IIP-63 - MVI Liquidity Mining - August 2021

Status: Proposed

Author: @overanalyser

Created: 29th July 2021

Discussion: https://gov.indexcoop.com/t/iip-63-mvi-liquidity-mining-august-2021/2183

Quorum 96,149.7 [1,922,994*0.05]

Simple Summary

Fund MVI:ETH liquidity mining for a further 30 days with a total allocation of 3286 INDEX

Abstract

Replenish the current staking contract for MVI:ETH Uniswap v2 LP tokens so that the current campaign is extended for a further 30 days (current staking contract term).

This is intended to support a sector leading liquidity pool to allow MVI to be traded with acceptable price impact (~8 ETH at 1%).

Motivation

$MVI launched ~110 days ago with a 90 liquidity mining campaign targeting $5 M Liquidity in the Uniswap V2 pool. This campaign has been largely successful, although liquidity AUM dropped as low as $2.48 M in June, recovering to $5.5 M as of the time of writing.

The Uniswap v2 pool is the main market for MVI, The current $5.3 M pool size allows 8 ETH [~240 MVI] trades with less than 1% price impact. LP’s in this pool are currently receiving (the annualised equivalent of) ~17% from trading fees and ~18% from INDEX rewards.

The current liquidity pool contains ~30% of all MVI issued.

Significant cuts in INDEX rewards (without an increase in trade volume / fees) are expected to result in a significant reduction in the liquidity and so result in larger price impact for any given trade. In order to maintain the current liquidity (in LP token number and/or $ terms) continued liquidity mining is required.

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See also here for further research into MVI liquidity.

During the call on the coop liquidity strategy on 29th July 2021 we agreed that it was not the best time to migrate MVI to a more concentrated liquidity option (e.g. Uniswap v3) due to concerns that the liquidity may become fragmented. Maintenance of the current liquidity, while we monitor and consider future options, was the preferred option.

Specification

Extend the current LM campaign for MVI:ETH Uniswap pair for 30-days, from August 12th, using the existing contract (as outlined in IIP-24) for an additional 3286 INDEX (~110 per day).

No action would be necessary for existing liquidity providers.

FOR

• Extend the mining incentives for the MVI set according to the parameters above.

AGAINST

• Allow the incentives from MVI liquidity to stop at the end of the current campaign (~12 August 2021).