Proposal: Strategic steps towards building a leading Multi-chain DeFi protocol and discontinuing existing liquidity mining

The INST token had a successful launch on June 17, 2021. Instadapp launched an aggressive liquidity mining program with the launch of INST token & governance. The liquidity mining program had two components:

  1. Incentivising users that import and manage their positions to the InstaDapp DSA v2 from Aave, Compound, Maker.
  2. Providers of liquidity to the INST-ETH pair on Uniswap using G-UNI pools.

The TVL has increased since launch - now stands at > $12 billion. Further, the DSA layer offers strong utility in the form of ability to earn yield, refinance loans, and use multiple strategies on the platform. However, the INST token has been trading between $5-9 at approx. $90-$160M circulating market cap.

Strong value discovery of the Instadapp token has the following important strategic levers:

  1. Continue providing further connectors & utility within the DSA layer - this involves adding new DeFi protocols. InstaDapp has added Liquity, Reflexer finance recently. InstaDapp is also going to launch new features such as stable coin Dex limit orders, flash loans etc. Further, the platform also launched integration with Uniswap v3 combined with multiple strategies for LPs. There is also potential to add fees/further revenue lines for new value added features that InstaDapp will launch.

  2. Become leading multi-chain Defi platform - This would involve significant investment in building bridges to multiple layer 1 chains as well as layer 2 chains. This path would have the highest ROI for value accrual for the InstaDapp platform but would also involve significant investment of resources & need for further incentives. This might need some bold bets including going beyond the aggregation/automation play of InstaDapp.

  3. Reduce sell pressure from existing liquidity mining programs. As we know, the existing liquidity incentives are distributed every week on Aave, Compound, Maker and Liquity positions managed on DSA v2. This program has been extended till Jan 15, 2022. This would involve a cost of $15M at today’s price, apart from creating constant token dumping by the farmers.

I propose the current liquidity incentives on Aave, Maker, Compound to be reduced as it has already met its initial objectives of widely distributing the InstaDapp token to core Defi users, and incentivising adoptions of DSA v2.

It is time that the same resources should be diverted to a more strategic, long term direction of building a multi-chain Defi platform. The token incentives could be used to drive multi-chain adoption & further, Instadapp could be used as a native token in the multi-chain layer leading to attractive value accrual for the token.

This step is important to achieve the long term vision of the InstaDapp platform & improve value accrual for the InstaDapp token.

12 Likes

Interesting writeup!

Agreed with all 3 points. I see you’ve quite updated with all the things going on with Instadapp haha.

On 2nd, currently, the team is very much focused on being more active with L2s as we think it has more room for innovation without the worry of gas cost and how to bridge DeFi between L2. Eg:- move Aave position from Polygon to Arbitirum, etc.

On 3rd, I do think that the current LM distribution was great to kickstart the tokenomics but now the token distribution doesn’t seem to be that effective. The market is stabilized, users are getting ~2% APR which is very low in DeFi to attract users, the maximum amount of tokens are getting allocated to whale users & a lot of token dumping. I do believe reducing or removing and allocating those tokens somewhere else (L2s to start with) could provide much better value. Especially, L2s will allow tokens to get distributed more evenly as small users will also be able to take part in it.

Would love to hear more thoughts of the community, INST holders & especially users on what do they think about it.

9 Likes

Agreed. Integrations of other high-performance L1/L2’ (Fantom, Avalanche) is a great future focus. I believe we are on the brink of seeing exponential growth within these ecosystems in Q4 of this year.

4 Likes

Great proposal. I agree that the initial liquidity mining has done a good job boosting TVL for Instadapp on Mainnet and Polygon and at this point, those who would be interested in migrating over probably have. To Samyak’s points, 2% is a rather low yield in DeFi terms and since the majority of that goes to whales who are dumping on the market we should find new communities who may want to use Instadapp products and exposure to the INST token.

Layer 1: I believe Cosmos is ripe for competition in the DeFi management/dashboard arena. With low transaction costs and interoperability enabled by IBC, apps like Osmosis Dex, Gravity Dex, and Juno Dex (October 1), Terra UST (September 29), Gravity Bridge & Althea Bridge (Soon) DeFi on Cosmos is about ready for the masses. Emeris App (app.emeris.com) is the only wallet management/dashboard product I’m familiar with for Cosmos.

Layer 2: Arbitrum seems like the right fit, from the recent surge in liquidity there people are obviously interested and feel secure enough to bridge assets there.

6 Likes

I totally agree. This proposal should be implemented as quickly as possible so that InstaDapp can catch the Defi season later this year.

1 Like

I agree with @gautamchhugani the rewards are causing a dump from some of the larger whales, but more importantly we could utilize these tokens in other ways that promote growth more directly.

Can we get some feedback here on how much should the reduction be?

  • 25% Reduction (Lowers rewards to 3m)
  • 50% Reduction (Lowers rewards to 2m)
  • 75% Reduction (Lowers rewards to 1m)
  • 90% Reduction (Lowers rewards to 100k)
  • 100% Reduction (Ends on going LM Rewards)
  • No Change (Keeps 4m rewards)

0 voters

While I do support reducing LM rewards for just holding positions in Instadapp (assuming we are not touching the LM rewards on G-UNI & Staker), I think we should reflect on why the 4 million rewards were extended only 2 weeks ago, now only to be removed based on a new proposal. It seems a bit short sighted and I just want to acknowledge that because short sighted actions can lead to mistrust in the community.

It reminds me of the recent proposal to extend LM on the G-UNI pools only to learn that there were going to be no rewards after the vote. We did rectify this a little afterwards, but my point is people are making decisions based on these changes, so let’s make sure we are thinking through the “why” and making decisions in the best interest of the protocol and community.

Lastly, do we have any data or dashboards that can show us whales dumping their INST? This would be a helpful artifact.

8 Likes

I support the idea! It would be good to direct the released funds to https://launchpad.binance.com/. In this regard, the question is whether there are plans to promote on centralized exchanges?

I agree, a dune dashboard would be great to visualize some of the hold/sell behavior of INST. Also would be good to know if the sellers of INST are using flashloan/exchange feature which we could sort of offset by implementing a fee structure.

IMO the value of using Instadapp goes beyond LM rewards so token rewards really shouldn’t be the value add of the platform. G-UNI and Staker incentives makes sense to me bc that incentivizes INST liquidity but the other rewards purpose is to boost/keep TVL in the platform which doesn’t seem to be doing the trick according to DeFi Pulse as of late July.

3 Likes

From a UX standpoint totally - new participants flooding into the scene (retail/coinbasers) won’t be using eth due to fees (considering how crazy it’s going to get in Q4 of this year)

Polygon + L1s (possibly L2’s if the UX is easy enough) will really be the way to go for new users - it’s going to be exciting to see where things go from here.

Glad to see this platform on the front foot with Polygon thus far, and im interested in whats to come from a coinbase-wallet standpoint.

1 Like

Terra would be incredibly amazing to access through instadapp. Anchor on top of that. Oh boy.

1 Like

Would love to see a bridge to Solana. Defi ecosystem in Solana is diverse and has a range of options that I’d love to access via instadapp.