TIP-11 Next Stage of MAGIC LP Emissions

Gaarp

Summary

This TIP outlines the next step in the DAO’s broader strategy towards sustainable liquidity as outlined in TIP-05. It proposes to transition the MAGIC-ETH LP rewards from 1M tokens per month to 650k tokens per month over a four month period with a staggered step down after two months. The below outlines the proposed tokens per month schedule:

End December to April → 1,000,000 (80-90% APR)
End April to June → 800,000 (65-75% APR)
End June to August → 650,000 (55-65% APR).

Note: APRs are indicative only and include circa 10% trading fees. They are based on a like-for-like share of the liquidity pool and price.

Context
In the five months since moving to Arbitrum, the MAGIC-ETH LP pair has grown from a $1.2M USD LP pool in late October 2021 to $58.5M USD as of 5 April 2022. It has regularly been in the top five liquidity pools and top three volume traded on all of Sushiswap on Arbitrum.

In achieving this, MAGIC has reached over $1B USD FDV and is on its way to becoming a recognised metaverse reserve ‘currency’. The depth of liquidity is set to further increase as more projects are on-boarded into the Treasure ecosystem via the Treasure AMM with MAGIC as the base pair. This will accelerate MAGIC’s transition to become the ‘ETH of the metaverse’.

As of 5 April 2022, the MAGIC-ETH pair has:

$58.5M liquidity
- 80-100% APR on 1M MAGIC token LP rewards per month
- Including ₁₀% APR on trading fees
10.4% of which is Protocol Owned Liquidity
- $5.5M from bonds (21.2k LP tokens)
- $580k from Balance Crystals (2.2k LP tokens)

This success has been delivered through the strategies executed from ratified TIP-05 Transition to Sustainable LP in November 2021. The goals for this strategy were to build deep liquidity, reduce reliance on mercenary capital, increase protocol owned liquidity via bonds and abstracted LP, and transition to long-term sustainable LP incentives.

The Council is now proposing to shift to the next phase in its LP strategy, reducing reliance on LP rewards and increasing protocol owned liquidity towards a medium term goal of ₃₃% of total liquidity. The Council will continue to closely monitor liquidity and volume on an ongoing basis.

Rationale

Execute strategy outlined in TIP-05.
Pathway to sustainable liquidity and LP rewards.
Deliver on long-term strategy to build protocol owned liquidity.
Execute via staggered reduction in rewards to minimise volatility and allow for balancing where required.

Proposal

Reduce the MAGIC-ETH SLP rewards from 1,000,000 MAGIC per month to 650,000 per month on the below staggered schedule:

End March to April → 1,000,000 (current)
End April to May → 800,000
End May to June → 800,000
End June to July → 650,000
End July to August → 650,000.

Emissions and the impact on liquidity will be reviewed on an ongoing basis.

Polling Period

The polling process begins now and will end at 10:00 UTC on 7 April. If quorum is reached, a Snapshot vote will be put up shortly thereafter.

spacedoctr

I'm approving this based on the rationale given, but I do want to put forth the question as to whether or not going from 1m to 800k target by end of April to May is a touch too soon because I sense that part of our community feels that it is. I would recommend providing a little more rationale for other voters as to specifically what the benefits are for not holding off on 800k until end of next month vs. this one.

Gaarp

spacedoctr hey there. We will have been on 1M per month incentives for 4 months by the end of this month. We have always said that we will be transitioning down, and the volume to liquidity ratio and general health of liquidity suggests this is a good time to transition. There is also close to 3 weeks notice before the step would occur which is ample time to alter strategies if that is a concern for LPs.

I suspect the people who do not want to change it (which are the minority) want to keep high APRs which we know are not sustainable. If there are valid reasons beyond protecting personal APRs I'd be happy to discuss.

pitannnosuko

It may be good to increase the rarity.

kyza

100% in support of protocol owned liquidity and gamified liquidity

spacedoctr

Gaarp Whoops, missed this, but totally agree with you! To clarify, I had already voted in favor when I wrote that comment. I'm not worried about APRs and such myself, it was more just a suggestion that further explanation might have been useful for those on the fence. Thanks for the reply!

feline

in support of the TIP

I could see (the marginal) LP'er transition their MAGIC stack into the Bridgeworld mines as LP APRs are reduced - a net positive for MAGIC, Bridgeworld, and guilds in general especially if the stack is time-locked