Update Staking Pool Contract and Rewards

Seb_EthMonk · September 6, 2021, 9:42pm

Summary:

Proposal to utilize the Uniswap v3 staker for ongoing staking rewards and deprecating rewards on the current G-UNI pools for the upcoming extended LM reward period.

Proposal:

The Instadapp team is proposing changing the current staking contracts for ETH/INST staking. The current G-UNI token contract was very helpful at establishing our initial liquidity, however there are some aspects of this pool we think could be improved. The Uniswap v3 staker contract will allow users to manage their own price range and ticks; and will accept any NFT position in the ETH/INST Uniswap v3 market. This will improve overall liquidity, allow for better price discovery and create a more competitive LP environment.

G-UNI rewards have been extended on September 15th through IGP#4

We propose that the allocated 1m rewards be redirected:

250k INST to the new Uniswap v3 Staker contract
750k INST reserved for upcoming liquidity incentives with other AMMs such as Bancor, Sushiswap, etc with the ability for the DAO to return any unused tokens back to the treasury by the end of the LM extension (January 15th, 2021)

Current Issues

The current G-UNI set up is managed by the team; this requires consistent input from the team to manage price ticks and price ranges. There is a price wall that is created with the G-UNI contracts; prices stay relatively stable but falling outside the set price range creates a liquidity shortage forcing the team to respond and bring the G-UNI price range into the new price. We think this sort of scenario is not ideal for the team or token price.

Reason:

The Uniswap v3 Staker contract is built directly on Uniswap v3 meaning any INST/ETH pool provider can participate in INST rewards; this should make it easier for integrations and external DApps to distribute INST rewards through their interfaces. (i.e. Zapper and Zerion) This will also create competition for INST/ETH liquidity and will create the conditions for better price discovery.

At token launch, we launched with two pools; one pool has stayed relatively close to the lower bound of the price tick and it has functionally operated as a pure staking contract which was not its intended purpose; shifting to Uniswap v3 Staker contract will allow for better utilization of reward incentives.

Code:

Uniswap v3 Staker Repo: https://github.com/Uniswap/uniswap-v3-staker
Uniswap v3 Staking Connector: https://github.com/Instadapp/dsa-connectors/pull/70
Uniswap v3 Resolver: https://github.com/Instadapp/dsa-resolvers/pull/8

Links:

Uniswap Staking Contracts Docs: Uniswap V3 Staker Design | Uniswap

Result:

This proposal would deprecate the G-UNI staking INST rewards in the upcoming LM extension and instead allocate 250k tokens to the new Uniswap v3 staker contract. This staking contract will enable users to better manage their own Uniswap v3 NFTs while also gaining INST rewards and will allow for better price discovery of INST.

750k tokens of the deprecated G-UNI rewards will be allocated to upcoming and future AMMs as liquidity mining incentives with the DAO Treasury recovering any unused funds at the end of the extended LM reward period.

allthecolors · September 7, 2021, 3:37am

If this moves forward while gas continues to churn above 100 gwei, this switch will be very expensive for many participating addresses. Speaking just for myself, the gas to migrate would likely eat up something like half of my G-UNI position’s value. And I don’t consider my position all that small, all things considered.

One way to address the issue would be to offer a bonus in INST to migrators to at least partially offset the cost of migrating, similar to Balancer’s gas fee rebate or UMA’s voting fee rebate system.

Finally, I think the proposal should say “deprecate” (that is, to eliminate / shut off / make obsolete) instead of depreciate (that is, to reduce the value of something). I’m only bringing it up because in this context it creates some ambiguity as to whether the G-UNI rewards will be reduced (depreciated) or eliminated entirely (deprecated). From context and amount of INST involved, I’m inferring it’s the latter.

Seb_EthMonk · September 7, 2021, 3:52am

Hey @allthecolors you are right; it should be ‘deprecate’ not ‘depreciate.’ I updated it above.

I like your idea of using a gas rebate or something similar; it actually works to distribute INST to users who are using and paying gas to use the platform. I can try to formulate a proposal around this.

samyak · September 7, 2021, 10:28am

Hey @allthecolors! This makes sense. Although, in he current G-UNI pool users will have to un-stake and re-stake again into a different pool and also the main goal for G-UNI pool was to have good INST - ETH market for buyers and sellers and the moment it goes out of range there is no INST liquidity in the market at all which restrict traders to do any operations.

We think the official staker from Uniswap is a good way moving forward to have good INST liquidity as the market is again about to go out of range. We’re also exploring more ways to have better advance version of G-UNI pool which we can also later involve in LM in near future.

miscao · September 7, 2021, 2:55pm

Thanks for starting the discussion on this proposal. I think it would help the community and users of the current G-UNI pools to understand how this proposal will change their current LM rewards.

We can try to hash this out with some initial questions:

Will the existing two G-UNI pools still exist within Instadapp and just not have LM rewards associated with them?
If number 1 is true, then the pool will still generate fees, which is currently 4.68% APY correct?
The two pools currently have 114.41% and 125.71% APR. With this proposal allocating 250k INST to the new Uniswap v3 Staker contract, will this new contract/pool have the same starting APR and continue to decrease over time as more users provide liquidity?
Follow-up to number 3: Will this new contract be a completely new feature within Instadapp where a user will have to withdraw funds from the existing pools and re-supply the funds into this new contract?
Will the net position in this new contract be counted towards the users net worth when calculating LM rewards for the other 4 million INST? e.g. today the net position in the G-UNI pools does not get rewards for the “net worth” of your assets on Instadapp rewards. This would essentially be double rewarded, but want to ask because this has been brought up before in Discord.

I would be in favor of trying to keep a similar LM reward scenario that we have today where users are rewarded INST based on the amount of capital provided and as more users participate, the APR continues to go down. I think this creates loyalty around the INST token and Dapp because as users are rewarded, they are incentivized to reinvest those rewards back into the contract.

samyak · September 7, 2021, 8:59pm

Hey @miscao! Appreciate your thoughts here.

By this proposal means that the existing pools won’t have any rewards attached to that and the new Uniswap staker will have LM rewards.
Yeah! It’ll still generate fees as long as it’s in the range.
The APR depends on the amount of liquidity. More the liquidity less the APR. Although considering the distribution in the current pool the APR distribution is less as we’re only using 250k INST and the other 750k INST is kept for some other easier solution for less advanced users.
Yes! It’ll be on Instadapp. Currently, the Instadapp team is working on making Uniswap v3 live on the UI which will then host this feature on top of it. Users will have to withdraw and supply again manually.
In the new rewards. Users will only get rewards if they are in the range.

Agreed with your last point. There are few assumptions that the team took to put this forward but considering this might be the new reward will be a bit advance for the users. What we can do is to maybe have rewards at both places (G-UNI pool & staker) to start with so we can allocate both kinds of users.