Some major inefficiencies that must be addressed

hey to all,
when i look at LP size in relation to market cap and volume per 24 hours, combine with comparison of other projects on OSMOSIS, or ERC20 and so on. with 35mil$ on astroport it is beyond wrong! with APR of 80%! that is 28mil USD per year the protocol is paying in MINE! do the math at current price how many MINE is that and the constant sell pressure.

a pool with 10mil usd should be more than enough for pylon at this time and with the buyback towards owning the lp it will grow as the project grows and reinvest into LP.

the rate of APY is linear to the amount of capital we attract, cutting it by 30-50% should solve this issue, can start with a 30% reduction or even 20% to see the effect it has, we don’t want an exodus :slight_smile: .

on the other hand we have the stakers, holders that are being MASSIVELY diluted without receiving any APY to negate that dilution. yes i am aware of the 25% buyback to the stakers, this is not even close to cover this mismanagement of the LP.

so first we should agree on a size of LP we wish to have and than begin to lower the APY until we reach that level. if you look at other pools on other ecosystem you can see that a 6-12 mil is considered more than enough for such volumes we see today on pylon.

we the stakers and holders are being diluted in an irresponsible way, how about we become responsible?

an update:
also i believe that there is a separation between the LP and stakers, since LP providers are not entitled to airdrops and buyback rewards, by lowering the APY considerably we will get rid of the degen farmers and will remain with a true loyal community members who believe in the project long term. therefore in order to first protect LP providers from IL and incorporate them with all the benefits of being a member in pylon protocol, they should receive part of the buybacks and airdrops the stakers receive. and since the pool will be much smaller it will benefit the protocol, stakers and true LP providers.

update2:
putting here some numbers, you can go to osmosis or other DEX and see how much slippage we get with a certain size of pool, i checked AKT/ATOM and with 10mil LP USD i got 0.3% slippage for a 14,000$ trade.

thanks! :pray: :v:

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Hi Hogsss,
First i will like to say that i support reducing LP incentives overall (in the long run i would like it to be 0 incentives, but this will be possible only after the POL structure will posses enough LP). IMO the size of the pool with the apr is creating to much sell pressure as you described.

I would like to add that having a large LP has it’s own benefits, for example major CEX listing usally requires liquidity and some other reasons, so for now maintaining a large enouh liquidity should be preserved.

I would support a 10% redirection from the LP incentives into the single MINE staking incetives(which are 0 at the moment), in addition to a 10% reduction of the LP incentives. this will support both the single stakers for the short term and will reduce the sell presure, 20% is a nice start the way i see it.
thanks for sharing :pray:

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Here comes a more drastic approach:

  • Reduce 90% of LP rewards
  • Introduce “super liquid staking” (this is a feature which OSMOSIS will introduce soon) - which allows to stake the 50% MINE portion of the LP position
  • Pair this idea with upcoming MINE burn with the $GFI introduction and we may have a deflationary token

Fix the tokenomics and make Pylon great again - $MINE will skyrocket to moon.

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hey Quasy,

regarding the major CEX listing usually they ask for starlight up payment for listing to occur so one of us is in the error side here :wink:

large LP have the advantage of lower slippage and less volatility, with our volume of trade it is equivalent of having a huge server farm that is being used only at 30% of it’s capacity, it is wasteful in my eyes.

i liked the idea of shifting at first from LP to stakers, 10% is enough if we lower the LP side around the 50%, i say around cause we can’t predict how the LP providers will react when we reduce by 20 or 50%, it is a mechanism that helps us control the amount of LP people provide.

i feel this is the most important subject atm for the protocol for its sustainability and for the community/ investors. the value atm is close to none in holding and staking, why should people do it when we are so irresponsibly giving away and diluting ourselves for no good reason?!

thank you :pray:

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hey :slight_smile:

90% is extreme and every change must be made gradually if w don’t want to break the machine or over correct to much. we will remain with close to zero people providing LP, some appreciation for the ones who provide LP is needed, we are all part and providing service and support to Pylon.

have you ever provided liquidity? by the sound of how you write you haven’t, people can get 30% APR by providing stable coin so what you are saying doesn’t make sense to the market.

i do not know how much LP pylon has incurred till now, but until the day that we have at least 1-3mil usd in LP we must relay on LP providers and respect their contribution.

liquid staking is a great idea that exist in many forms, also just receiving a synthetic asset when staking the LP should do the trick and the calculation are made as you said , value 50% of the LP value. i just don’t want us to wait for something that is not live when we have other options at hand.

i really do think this matter should be addressed sooner rather than later :slight_smile:
peace!

2 Likes

Good or bad changes…we must try for sure. But have in mind that early LP providers are in great pain atm. Reducing Apr will hit them plenty. For PYLON, new people that will provide Apr,will be people that understand that lower Apr and are willing to stay for the long run.
Lately i’ve seen such low activity from pylon and hope not to have even worse surprises ( such as mINE at 0.039$) cuz bad decisions.

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actually since LP are MINE/UST they suffer less losses, pools re-balance itself hence they DCA in a way, their loss is 50% less than if you hold just mine, add to that great APY and they are about even or with gains, especially if they sold along the way. with that they took action and provided LP so good for them! until now :wink:

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if you have time, try a 1k invest since 1 September …you will see that even APR was 170% for 1month,then 2 months 120% or so, then 95% till today…price was 0.175 and since November it started to go down till 0.039 today…Even if you reinvest all, you will roughly have 500-600ish?..So you still think they are on gain?

In theory after 1 year the tokenomics is designed to have a reduction. We could eventually consider to reduce even further.
Personally I think we should also discuss if the full supply is not too much and a part of it, which, to me, has no usage, could be burnt (1-2 bn at least).

I fully agree that the incentives should be cut, but as others mention it should also be aligned with the upcoming PoL.

Another thing to watch out for, is cutting it too drastically at first, as this can (which you also describe) lead to LPers fleeing, resulting in a MINE dump and thus further downside. At least short term.

i am hoping/expecting that 30% reduction in APY would reduce the pool by 50%, that would give us a 15mil pool, this will cut our monthly expenses drastically and selling pressure with it.

i think in order to not get lost/ distracted and scattered we need to focus on one thing at a time, so thank you for bringing back this focus :slight_smile: .
it will also help us isolate each action and the effect it has, maybe this change will solve the stakers issue and the airdrops +25% buybacks will be enough? so one thing at a time… LET’S LOWER THE APR for the LP by 20-30% at first, so we can start going towards a proposal :slight_smile:

thanks!

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Agreed. I think that aligning this with the Treasury rollout + establishment of PoL would be nice, but only if that is imminent.

Otherwise there might be some good logic in getting this to the voting table ASAP and go do something about it.

Let’s give it a couple more days (or perhaps to End of Week) for additional community review / feedback before a vote?

2 Likes

yes, it must be gradual and correlated with the growth of PoL.
it doesn’t require developing or auditing so it can be imminent, as you said let’s give it some time for others to read and process it :slight_smile:
cheers! :v: :pray:

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Thank you so much for bringing this up. It is something I have been keen on for quite some time. I agree with your argument points for reducing LP rewards.

My end goal would be to reduce LP rewards to 0. As discussed here, this will be a process.

Here are a few things I think we need to also think about.

  • Is it “ethical” to reduce LP rewards whilst LPs have locked up their liquidity due to the Astroport lockdrop?

  • Currently about $13m of MINE is being staked in governance whereas about $20m MINE is being used for liquidity. This means the MINE community is potentially made up of more LP farmers than governance stakers.

  • If we cut LP rewards in this current climate (as you have pointed out, staking or holding MINE isn’t exactly attractive), I believe LPs who are unhappy with the reduction will just sell their MINE. The greater the LP reward reduction, the more people that will exit the LP position and sell MINE.

For example, if we cut LP rewards enough to ultimately reduce MINE’s liquidity to $20m, then we would have $10m MINE being sold on the market. This will wreck governance stakers. This is why I think for whatever reduction in LP rewards we make, we need to line it up with the release of good news re: Pylon and MINE and to make sure Pylon/MINE sentiment is positive. This should 1) reduce LPs selling MINE, 2) increase people buying MINE.

For this reason, I think it would be useful to open up a line of communication with the Pylon team to see if there is an “ideal” time to reduce LP rewards. I have messaged the team re: this.

Just a note about LP reward reduction
The tokenomics doc said (cumulative!):
year 1 750 bn
year 2 1 bn
year 3 1.25 bn
year 4 1.5 bn
LP stakers should be aware that the rewards will be reduced by 1 third after the first year.

Great observations:

  1. Is it ethical? i feel it is, i have locked LP for 1 year and when i locked i knew it will be reduced and changed with time. We are not removing it completely, we are lowering it to find a new balance. Meaning right now the LP grew by another 10% so APR dropped to 84%, this shows us the APR is too high if we keep attracting new liquidity. Lowering the amount of MINE dedicated to the pool will make people withdraw liquidity which will make the APR rise again. This is our way of controlling the size of liquidity the protocol needs at a certain period.

  2. The fact that we have more LP than mine holders should light up a warning sign, or else the sell pressure will continue and stakers will get diluted as we have been till now. so keep bleeding? or address it and find a solution that will do its best to honor all sides.

Some LP will sell i agree, at least it would be a one time thing and not continuous. Not all will sell of course, and we are doing it to distinguish the farmer that moves from pool to pool where the APY is highest, i have no issue with them btw, but Pylon protocol doesn’t need them at this phase of the protocol. flexibility is important in any business that want to thrive in today’s world and it is not something that wasn’t done many time before in other projects.

With that the single staking aspect is something that is working but not yet visible/ executed to the stakers, so maybe this is one critical thing we need to solve before reducing the LP APR? also incorporate in the APR the airdrop we are receiving, this could help improve the optics of staking and present it in a new and accurate light.

also an additional allocation of MINE can be given to the single asset stakers, (just an idea i am throwing here)… from the amount we save on the LP rewards 30% (a rough number, focus on the idea pls :wink: ) will go to single staking pool, the protocol saves 70% from that reduction, as more projects onboard and more UST is being locked the 25% buy backs would be enough to cover the staking APR.

we can’t satisfy all people and i don’t even try, some people are satisfied with 35% APR some with 120%, this is what creates the abs and flow of people an money. but by creating a more balanced and profitable system will bring new members to the community.

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i acknowledge that’s what it says, it is not a binding agreement set in stone :wink:
is there anything else you meant by it?

1 - I feel a similar way. It falls within my level of acceptable behaviour. It was something raised in the proposal to migrate MINE LP rewards and had been talked about a lot in here before the move. Only thing I was that was done differently is better communications about this to the public prior the migration on Astroport lockdrop.

2 - Also agree, definitely a red flag when we have more ppl LPing than in governance. That doesn’t create the kind of community I think Pylon is moving towards.

I actually really like the idea of trying to create an incentive for those moving their LPed MINE to governance. We could try to do some kind of special “lockdrop” style thing where LPed MINE moved to governance and held there for 6 months (could be whatever time period) receives X amount of MINE as a bonus.

I still think we should line up the reduction of LP rewards with positive momentum. Having a chat with some Pylon people, I believe they’re working towards some stuff later this month.

If we were able to provide incentives + cut LP rewards post positive sentiment, then i think an LP reduction of up to 50% is possible.

Should we reach out to the team to see if the building/development of positive sentiment is something we can work towards/time?

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Reducing LP rewards will certainly make people take their money and leave even that means having lost a lot of money. That’s sad.
It’s not our fault the tokenomics weren’t that good ( or some other issue). We are here that we love the project, are here for the long run, are here to support with our money the project, but in the end it’s an investment. When talking about reducing, for sure there must be “something” to balance the decision.

There is no reward for having MINE atm, the MINE price has gone down in such way that even 200% apr can’t get back the losses. Who got out in december had only to gain. All the rest who believed, are waiting for the project to be were it should be and to get something back for there patience and invested money.

Either way, I think throwing reductions % without excel spreadsheets to sustain your idea its just massive fear spreader. Is this what we want? Maybe the pylon team should take a stand also.

the reward in holding something should not come from inflation but growth. That is where i am focusing personally. Reduction of LP rewards is clearly stated in tokenomics.
People taking their money and leave means other coming or increasing position at cheaper price… i would not be too worried by lp rewards decreasing: actually the goal is to stop them in a mature project.

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