Summary
The current Arbitrum MAGIC<>ETH SLP rewards are coming to an end in a few days. This marks the end of migration, and a broader shift towards a longer-term plan of sustainable liquidity. A multi-phased approach is proposed, including:
- a progresssive reduction in LP rewards to sustainable emissions, reviewed ongoing
- creation of a MAGIC<>gOHM pair
- pursuing protocol owned liquidity; and
- exploration of alternative liquidity solutions.
The first stage will involve moving to a 30 day MAGIC<>ETH SLP rewards programme at 50k-60k MAGIC per day (>200% APR). We are hoping to supplement rewards through a Sushi Swap Onsen programme pending final approval from their team. The intention is for this pair to run alongside a MAGIC<>gOHM SLP once gOHM is launched on Arbitrum; the dates and details are to be confirmed.
Rationale
With the current Arbitrum MAGIC<>ETH SLP rewards coming to an end, it is an ideal time to reflect on where we've come and where to next re building strong and sustainable liquidity for the DAO.
L1 LP
We originally initiated a Pool2 for MAGIC<>ETH on L1 in a 90 day programme, with 10.5m tokens or 116k tokens per day. At a token price of 5-10c this equated to ~$5-10k USD per day. This was necessary to bootstrap liquidity for what was then a nascent token. We further explored utility for LPs beyond token rewards, which have informed future strategies.
Migration to Arbitrum
Fast forward to Arbitrum. The second LP rewards programme was launched; 3.6m tokens over 30 days or 120k tokens per day (30-35k USD per day based on a 30-35c price). This was an attractive strategy for LPs (>300% APR), and purposely so (note: price was naturally out of our control).
It was vital that we incentivised depth of liquidity on L2 through migration to foster trust and confidence to bridge for what was to many, a new chain. This was particularly important given that the DAO does not own any LP as it was a fair launch (ie. no funds raised). All liquidity to date is and has been fully community driven.
This strategy has proven to be successful - the MAGIC<>ETH SLP has been in the top 10 liquidity pairs on Sushi Swap Arbitrum since migration, with regular liquidity and weekly volume >$3.5m USD. This sustained liquidity and volume has helped bring attention to our project from key integration partners. However, these emissions are not sustainable, nor were they intended to continue beyond the migration phase.
Going Forward
MAGIC is a scarce resource. This is a key tenet of the Treasure metaverse. Mining rewards will continue to halve each year. LP rewards should align with this trajectory to ensure 1) ecosystem balance and 2) to build long-term sustainability.
With this in mind, we will be proposing progressive changes commencing with TIP-05. Indicatively, this includes:
Short term
- MAGIC<>ETH SLP rewards to be reduced from 120k MAGIC per day (30-35k USD) to 50k to 66k tokens per day ($17.5 to $20k USD at 0.35c) for 30 days. This is aimed to be supported by a Sushiswap Onsen rewards pool, typically paid in xSushi (final approval TBC). The underlying APR (ex Sushi rewards) is estimated at >200% on a $3.5m liquidity pool. Awareness from presence on the Onsen dashboard should also serve to onboard and diversify liquidity
Short-to-Medium term
- Launch MAGIC<>gOHM SLP pair and rewards as mentioned previously. OHM are in the process of moving to their v2 token gOHM which is the governance enabled wsOHM (among other upgrades). This means you will benefit from the rebasing of sOHM, while still being able to use it within other DeFi applications such as a liquidity pair (similar to wsOHM)
- We are working closely with the OHM DAO Policy Team regarding a launch date. As part of OHM’s shift to gOHM, they have proposed ‘OIP-45 Proteus’ - a ~$100m USD incentive programme to bootstrap liquidity for gOHM across chains (https://forum.olympusdao.finance/d/381-oip-45-proteus). We will be applying for inclusion in an Arbitrum cohort once details are made available (nothing confirmed yet)
- Pursue MAGIC<>gOHM (and possibly MAGIC<>ETH) bonds. As mentioned several times, we have long term ambitions to own a material portion of our liquidity. This helps mitigate mercenary capital, diversifies treasury and gives the DAO more flexibility over policy decisions. This would not replace LP rewards, rather we see them as complementary strategies. Ideally the above bond programme could be executed through OHM Pro, leveraging our MAGIC<>gOHM pair. Inclusion in the programme is not yet confirmed. We will advise on updates as they become available.
Medium-to-Long term
- LP Abstractions: We believe liquidity can be enriched through creative solutions that abstract away complexity while embedding MAGIC across the metaverse. We will be actively exploring frameworks that gamify and embed composable MAGIC LP within partner ecosystems that they are incentivised to grow. For example, wrapping MAGIC LP as $TOKEN within Smol Brains, then integrating $TOKEN into core economic loops within the Smol Brain ecosystem such that demand for $TOKEN results in depth in MAGIC liquidity; but without the user consciously knowing they are adding liquidity to MAGIC
- Other liquidity options such as Tokemak will be explored overtime (note: it is extremely competitive to become a Tokemak reactor)
Proposal
Commence transition to a sustainable liquidity framework (above). First phase to include shifting to a 30 day MAGIC<>ETH SLP rewards programme at 50k to 60k MAGIC per day when the current programme finishes.
Polling Period (QUORUM REACHED)
The polling process begins now and will end at 12:59 UTC on 22 November. If quorum is reached, a Snapshot vote will be put up at 13:59 UTC on 22 November.
