic rates gets approved step-by-step, it might be logical for everyone to jump into V3. A safer, more utilized protocol, hopefully.

When you go to the new interface, if you have some V2 passive liquidity, the interface will suggest to you to move it. That’s all, 1-2 buttons at max. Stay in it for ages!

V3 Pools: USDC, WBTC, ETH

Approximately 40% of the current GEAR rewards would migrate over to the V3 passive lending pools. The pools created at the start would be USDC, WBTC, and ETH. At the emissions rate suggested, 10% APY on such pools in GEAR (discounting any organic rates, which can be high from margin trading) would be:

$4M in ETH: 10% + organic rates $4M in USDC: 10% + organic rates $2M in WBTC: 10% + organic rates

That means if the pools are less stocked up than those amounts, the GEAR rates would even be 10%+. If the pools get filled up faster, then the rate might be < 10%. However, V3 has a higher tier structure for lenders to enjoy higher rates, so the goal is to build a protocol which can give at least 10%+ organically, let alone GEAR emissions. Anyway, that's mostly speculation at the moment, and will ultimately depend on usage of v3.

gear screenshot.png

Rationale

As the full article explains, the goal is to take away the “cream” of unutilized liquidity in V2 while V3 is not fully ready with farming just yet. As soon as V3 catches on and gets utilized, the remaining LM can be moved over from V2 to V3 even sooner. Alternatively, in case that process takes too long, then the LM would only be moved once farms are added to V3 in January.

The goal eventually is to fully remove any emissions once the protocol and its integrations create better borrower opportunities. All the details and the logic on V3 launch steps can be found here: https://blog.gearbox.fi/gearbox-protocol-v3-launch-steps-roadmap

Math

My understanding is the latest LM rewards are those referenced in GIP 30 and GIP 68. GIP 30 set out the current level of rewards, and GIP 68 simply removed the rewards from the FRAX pool with no further changes. (Unfortunately, as a contributor on the marketing side I am simply too dumb to check the chain).

Given the above, the current rewards for lenders are as follows:

lm rewards 2.png

Meaning in total, there are currently 98.55 GEAR per block being directed towards V2 lenders. According to this proposal 40% of this will be directed to V3, which means 39.42 GEAR per block.

These should be split such that 40% of emissions go to ETH, 40% go to USDC, and 20% go to WBTC, such that:

15.768 per block to ETH pool 15.768 per block to USDC pool 7.884 per block to WBTC pool

~41150538 per year to ETH pool ~41150538 per year to USDC pool ~20575269 per year to WBTC pool.

This is equivalent (roughly) to 102M of GEAR (1% of supply) per year in total. Given current GEAR prices this (very roughly) corresponds to our "target" APYs of 10% on 4m for ETH/USDC and 10% on 2m for WBTC.

V2 pools will each have their rewards reduced by 40% accordingly.

new per block.png