This proposal aims to introduce 3 phases that could empower Idle Governance to foster liquidity provision and enhance swap volumes, with Phase 1 being the main object of this post.
Phase 1 consists of deploying $120k in UNI v3 pool on Ethereum and the approval of a LP staking program on Polygon to target $1m liquidity. If there is consensus on the initiative, another post would collect potential program outlines.
Key facts on Ethereum network
- To unlock the listing of $IDLE as collateral on Fuse, Idle needs to deploy $120k in UNI v3
- In late October, LP staking program on Sushi will end
- Leagues are working on Treasury Diversification with strategic partners
Extensive topic descriptions:
The Treasury League is actively working on getting Idle listed as a collateral asset on different lending protocols. $IDLE recently got approved to be added to the Fuse pool and a current blocker is the required price oracle (TWAP) for the ETH/IDLE pair. As we do not have a Chainlink price feed yet, the Fuse team would be more comfortable with a UNI v3 TWAP instead of a Sushi one, but the current UNI v3 pool is illiquid. Fuse requires to have at least $120k liquidity in UNI v3 directly owned by the Governance, with guarantees that those funds would not be removed.
LP staking allocated 180,000 $IDLE (1000 $IDLE/day) over 6 months, using the Ampleforth Geyser model. Discussions and snapshots are available here.
The program attracted about $2.7m in pool TVL since few days ago, with an acquisition cost of $0.67 per $1 in 6-month liquidity ($0.11 per month).
Up to early September we had the same TVL as in late April, when the program started. The price at that time was $14 and a few weeks ago was around $6, resulting in a +130% increase of $IDLE tokens deployed in LP contracts. This incentivized phase generated a very good retention rate.
- The Treasury Diversification would enable Idle Governance to hold stablecoins and ETH. Part of those funds could be directly deployed in DEXs to provide liquidity. Benefits of this action:
limit the distribution of $IDLE from Treasury
provide stable and non-opportunistic liquidity on the market
earn fees from swaps and get an additional revenue stream
Key facts on Polygon network
- Deployment of the Idle strategies in October and no active markets on that layer
Extensive topic description:
- With the approval of the $700k program with Polygon, Idle Leagues are working on the deployment phase.
The launch could get visibility within the Polygon community, but users would be forced to use ETH markets if they would like to become token holders.
A Polygon pool would enable community members to swap tokens with cheap tx fees, increasing the volumes and attracting prospective token holders blocked by ETH expensive tx costs. On the other side, Governance functions would be available only on Ethereum network.
The Treasury League proposes the following implementation phases,whereas Phase 1 should be the main focus of the discussion for this proposal.
Deployment of $120k liquidity in UNI v3 (IDLE/ETH pool).
Ecosystem Fund and SushiCollector (already managed by Treasury League) could fund the 50-50 pool with 10,000 $IDLE and $60k from the $SUSHI reserve. The operation requires 1 on-chain action, with funds deployed via Treasury League multisig.
Design of a Polygon LP staking program, with the aim of attracting $1m in liquidity. According to this simulation tool provided by Mechanism Capital, that liquidity would allow $10k token swap with 2% slippage. In combination with cheap tx fees, users can get easy access to $IDLE.
The expected budget allocated to this initiative would be 20k IDLE for a 3-month program.
Rationale: the allocation is proportionally time-weighted with the previous campaign (half the duration, half the budget) and TVL-weighted ($1m in liquidity would need ⅓ of the previous incentives). Considering the good retention rate achieved with LP staking, the Ampleforth model would also be used also for this program.
Reaching $1m liquidity in Polygon, the acquisition cost would be improved to $0.1 per $1 in 3-month liquidity ($0.03 per month).
The end of the LP staking program would generate questions about what’s next.
Once Phase 1 is completed, Governance can discuss different options:
launch a temporary LP staking program;
explore uncollateralized loans (e.g. Iron Bank) and provide directly liquidity on the market
do nothing and track retention of organic liquidity.
According to the decisions finalized in Phase 1, it’s possible that there are no actions planned here.
Ethereum and Polygon sides
With funds raised via Treasury Diversification, Idle DAO can combine current incentivization models with direct liquidity provision on Ethereum/Polygon markets.
We encourage the community to raise their voice on how to proceed from here and express their opinions. We look forward to proceeding with the next steps once the consensus has been archived.