Proposal - Re-structured Pools

Fellow Yapes!

The past couple of days have been a major wake-up call to me with regards to our liquidity pools and their current effect on YAPE price. Although the current structure of minting LP Tokens and staking them to mine YAPE makes sense in theory, the brutal reality is it’s easily exploitable, and as we’ve recently seen, has proven to be detrimental.

Currently, degens have the ability to come onto our protocol with massive liquidity and LP in pools such as USDC/USDT, with absolutely zero risk, and do nothing more than farm & dump YAPE, effectively tanking the price of our native token.

SOMETHING MUST BE DONE!

I propose we adopt a structure similar to Bancor’s protocol to where we offer “single-sided” liquidity pools.

In this structure, the YAPE DAO would co-invest a certain amount of YAPE when a pool is established, effectively opening up room on the “TKN” side for an LP to come in and stake their asset. Once the TKN side of the pool becomes full, the only way to open up more room is for more YAPE to be staked on the other side, and would be provided by regular HODLers of YAPE. The DAO’s co-invested amount of YAPE would remain in each pool and earn swap fees for the protocol’s treasury (no burning is necessary).

Mining APY appropriation could be set to voted/approved distributions, such as a 75% YAPE/25% TKN split, to further incentivize people to buy and stake YAPE, attracting more TKN-side LPs.

This theory is quite simple, but VERY effective in native token utilization. It makes people have to purchase and stake YAPE in order to reap the benefits of APY earnings if they intend on providing massive amounts of liquidity, or wait for someone else to do it.

We may be able to “fork” Bancor’s V2.1 structure and re-vamp it to where we take the staked TKN-side assets and re-purpose them onto Yearn.Finance when sitting idle, just as we do now, and earn more revenue for our Treasury.

Lastly, I imagine there are several logistical issues with this proposal (as I am not a coder what-so-ever), but I do understand that if we don’t make a major change to our strategy, the YAPE token will be nothing more than a farm & dump ponzi! With that said, let’s start small, maybe 2 pools, and then build from there.

Thanks for taking the time to read this, let’s make this change for the betterment of our jungle! :gorilla:

-ow3n

for further guidance screenshotted from Bancor’s informational pages

3 Likes

Looks like an effective mechanism to incentivize against dumping the native token. If we did go down this path we could start with YAPE/(USDC,DAI,USDT,ETH) pools? We would need to restructure the emissions just as we just did with the last batch of pools added.

Would also need to clarify where that YAPE would come from to fund the pools - I am thinking from the treasury off the top of my head.

Right, stable pairs + ETH pair would be an effective start and would become the back-bone of Yapeswap’s mining operations for the foreseeable future.

With that said, other pairs can easily be added in so long as they pass the DAO vote with realistic co-investments (from the treasury?)… especially pairs that coincide with Yearn (ie SNX, AAVE, etc).

Aside from the cYAPE mine, all other pools would effectively be terminated after say, a week or so. Yapes would have to exit these pools and reconstitute their assets to the newly offered pairs.

Here’s my initial thought of weighted emissions, all of which having a 75/25 split in favor of the YAPE side:

cYape Mine - 20%
YAPE/ETH - 20%
YAPE/USDC - 20%
YAPE/USDT - 20%
YAPE/DAI - 20%

If all goes well, a new vote involving SNX, AAVE, LINK & SUSHI would quickly follow, with cYape mine having favorited weight.

Just my 2 cents though, any comments recommendations are encouraged!

1 Like

Agreed that there is currently not as strong of an incentive to HODL YAPE as there can be, and Ow3n provides a viable solution with this proposal. Would love to hear what the rest of the team/community thinks.

Please share your thoughts!

2 Likes

I support this change once reviewed by one of our core engineers. Given our roots I’m unclear of the level of effort required to add these pools to our AMM.

@Ow3n are there other patterns you thought of to avoid dumping YAPE? I could raise this at our next team meeting.

2 Likes

There are fundamental efforts we can take to help mitigate token dumping, such as:

  1. Cool-down periods when unstaking from mining pools, maybe 24-hour time-lock contracts.

  2. Implementing token burns when different events take place.

  3. Re-vamp the emission schedule and integrate an overall max supply cap of something like 150M.

  4. Both 2 & 3 combined.

  5. DAO-approved token buy-backs and re-distribution (although it seems like veYape already does this in a way?)

These are just a few ideas off the top of my head, which I’m sure we’re all pretty familiar with. However, none of it may even be necessary so long as Yape token utilization happens, which I think single-sided liquidity pools would do for us.

Please take a look at Bancor’s Github, (it’s all pretty greek to me) but maybe our devs can decipher its constructs:

In the mean time, I can keep brainstorming more viable options.

Thanks for your input!

It seems that single-sided liquidity enables regular investors to avoid the impermanent loss and YAPE HODLers to keep LPing only with their YAPE. I think this is a pretty brilliant idea, but just wonder why did you note that “no burning is necessary”.

1 Like

Yes! I think it would be very beneficial long-term. We wouldn’t even need to create a lot of pools to start, but would have the option to expand quite rapidly if we chose to do so.

I said no burning necessary just because Bancor burns the fees (and eventually their contribution) that their co-invested BNT in each pool earns.

I figured we could take those fees and throw them into Yearn to build the treasury, and maybe use it for buy-backs & larger burns every now and then. Or use it to keep our APYs competitive.

1. Cool-down periods when unstaking from mining pools, maybe 24-hour time-lock contracts.
I don’t like this one because it would really piss me off as a user if a protocol did this to me
2. Implementing token burns when different events take place.
Interesting, I think we should discuss more if we ended up implementing item 3
3. Re-vamp the emission schedule and integrate an overall max supply cap of something like 150M.
I think this could be a good idea and perhaps we should discuss it more in a separate forum post
4. Both 2 & 3 combined.
5. DAO-approved token buy-backs and re-distribution (although it seems like veYape already does this in a way?)
Correct, we buy back YAPE and distribute to veYAPE holders

1 Like

This is super dupe IMO. If I am not mistaken it would also get rid of IL which would be a great value prop to users of the protocol in itself,

1 Like

Right so Bancor has a structure in place where their protocol covers IL at a rate of 1% a day up to 100% (so 100 days)…once that happens, you’re fully covered, and you don’t need to re-stake or anything, full set it and forget it. Now for us, if we could incorporate that, all the better!

Basically, their structure doesn’t eliminate IL, they insure your staked positions, and cover the costs from their treasury. However, they have proven that their earned reserves of tokens heavily exceeds any IL costs they incur, so it’s very lucrative.

This is where I fall short of being a giga-brain about their protocol. If we didn’t implement the IL coverage structure, then consider the following as an example:

YAPE/ETH Pool

  1. YAPE co-investment of 5M (worth $1000)
    ETH LP comes in & matches that value

  2. 5M YAPE value drops to $500 due to market conditions, and ETH value stays the same

What happens to the pool’s matching structure at that point? I’m pretty sure nothing detrimental actually occurs to the pool, and people would be free to un-stake their ETH (and its relative value) with no harm done regarding IL.

As far as YAPE-side goes, yes, their position suffered IL due to price decrease, and LPs would have to stake that $500 worth of YAPE + whatever equivilent amount of value of YAPE if they intend to open up more space on the ETH-side. But if they try add more ETH in without making up that difference, the pool simply won’t let them.

Now this is where the IL insurance comes into play. With the dual-sided pools we currently have, I essentially lose tokens automatically when I un-stake (correct?) Because of the IL.

But with single-sided pools, let’s say I have 100% IL coverage on my YAPE, the protocol treasury would insure that amount of YAPE so that I can still un-stake the same amount of tokens (equal to my original staked amount) because the earned fees from protocol co-investments and veYAPE, etc, would outweigh the cost of this insurance coverage.

The big thing to take away here is that the IL coverage pertains to the amount of tokens, not its actual value.

I hope this explanation helps a little sers, and I suppose long-story-short, if we can include the IL coverage structure, we need to make this happen!

Another thing to point out is that when you stake Bancor’s native token (BNT) on the BNT-side of their pools, they automatically give you a 1 for 1 in vBNT. This vBNT is just like our veYAPE, except they monetized their vBNT so you have the option to leverage/sell/trade against your own staked position, at zero risk or liquidation.

The only catch is that you eventually need that vBNT amount back to unlock your original stake.

Yapeswap doesn’t need to do all this, and I actually discourage trying to implement all this as there’s no need. I personally like the strategy for veYAPE that we currently have in place as it drives more buys for YAPE itself. But that’s just my 2 satoshis on the matter.