3pool (aUSD-USDC-USDT) Incentive Program powered by Taiga Protocol

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

5 Likes

It’s nice to see a topic for discussion.

Perhaps it’s time to create a poll here on the topic so that forum members can softly vote to show their opinion?

@cp287 Great idea! Starting a poll now

This is a poll to determine how to fairly distribute 20,000 KSM subsidy received from Kusama Treasury Council to bootstrap 3pool (aUSD-USDC-USDT)

  • Proposal 1
  • Proposal 2
  • Proposal 3
  • Proposal 4

0 voters

Also noticed there was a typo in my original post, 3pool is for aUSD-USDC-USDT

2 Likes

Thank you everyone for casting your vote! Closing the poll now.

Proposal 2 is the favoured option. We will now move to on-chain proposal to prepare the vaults for subsidy distribution.

Update as of 6/19/2022

Further to the approval for proposal to set up vault on Karura to manage the KSM grant funds. We are revising the incentive emission schedule for the initial month to combat volatile market conditions.

Revised weekly incentive emission schedule as follows:
8,000 TAI
250 LKSM
30 taiKSM
2,000 KAR

Additional notes

  1. Week 1 emission start/end date: 6/13/2022 to 6/19/2022
  2. 3pool and incentives emission is currently live on Karura dApp
  3. Incentives and fees will be claimable starting on 6/20/2022 15:00 UTC via Taiga dApp
  4. We will revise emission schedule every 4 weeks to reflect changing 3pool TVL and overall market volatility to ensure pool competitiveness
  5. In order to keep APR for 3pool on Karura competitive over 52 weeks, we will use any undistributed incentives from the previous months to further incentivize 3pool on a continued basis. If there is a surplus of incentives from the 1st year (ie. total distributed TAI tokens for 3pool is less than 2.5M), we will rollover the surplus to the following year as an additional bonus for 3pool. Ultimately, our objective with the assigned budget is to distribute to 3pool on Karura participants in a fair and consistent
  6. Approved original incentive schedule