1. How much liquidity do we need? (75% pool 2 rewards)
We currently have $17mil in the PICKLE/ETH pool earning a %233 APY by directing 75% of Pickle emissions to that pool.
It’s not clear if we actually need $17mil in liquidity.
A few points to consider:
Increased liquidity will make pickle prices more stable, which may make pickle tokens seem less risky to farmers across all pools to hold (lower slippage makes pickle prices less volatile).
On the other hand, directing too many rewards to pool2 and paying for excessive liquidity is an opportunity cost as these rewards may be better utilised towards increasing TVL by spraying emissions on new pJars.
Lowering rewards to pool2, and it’s effect on APY is unclear. Some farmers will decide the risk-reward is not good enough and leave, causing APY to move back up into equilibrium.
As for whether we need $17mil in liquidity, or not, here’s a comparison to yearn (where liquidity is not subsidized by rewards):
Yearn (8th largest pool on uniswap)
Pickle (9th largest pool on uniswap):
Pickle’s liquidity/volume = 4.8
Yearn’s liquidity/volume = 1.03
So, Pickle may have more liquidity than actually needed (in comparison to YFI where liquidity is not subsidized).
Perhaps a slight reduction from 75% to 70% may free up rewards to bring in TVL on the new pJars instead.
My main concern is that any drastic change to the 75% allocation will cause an exodus in pool2 liquidity, and these farmers (with high risk and high APY appetite) may simply sell and move off platform.
In the interest of price stability, I think any changes to this 75% allocation should be conservative, and gradual. Perhaps a 5% change at most, followed by another 5% in the following week if need be, etc.
2. Rewarding pJars
The main goal of emission towards pJars is to maximize TVL across all our pools.
For the three new pools, the TVLs are currently:
renBTC: $4mil TVL,
3pool: $31mil TVL,
ETH/wBTC: $524mil TVL
To get the most value out of our rewards, we should incentivize the ETH/wBTC pool, and the 3pool.
Note, $104mil of ETH/wBTC is already staked with Pickle according to https://pickle-dashboard.netlify.app/jars
The larger pools (the UNI pools) should probably have slightly higher emissions to keep the large TVL happy (compared to the Curve pools).
The renBTC pool may be too small to warrant rewards, and we need to keep the APYs high enough for the other pJars so they can recover their 0.5% fee within a reasonable amount of time (say 1 month before the UNI rewards pool ends)
An overall distribution of rewards might look like:
- 70% to PICKLE/ETH
- 6% to pUNIDAI
- 6% to pUNIUSDC
- 6% to pUNIUSDT
- 3% to psCRV
- 6% to UNI ETH/wBTC
- 3% to Curve’s 3pool
3. Third option, Rewarding Staking
While not discussed in the initial post, it may be beneficial to reward the Pickle Staking pool with some emissions, say 3~5%.
This has the benefit of making the perceived value of all Pickle rewards across pool2 and pJars more valuable, incentivizing temporary farmers in the pJars to hold, stake, and participate in governance.
They come for the pickle, and stay for the community.
A distribution with incentivized staking pool might look like:
- 70% to PICKLE/ETH
- 5% to pUNIDAI
- 5% to pUNIUSDC
- 5% to pUNIUSDT
- 3.333% to psCRV
- 5% to UNI ETH/wBTC
- 3.333% to Curve’s 3pool
- 3.333% to Pickle Staking pool