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:
Incentivising users that import and manage their positions to the InstaDapp DSA v2 from Aave, Compound, Maker.
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:
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.
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.
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.
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.
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.
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.
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.
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.
I wanted to revisit this topic now that there is more development and a lot of the ideas here can be a bit more fleshed out. Let’s start with what is being developed and then we can relate them to fees, utility and aligning token value.
Instadapp is building infrastructure to make it a competitive leader and fundamental protocol for multi-chain asset management and utility. Instadapp’s Interop service will be a foundational layer for protocol expansion, reconnecting liquidity on the various networks and enabling greater access. The ease of use of Instadapp will continue to make us a premier place for DeFi Management especially as we make our accounts an ‘all in one’ for DeFi. I agree with @gautamchhugani that services and features are what will make us stand apart and create revenue.
Instadapp Liquidity Service (In Development)
Instadapp is developing the Instadapp Liquidity a framework for Liquidity to be more capital efficient, these developments shift the assets on the platform from just TVL to actually being productive value accruing assets. This is also a great place to incentive token farming as Liquidity on the Liquidity Framework will power flashloans and other Instadapp services, these newer features and utilizing Liquidity generates revenue and creates a more effective feedback loop. We will release more details regarding this when we are further in development.
Staking INST for Fees
We have thought of some more complex fee sharing models but I think to start we can do a simple xINST vesting staking model to start. I would suggest a limited vesting as there are other developments which may bring other utility to the token so we don’t want to make this setup too restrictive.
1 INST = 0.25 xINST (no lock)
1 INST = 0.50 xINST (6 month lock)
1 INST = 1.00 xINST (12 month lock)
Brief summary of how xINST could work: 50% of all platform fees are used to buyback INST and distribute to xINST stakers the other 50% of the platform fees are sent to the DAO Treasury. xINST can be unstaked at any time but enters a ‘cooldown’ which takes a period of 4 weeks. If you ‘cooldown’ before the unlock period you lose any bonus INST for the lock period. xINST can still vote during the cooldown but does not earn fees or additional xINST during cooldown.
Shifting the Liquidity Mining rewards away from any TVL to these new sources will shift the unproductive farmers and make it so only providers to Instadapp services and Instadapp stakeholders retain the DAO’s value and protocol’s value accrual. Incentivizing these other sources will make the TVL in the platform more productive and aligns this value with growing the overall platform.
This is a really neat concept @Seb_EthMonk - I think it will create more incentives for users/investors to have a long term outlook for Instadapp and INST.
Of the three ideas laid out, it sounds like Interop & Liquidity Service are in development. Staking INST for Fees is something we could make progress on, but we would need to introduce fees onto the platform first right? @Duo wrote a good summary on these possibilities, which actually come in below the AAVE 0.09% fees being charged ATM.
We can monitor usage over the next n number of days/weeks and if there is no decline in flashloan usage, then we can infer that introducing fees on the platform at a lower percent will work.
Now that I’m typing that out loud, it also sounds like we would need the Instadapp Liquidity completed before we can Stake if we were to replace AAVE Liquidity & Fees.
Great points @miscao! Yes, would be great to track the movement of the users and usage of flashloan for next few days/weeks. The flashloan aggregator is also in development on which we can start charging fees as long as the net fee could be <= 5BPS or something.
Other than that Interop is very close to beta launch and initial Liquidity contracts just got out of audits today so both are very near. We have not announced the details on Liquidity yet which we are going to do soon.