[HIP-01] Hermes Metis Marathon

As a result of the CommonWealth discussion surrounding [HIP-1], we are setting the Hermes Metis Marathon Proposal up for vote which the DAO will send to the Metis team if it passes.

Introduction

The reason for this grant proposal is to help bring new users to Metis Andromeda by addressing current liquidity issues on-chain. We propose to do this by rewarding users with Metis when they do something positive for Hermes Protocol and Metis ecosystem.

Overview

Our goal is to attract new tvl and projects to Metis by using Metis Marathon’s incentives to make renting liquidity in Hermes Protocol as effective and cheap as possible.

By distributing Metis incentives to both individual LPers and protocol bribers proportionately in accordance with fees generated by each AMM pool we are ensuring that the incentive distribution is optimized to attract liquidity according to the volume of fees generated.

The incentive distribution schedule will be revised monthly to ensure that both Hermes and Metis’s goals are being met.

Prices in USD are assuming 1 Metis is worth 30 USD.

Type	Duration in Weeks	k Metis /week	Total k Metis	Total k USD
Lock V1	10	2	20	600
Bribes V1	10	0.18 - 9.5	1.8 - 95	54 - 2850
Bribes V2	15	0.2 - 3.5	3 - 52.5	90 - 1575
Marketing V1 & V2	0	0	1	30
Development V1	10	1.3	15.5	465
Total V1	10	3.68 - 16.3	38.3 - 131.5	1149 - 3945
Total V2	15	0.2 - 3.5	3 - 52.5	90 - 1575
Total	25	1,652 - 7,36	41.3 - 184	1239 - 5520

Incentives Breakdown

The Hermes model of distributing LP fees to $veHERMES lockers rather than to LP providers ensures that incentives are aligned with fees, rather than with liquidity as is the case in traditional AMM’s. Aligning incentives with fees is a clear improvement over other models, and has already proved product market fit with protocols such as Hermes and Velodrome on Optimism.

Our aim is to align the distribution of Metis incentives with Metis and Hermes growth. Matching protocol bribes on Metis-native token pairs will attract liquidity to Metis as a whole, and ve-locking incentives will ensure a positive and sustainable flywheel effect on the whole Metis ecosystem. Our proposal benefits both existing Metis native protocols (such as Revenant) to ultra-efficiently grow liquidity further, and will incentivize new protocols to do the same.

Our goal is to grow liquidity on Metis for both native pairs and Metis protocols, allowing the chain to thrive without concerning with liquidity issues.

Locks

An effective way of sustaining the protocol’s positive flywheel effect is to heavily incentivize token locking. There are currently approximately 750k Hermes emitted per week. Incentivizing token locking will absorb a substantial portion of weekly emissions, and will create a positive feedback loop which will increase the efficiency of other Metis incentives.

Metis Ecosystem Benefits

Aligning incentives in a way that maximizes the benefit to both existing and new Metis protocols will ensure that the distribution of incentives is effective and will both retain existing liquidity and attract new protocols and liquidity to the Metis ecosystem.

Duration: Until V2 (~10 weeks)

	For the respective week's new 4 year lockers (*)
k Metis per week	2
Total k Metis	20
Total k USD	600

(*) - Every new Hermes locked for 4 years, as it should encourage new and existing lockers to keep locking and growing their position.

Example:

2k METIS / HERMES locked for 4 years in that week

If we have 2M HERMES locked in a week then it’s distributed 0.002 METIS per 1 Hermes locked: 2000/2000000 = 0.001

At the time of writing, lockers would get approximately $0.59 back for every $1 locked.

Bribes

Our fees are 0.01% for all pairs, boosting native pairs' fees by 50x will create a positive flywheel effect. By multiplying weekly fees instead of having a fix amount per week makes incentives coordinated with our's and Metis goals, of only incentivizing used liquidity. Matching bribes from Metis protocols will attract more voters and emissions that lead to raising liquidity, it also makes it appellative to new protocols to come to Metis.

Metis Ecosystem Benefits

Simulating higher fees will in turn bring more value to lockers, increasing emissions value and tvl to these pools as more voters are directed to them. By doing this and maintaining tvl, we can deepen liquidity of native pairs and increase the number of possible market participants in Metis. Raising and incentivizing protocols' bribes deepens liquidity throughout the whole ecosystem.

Duration: Until V2 (~10 weeks)

	Native Pairs	Match Bribes	Total
k Metis per week	0.18 - 1.5 (*)	0 - 0.5	0.18 - 9.5
Total k Metis	1,8 - 90	0 - 5	1.8 - 95
Total k USD	54 - 2700	0 - 150	54 - 2850

(*) - Max(Min(30, Pair’s Weekly Volume * 0.0001 * 50),1500)

Native Pairs:

• METIS/m.USDC
• METIS/WETH
• WETH/m.USDC
• m.USDC/m.USDT
• m.DAI/m.USDC
• HERMES/METIS

In V2 deepening cross-chain Metis liquidity is definitely a plus, easing on boarding of new users and protocols. Bribing both key pairs METIS/m.USDC and METIS/WETH is of the most importance to assure liquidity to all Metis users.

Duration: After V2 Launch until Metis Marathon End (~15 weeks)

	Native Pairs	Match Bribes	Total
k Metis per week	0.1 - 1.5 (*)	0 - 0.5	0.2 - 3.5
Total k Metis	3 - 45	0 - 7.5	3 - 52.5
Total k USD	90 - 1350	0 - 225	90 - 1575

(*) - Max(Min(50, Pair’s Weekly Volume * 0.0001 * 50),1500)

Native Pairs:

• METIS/m.USDC
• METIS/WETH

Marketing

Promote this incentive campaign throughout V1 and V2.

Metis Ecosystem Benefits

Bring awareness to both users and protocols about our partnership and Metis Marathon.

Duration: One time payment

	Promote Hermes & Metis Marathon
Total k Metis	1
Total k USD	30

Development

Pay for development costs and audits. Creating a contract to keep track and airdrop Metis weekly to lockers is the most decentralized way of going about it, but it takes time and requires an audit.

Metis Ecosystem Benefits

Promote incentive distribution in a decentralized and safe way.

Duration: Until V2 (~10 weeks)

	Code4rena	Operational Costs	Total
k Metis per week	0 (*)	1.3	1.3
Total k Metis	2.5	13	15.5
Total k USD	75	390	465

(*) - One time payment for audit regarding lock incentive contract

Conclusion

Most native and ecosystem tokens have liquidity issues that need to be addressed. Incentivizing Hermes Protocol’s flywheel will enable the circumstances to solve these issues and attract new protocols in the process. We have been since the beginning of the year growing the Metis ecosystem and want to continue to do so in the best way possible.

Incentivizing Hermes Protocol’s flywheel will enable the circumstances to solve these issues and attract new protocols in the process. We have been since the beginning of the year growing the Metis ecosystem and want to continue to do so in the best way possible. Stimulating our protocol will not grow only Hermes but Metis as a whole, raising Total Value Locked across all Metis, including other Decentralized Exchanges.