tl;dr
- To fairly distribute the KSM subsidy received from Kusama Treasury for 3pool on Karura. We recommend Proposal 2 as it offers a well balanced of yield, reward usability, contribution to Kusama network security and diversity in reward tokens
About
- 3pool (aUSD-USDC-USDT) is the first stablecoin liquidity pool on Karura powered by Taiga Protocol
- 3pool was approved for 20,000 KSM subsidy by Kusama Treasury Council
- This is a proposal to decide on the KSM subsidy distribution mechanism for 3pool
- 3pool Incentives Composition Summary
Proposal 1 - 50% LKSM & 50% aUSD
Projected APR* range
Min: 5.43%
Max: 55.44%
Advantages
- least supply shock on KSM
- using aUSD as a form of incentive reduces volatility on overall yield
- promotes aUSD adoption as LPs can use aUSD directly in the ecosystem
Disadvantages
- especially in such volatile market condition, need to consider liquidation risk of collateralized vault position (liquidation factor set to => 250%), requires close monitoring of position. May not be suitable in high volatility environment
- high collateralization ratio for minting aUSD leads to low capital efficiency of LKSM
- using half of the LKSM to mint aUSD would sacrifice additional yield from LKSM collateral staking. Making the total projected yield for this proposal to be the lowest amongst all proposals
Proposal 2 - 50% LKSM & 50% taiKSM
Projected APR* range
Min: 7.71%
Max: 87.66%
Advantages
- balanced mix of yield tokens received by LPs
- LKSM and taiKSM incentives can be used in collateral staking to further unlock yield
- second highest overall projected yield amongst all proposals
- 50% of LKSM plus 35% of the underlying composition of taiKSM will be in the form of LKSM, totaling to 85% of the subsidy will be in the form of LKSM, which provides further security to the Kusama network
- less supply shock on KSM relative to directly distributing the full subsidy in LKSM
Proposal 3 - 100% LKSM
Projected APR* range
Min: 7.68%
Max: 77.50%
Advantages
- simple operation to earn moderate yield
- staking 100% of KSM for LKSM provides security to overall Kusama network
- moderate yield amongst all proposals
Disadvantages
- highest level of supply shock on KSM amongst all proposals
Proposal 4 - 100% taiKSM
Projected APR* range
Min: 7.75%
Max: 97.81%
Advantage
- moderate supply shock on KSM relative to proposal 1 because taiKSM can be used in collateral staking to unlock higher yield relative to LKSM collateral staking
- taiKSM incentives can be used as collateral to borrow aUSD as an alternative option
- provides the most competitive overall projected yield amongst all proposals
- 70% of taiKSM will be composed of LKSM, which will contribute to the overall security of Kusama network
*projected APR is based on a TVL range of USD 1M to 52M
Additional Notes
- Review of distribution mechanism every 4 weeks OR every incremental increase in TVL of USD 5M
- Review of incentives schedule every 4 weeks
- Bi-weekly review of vault collateralization ratio if Proposal 1 is chosen
Additional Resources