Making Nexus Pylon Pool Liquid

Problem

One of the flagship features of Pylon Gateway is the “lossless” Pylon Pool, where users can stake UST in return for project tokens, with the projects receiving a portion of the yield and 20% of the yields contribute to value accrual for MINE stakers via buybacks.

Pylon Pool being the flagship and the backbone of the Pylon Protocol, one of the most significant costs of participating in lossless Pylon Pool was the lockup period of UST, and the lack of liquidity derived from such lockup.

Tokenized Pylon Pool

In order to resolve such issue; I propose Pylon Pool to be tokenized, so that “Pylon Pool Tokens” would be given to the depositors of the Pylon Pools, representing the UST value that the depositor has contributed to the Pylon Pool. Upon maturation of the Pylon Pool, any holders of the Pylon Pool Tokens should be able to claim the deposited UST in accordance of the Token’s nominal UST value regardless to the original depositors. Simply to put, 1 Pylon Pool Token would represent 1 UST deposited to Pylon Pool

I propose starting with Nexus Pylon Pool as a test-bed, and consider the future Pylon Pools to adopt the similar methods

Pylon Pool Token Design

In order to serve it’s purpose effectively, Pylon Pool tokens should have the following features in their design

  • Pylon Pool rewards to be distributed to Pylon Pool Token Holders
  • Pylon Pool Token to be able to receive message from anyone to claim the rewards that it’s entitled
  • Claim rewards are only to be distributed to Pylon Pool Token holders regardless to the origin of the claim message

Nexus Protocol’s nAsset design could be a decent reference

Making Pylon Pool Liquid

With Pylon Pool being tokenized, now the depositors are free to send/receive or to trade Pylon Pool Tokens. In order to provide more readily available liquidity in the market, AMM DEX may be utilized. Pylon Pool Token - Project token pair would be the most efficient method to provide the liquidity, since the design of the Pylon Pool Token allows the Pool’s rewards to be claimed by Liquidity Pools, meaning that the liquidity providers would not have to bear the opportunity cost of forfeiting the yield.

Why would anyone provide liquidity to Pylon Pool Token - Project Token pair?

Pylon Pool’s beneficiary would have the primary interest to contribute to the liquidity pool as Pylon Pool with liquidity would inevitably be more attractive for the Pylon Pool participants. Thus my expectation is that the Project teams would be one of the first to contribute to the liquidity pool.

Also, Pylon Pool Token - Project Token pair could be more attractive farming alternative to Project Token - UST pair in longer term, as you would be yielding on the UST side for the Pylon Pool Token pair. (especially with the trend of Protocol Owned Liquidity emerging leading to decreasing opportunity for LP farming incentives.)

Expected Effects

For project teams, liquid Pylon Pools may accrue more UST deposits, allowing more users to jump in without fretting about long lockup durations. For Pylon Pool participants, this upgrade means now users will now be able to freely exit the pools before the vesting period finishes. For Pylon Protocol, more active participation and utilization of Pylon Pools will improve and strengthen the value accrual of the protocol and MINE tokens.

4 Likes

I personally do not want to make another market inefficiency in Terra system by tokenizing everything…The service should be intuitive and simple, but powerful. If the pool is tokenized, then the price of that token would be also quite volatile, which is a preferable product for short term trader. Moreover, there will be some impact on decreasing amount of inflow on a pool, since what you need to do is just to buy a pool token instead of vesting more ust into the pool.

4 Likes

From my point of view, this topic has to be discussed in more details before making a decision.

One of the greatest challenges would be that it’s possible to claim project tokens after 50% of the vesting period. Looking at this proposal, I don’t see any solution or design how to appropriate account this challenge. One idea would be, to disqualify positions who had already claimed at least 1 time from the pool from this mechanic. But this would make the mechanic more complex and against the idea of easy to use.

On top of that, I think there should be a reason why Nexus Pool would qualify for Pool Tokens and other projects not? The reasoning behind this isn’t clear to me, to make a decision yet.

Until all those points are discussed and there is a consensus about proper solutions, I would strongly recommend voting against (No) this proposal.

2 Likes

There is no logic to purchase from the pool above 1 UST as you can just simply deposit into Pylon Pool to mint exactly same token; thus not so sure why you would be worried about price volatility
The logic is quite simple with the price action of the pool : as Pylon Pool token represents UST to be unlocked after vestting; the token should be traded in the net present value of locked UST

That is not how Pylon Pool works; Pylon Pool rewards is distributed linearly in proportion to the UST deposited into the pool. So lockup does not have to be considered in the token design; the lock up time is universal regardless to the entry timing to Pylon Pool; thus why would that make any difference?

That is not how Pylon Pool works; Pylon Pool rewards is distributed linearly in proportion to the UST deposited into the pool. So lockup does not have to be considered in the token design; the lock up time is universal regardless to the entry timing to Pylon Pool; thus why would that make any difference?

Maybe I misunderstood your idea, but let me make an example:

  • $MINE Pool 2
    • 6 months total vesting. (Dec 29, 2021 03:00Z)
    • Rewards claimable starting after 3 months. (Jun 27, 2022 03:00Z)

While the pool is within the vesting period, no $MINE token withdraws would be possible and I can agree that each 1 UST deposited to Pylon Pool could represent 1 pool token.

When we reach Dec 29, 2021 03:00Z it’s possible to withdraw any amount of token, which were accumulated to this point of time. People could choose to withdraw as often as they like (e. g. daily).

In other words 1 UST deposited to Pylon pool with a withdraw of all accumulated tokens would be less valuable than 1 UST deposited to Pylon pool without such a withdraw.

As far as I understood, this issue isn’t addressed in the suggested Tokenized Pylon Pool model.

Or is the whole idea about tokenizing not yet claimable tokens before vesting period ends?

Maybe you could clear this up?

2 Likes

Your answer can not explain the price difference between nLuna-Luna-bLuna, mETH-bETH, etc.
Where do you think those differences come from? I was talking about market inefficiency and volatility followed.
Moreover, as I mentioned above, it will only decrease the demand of vesting on Pylon pool in a long term since tokenized pool will share limited market inflow with Pylon pool itself. The transaction volume per day may seem greater, but it does not necessarily mean the increase in the volume of vesting amount.

1 Like

Thanks for posting.

I love the idea of creating liquidity for pools. I am aware that the Pylon team will be making an announcement with Nexus Protocol regarding liquid staked derivatives and tokenized pools. I think it is best to wait for this announcement before brainstorming ideas around it. https://twitter.com/pylon_protocol/status/1463265469859872769?s=20

With this said, I think it is also a great idea to do this as a trial with the Nexus pool. Creating ‘derivatives’ of pools will likely come with new challenges and potential risks, some of which the comments have addressed (i.e. potentially reducing the capital raised by projects and MINE stakers, making a useful and simple tool too complex). On the other hand, it has the potential to also increase the benefit to both project and MINE stakers and provide a tool people end up loving. So with what sounds like a willing partner (Nexus Protocol) we will be able to trial this cool idea.

3 Likes

I have a question.

I add $200 to the 6 month pool on day 1, and $200 to the pool on day 90.
How would a pool token that has accrued 3 months of yield be distinguished from one with zero days of yield historically?

This is def a good question, and come clarity will be needed here.

pylon pool - project token pair. It doesnt make always sense: the project token does not exist in many cases!
I fear that the gateway pool will be less appetible. People will directly buy a liquid token and projects joining the gateway could be disincentivized cause they will sell the same amount of token at lower price (also mine stakers will loose).
Onthe other hand having the token splitted by prism in fix part plus yeld part with both traded against UST we would visualize the gateway principal in UST plus the yeld , so people could add to the pool more if the return is higher than 20% per year as the benchmark will be anchor return on ust. Obviously the risk would be high and I would personally not do it but i am not aware of the market.
Anyway: the project starting the pool should have last word
if some gateway accept to try it … .
Personally I vote no and I ask a longer discussion of pro and cons before changing the vote.
No decisions in a hurry

2 Likes

actually it would: to withdraw u need to burn the token you hold …
anyway I am for voting no too

If you refer to the Pylon Pool token design section

  • Pylon Pool Token to be able to receive message from anyone to claim the rewards that it’s entitled
  • Claim rewards are only to be distributed to Pylon Pool Token holders regardless to the origin of the claim message

This means that the holders of the Pylon Pool token would be able to claim the token at any time (before vesting period ends) just like current Pylon Pool. Only difference is that now there is a token that represents the UST deposited to Pylon Pool.

bLuna-Luna is a good example for the point that I was making; as you can mint bLuna with Luna, price of bLuna would always be below 1 in rational market; if it’s above 1 (due to someone fat fingering) market will quickly assume the arbitrage gap.

And I would disagree on decreasing the demand in a long term; as forfeiting liquidity for fixed time is definitely considered as cost in the market, as the different level of popularity shown in Pylon Pools with different vesting period (Compare Pool 1 & Pool 3 for any projects). Making Pylon Pool liquid would, in fact, make the Pylon Pool more attractive, thus attracting more demand to the Pool.

if you have inserted in same Pylon Pool (with same vesting period), regardless to the time of depositing, you will be getting a same token. Thus you would get 200 tokens at day 1, 200 tokens at day 90.

The yield is not captured by the token, it’s distributed to token holder; refer to bLuna or nLuna or nETH. In frontend, the users will feel no difference to the current Pylon Pool, except now they will have a token when they deposit to Pylon Pool

Also, Pylon Pool Token - Project Token pair could be more attractive farming alternative to Project Token - UST pair in longer term, as you would be yielding on the UST side for the Pylon Pool Token pair. (especially with the trend of Protocol Owned Liquidity emerging leading to decreasing opportunity for LP farming incentives.)

Maybe at some indeterminate time in the future these LPs could be attractive but I’m not sure why currently anyone other than the dev team would contribute when there will be zero token rewards allocated to these LPs. So it would be swap fees only.

I’m not saying this is a bad idea but I’m concerned the liquidity could be very low unless the protocol provides most/all of it.

I am not sure if you understand the market inefficiency and why it creates the volatility, and also not sure if what you want is to make the Pylon pool volatile, because your proposal will definitely add volatility on Pylon pool itself. Please correct me if there is anything wrong.

First of all, bLuna-Luna cannot be an example of your proposal since

  • They have different tokenomics model:
    bLuna = Luna - (validator tax(%) + reward conversion fee (almost fixed) + ANC protocol fee (%)) + Opportunity cost
    Pylon pool token = Pylon pool - (number of days)x(emitted rewards)
  • Considering the emitted rewards are highly volatile (because it is in its initial stage), the price gap between Pylon pool token can be drastically different from original Pylon pool value depending on the price of emitted rewards token.
  • Furthermore, Crypto market is not very rational market. It is more close to irrational and is influenced heavily by unexpected external environment. In some extreme days, even stability of bLuna-Luna pair has been severely impaired. Now we have Nexus & Kujira to minimize the impact, but do we have such cushion for liquid Pylon pool token?

Let me put my perspective in Q&A mode:

  • Current Pylon Pool is an isolated and stable product which only redirects yields to the participants.
  • Someone wants to add volatility on Pylon Pool, so he/she makes the pool become liquid and bring it into a swap market.
  • Who will be the winner or beneficiary of this liquid product?
    Short-term traders.
  • So will the Pylon pool become more attractive?
    Yes, to the short-term traders.
  • Do I enjoy roller coaster?
    Yes, but not my asset.
  • Will it add more value to the project team and depositor of Pylon Pool, or $MINE stakers?
    Please add any opinion on this, since I cannot find any additional value of mixing volatility (except for slightly increased protocol tax/fee if such swap is made inside Pylon POL). I think Pylon pool should stay stable as itself, not mixed with any volatility no matter how small or big the volatility is.

Why is this 14 hours-old proposal is put for vote already?
Don’t you think there should be more discussion if it is a right way to go, like a week or two?

I cannot believe this is happened.

1 Like

@Realshimmy what is the advantage of adding first to gateway?

Don’t worry. This proposal is already under voting…believe or not.