Proposal for amending the yield farming mechanics (1/5)

THE PROBLEM

Under the current reward system, the Liquidity Providers (LP’s) in AVAX pools get exact same rewards as in PNG Pools for each AVAX equivalent amount they provide. This creates a risk reward imbalance in favour of AVAX pools since AVAX is considered a more secure investment with its

larger market cap lesser inflation lower risk of impermanent loss due to bigger liquidity pools. As a result, most of the PNG rewards goes to AVAX LP’s, who then dump those to buy more AVAX. The sell pressure on the PNG results in decreased yield for all the LP’s including those in AVAX pools and limits the growth of liquidity pools.

THE CHALLENGE

PNG price must be supported by creating incentives to buy and hold on to PNG.

THE SOLUTION I have listed 5 proposals which will increase contribute to demand relation. These proposals can be voted separately. The complete write up is available at https://gov.pangolin.exchange/t/proposal-for-amending-the-yield-farming-mechanics/838

PROPOSAL 1- SPLITTING THE REWARD BUCKETS FOR PNG AND AVAX PAIRS

While incentivizing AVAX liquidity is important for attracting LP’s to Pangolin, the majority of the PNG rewards should support PNG pools and go to PNG LP’s who are more likely to hold on to their tokens to increase their liquidity instead of dumping them.

I propose to split the daily 175k PNG rewards to two fixed buckets regardless of the total liquidity in them:

PNG Pools: 62.5% of the rewards AVAX Pools: 37.5% of the rewards

With the increased PNG price, 37.5% of incentives is enough to keep AVAX LP’s in Pangolin

I believe this is better than having a reward ratio for each AVAX equivalent liquidity between AVAX and PNG Pools in which case PNG rewards would start to fall along with the PNG price.

Sparing 62.5% of the PNG rewards only for PNG pools will positively effect the PNG value and result in increased liquidity in PNG Pools.