GIP-7: Should GnosisDAO pay additional GNO rewards for GNO<>ETH LP on Sushiswap?

Should GnosisDAO pay additional GNO rewards for GNO<>ETH LP on Sushiswap?

  • Yes
  • No
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GIP: 7
title: Should GnosisDAO pay additional GNO rewards for GNO<>ETH LP on Sushiswap?
author: @rafa
status: closed
type: Funding
created: 2021-01-22

Simple Summary

Paying out a GNO reward on top of the upcoming SUSHI reward that the GNO<>ETH Onsen pool will have.

Abstract:

The objective of this proposal is to kick off a crossDAO collaboration attempting to create stakeholders for both communities (Sushi and GnosisDAO).

GNO<>ETH will soon be a part of Onsen (in less than 48 hours) and start accruing Sushi rewards.

Through a liquidity incentivisation campaign, both teams can distribute a stake to the members of both communities.

Motivation

Both Sushi and Gnosis are DAO’s and teams committed to building decentralized products enabling the future of open finance.

It has been quite impressive to see the strong community that has formed around Sushi, and the GnosisDAO would benefit from feedback and participation from the Sushi community in order to explore future synergies between our products.

As a precedent for this and future collabs, we are currently running this joint grant program -> https://blog.gnosis.pm/introducing-the-gnosis-safe-sushiswap-grant-f2e597c6d6cb

A grant has already been accepted to build a Sushiswap interface inside the Gnosis Safe’s app store.

Specification

Pay ~2x the dollar worth of SUSHI in GNO to GNO<>ETH Sushi LPs during the 60 days that the program will last.

Onsen rewards per block will be ~0.08333333333333334 SUSHI, worth around $0.55 USD at time of writing.

With the above, we can achieve:

  1. Creating stakeholders for both communities
  2. Foment cross-DAO collaborations in the future
  3. Increase GNO liquidity

There is a simple method in which the DAO can reward GNO<>ETH LPs by sending GNO to the pair contract, effectively distributing the reward to participants.

2 Likes

I find it difficult to see how the first two supposed benefits will follow from GNO giveway.

For the third benefit, what is the evidence that liquidity is currently lacking and requires subsidies? GNO is not some freshly issued token, there is already significant liquidity pooled over years across CEXes and DEXes.

Summer 2020 liquidity incentives made sense, at least, from the point of view of promoting and battle-testing Mesa.

How are GNO rewards paid out to SUSHI LP holders?

Hi Gnostik. My reasoning behind the first two points is that if we provide a GNO reward to users that participate in the pool, we make them stake holders of the GnosisDAO, given that they can start voting. This would naturally create an incentive for them to stay up to date with the DAO proposals and other Gnosis activities.

Regarding increasing liquidity, GNO was fairly illiquid last year, specially in DEXs. Fortunately we now have liquidity in Uniswap and Balancer. I see value in having more liquidity in Sushi, in order to cover the 3 most used DEXs in the space. Sushiswap liquidity for the pair just spiked given that there is now a Sushi reward, I’d expect it to increase even more if we add an additional reward on top.

Regarding incentives for protocols, we are working on v2 for Gnosis Protocol DEX. Would love to hear if you have any ideas on how to incentivise takers there. You can join the discussion here -> Should Gnosis Build Gnosis Protocol v2?

1 Like

The easiest way to do so is to send GNO to the GNO<>WETH pair contract, this way it gets arb’d to all stakers.

Please note that there are no GNO rewards yet, and we would need to pass this proposal in order to enable them.

1 Like

I’m having a bit of a hard time understanding the implications and motivation of this proposal. I’m also not experienced in all-things liquidity provision and LP rewards etc. But here are questions that I have:

Do I understand correctly that it’s the goal to increase the total number of GNO holders in order to make the DAO stronger and more diverse?
What keeps the LPs from dumping the GNO rewards right away? What reason is there to believe that they would keep some/all GNO?

Is it possible to approximate how much GNO that would be in total?

I get that GNO liquidity is important. What is the current GNO liquidity out there? Does it need to be higher?
Would the total GNO liquidity really increase with this proposal? Why would existing Uniswap/Balancer LPs not just move their liquidty over, thereby keeping the total liquidity the same?

Since this liquidity program (like most of them outhere) is time-limited - is there any data on the long term effect of such programs? I’m worried that after 60days liquidity would go back to the original value again. So I’m wondering about if there’s any long term value in this.

2 Likes

There is 30M in Balancer GNO pools and 3M in Uniswap.
Sushiswap pool is not even 1M despite growing x6 on incentives.: https://sushiswap.fi/pair/0x41328fdba556c8c969418ccccb077b7b8d932aa5

If incentivized Sushiswap liquidity didn’t just migrate from other DEXes and if it was actually sticky beyond 60 days - then it might have made sense to discuss whether it’s worth paying for it.

As for the other benefit of inter-community collaboration: my impression is Sushiswap yield farmers primarily chase yield, sell the harvest and rotate crops. They have dozens of tokens parading through Onsen. This carousel mostly benefits Sushiswap; participating projects get a bit of publicity in return, but my opinion is that extra subsidies here hardly make any sense for Gnosis. I’m happy to be convinced with some examples to the contrary.

6 Likes

Hi Tobi. Thanks for taking the time to comment.

Do I understand correctly that it’s the goal to increase the total number of GNO holders in order to make the DAO stronger and more diverse?
What keeps the LPs from dumping the GNO rewards right away? What reason is there to believe that they would keep some/all GNO?

Correct, the initial goal is to distribute GNO token holders amongst more participants. The hope is that we would have an appealing pool which in turn causes people to buy GNO in order to participate in the pool, thus increasing both price and number of holders.

There is, unfortunately, no guarantee that new GNO holders will not dump. Nonetheless, this is the only time that Gnosis has explored to pay a reward on top of an existing reward. We could explore a lockup period for part of the rewards, though it would create some additional technical overhead.

Is it possible to approximate how much GNO that would be in total?

Currently the Sushi team has not determined the length of the program, they tend to decide on the go. Normally they last 60 days, though the team mentioned that they could expand our offering.

Sushiswap currently pays around ~154 SUSHI per day to the GNO<>ETH pool (at the time of writing).

The total award for 60 days would then be around The total award for 60 days would then be around 154*60 = 9240, which is currently worth ~67,729 USD.

If a 2x amount sounds excessive, What would you think about just doing a 1x distribution? Do you have any specific suggestions in amounts?

It is important to understand that since a lot of current GNO holders are closely related to Gnosis, either as employees or long time community members, it would be mainly them to whom this reward will be paid out.

I get that GNO liquidity is important. What is the current GNO liquidity out there? Does it need to be higher?
Would the total GNO liquidity really increase with this proposal? Why would existing Uniswap/Balancer LPs not just move their liquidity over, thereby keeping the total liquidity the same?

There is currently $3M USD worth of GNO liquidity on Uniswap, mostly provided by Gnosis + ~30M on Balancer, out of which around ⅓ is provided by Gnosis Ltd. I am unaware who the main providers of the rest are.

I think more liquidity is always positive as it will give a more realistic representation of price and will reduce volatility. Additionally, liquidity tends to attract investors and makes it easier for them to take a position on GNO.

There was already a ~800k USD spike in new GNO liquidity in Sushiswap after the rewards kicked in, which I view as positive.

Gnosis so far decided not to participate in order to not dilute the rewards, but why the balancer pool hasn’t moved is still a mystery for me.

Conclusion:

I think the larger goal to achieve is making GNO token less stale, both in the terms of supply (liquidity) and demand (taker volume).

I think it is healthy to experiment with different ideas to see these can have a positive impact at a limited cost to Gnosis.

2 Likes

Hi Gnositik, thanks for taking the time to comment. Some of your questions have been answered above, so it might be worth reading.

Regarding the 30M in Balancer and the 3M in Uniswap it is important to note:

Most of the liquidity in Uniswap is provided by Gnosis
A bit less than ⅓ of the liquidity of Balancer is provided by Gnosis as well
The other ⅔ of the pools are held mainly by 5 addresses, it is unknown for my why they didn’t move if rewards are higher
Gnosis decided not to participate in the Sushi pool in order to not dilute the reward to other participants

The added liquidity to Sushiswap was new, and does not belong to Gnosis, which I see as quite a positive event.

Regarding liquidity remaining, I think this is a very valid point, and often after rewards liquidity leaves. Looking at data, I get a mixed message.

I take the assumption that it is more likely that GNO behaves more like tokens on a similar marketcap, thus, I would rule out most of the previous adds to Onsen and focus on ANT, and
AMPL, which have had similar market caps to GNO

When it comes to ANT, it happens as you mention -> liquidity evaporates after the rewards are gone.

When it comes to AMPL, liquidity reduced from the start, but continued at a decent ~2M USD up until recent days.

You can check both pairs here:

https://sushiswap.fi/pair/0x378b4c5f2a8a0796a8d4c798ef737cf00ae8e667

https://sushiswap.fi/pair/0xcb2286d9471cc185281c4f763d34a962ed212962

As I stated in the previous comment, the final objective of this proposal is to add more liveliness to GNO supply and demand, thus guaranteeing fairer pricing and easier access for new investors. Would be happy to hear which other ideas you have in order to achieve this.

2 Likes

Doesn’t this go against the idea of increasing the diversity of the current token holders?

1 Like

I think liquidity mining should be targeted at prediction markets, not the GNO token itself. Liquidity incentives can be good to bootstrap the trading of a token, but in the case of GNO, it’s already very liquid (30M in balancer).
We could have wrapped Omen tokens put on sushiswap with liquidity incentives. This would make more sense in order to promote Gnosis products.

2 Likes

Incentivizing more liquidity on the GNO><WETH pair is good for all parties. I’m heavily in favor of adding a rewards program. As a long term holder of GNO, I’d like to see more community development going on. The community has seemed somewhat insular and should be attracting more people to come to the forums and participate in the DAO. Having better access to GNO accomplishes this and more.

2 Likes

The main objective would be to distribute with as many parties as possible. Nonetheless, given the current distribution of GNO, it is important to note what is likely to happen.

Though I think this could be a good idea, my main concerns with incentivising prediction markets would be:

  • Which markets would incentivise high participation?

  • Are there markets that can benefit the GnosisDAO directly (via cashflow or something similar)?

  • How can the LP’s of the given markets avoid or hedge losses in a given market?

  • Is this market beneficial enough that it is worth subsidising the loss of LP’s with GNO?

I think this could be a whole thread on its own.

The discussion has become a bit stale. From the main discussion points, I’d argue to reduce the rewards to 1x the SUSHI reward on the pair.

What are the thoughts on this?

Given that there is already a partial majority, I will soon be moving this to stage 3.

3 Likes

This proposal can already move forward to Phase-III given that there is a relative majority and more than 5 days have passed.

Due to the concerns brought up by @tschubotz, @Richard, and @gnostik, the reward will be reduced to 700 GNO paid out throughout one month once the proposal gets accepted (if it does).

Please wait for the final proposal with the specific details on the implementation of the reward distribution.

1 Like

I think Dex reward could improve people interest and get GNO more famous!

1 Like

I consider this as a good idea

1 Like

Just trying to follow this back to the initial proposed amount as a total, but can’t find it above. What is this in relation to the sushi amount? and what is it reduced from as a total from the initial proposal?

Current SUSHI reward is ~ 9240 SUSHI, which is $130838,4 USD at time of writing.

The original proposal suggested doing 2x the USD dollar amount of the Sushi reward.

I decided to go for a smaller amount for the following reasons:

  1. We have a fixed supply of GNO, in contrast to the inflationary supply of SUSHI from which the reward is being paid

  2. This is our first experiment paying rewards for LPing outside of our own protocols, so it would be prudent to first see what are the resuts before spending a large amount of funds

  3. Though the proposal has passed Phase-II according to the DAO rules, some members expressed a concern on spending large amounts without being completely certain about the results. I think listening to all voices increases the chances of the proposal to pass and helps maintain participation even if the most desired outcome of a member is not met.