$BRIGHT Liquidity Distributions on xDAI

There is an opportunity to receive some $STAKE rewards from the xDAI ecosystem potentially matching Bright rewards 1 for 1 but I would like to poll the community on a few questions first. Sorry for the lengthy post, there are a lot of questions below and they all are related. I look forward to hearing Bright communities feedback and I want to give a shout out to @castall for his help with this.

Background

Bright rewards began in middle September.

  • rewards for wrapping $Bright are 50 000 per month over a 2 month period (100 000 $BRIGHT) with sept 16th as the official start date.
  • rewards for Bright-HNY LP are 175 000 per month over a 2 month period (350 000 $BRIGHT)
  • BrightDAO can mint up to 10 million $BRIGHT per year as set forth in “Max Supply”. Just stating the obvious but of course that doesn’t mean we have to.

Polls

Should We Request $STAKE to match $BRIGHT in 1 for 1 rewards? This would likely mean a BRIGHT-STAKE LP or some effort to partner with xDAI
  • Yes
  • No

0 voters

How Should We Proceed with Farms
  • Keep similar model with a liquidity pair and the gBRIGHT reward pools just maybe modify what and how much we distribute
  • Try something completely different - Such as an Olympus Pro Liquidity mining (see below for details)

0 voters

Duration and approach to rewards? it’s possible all these options even the 1-2 month concentrated will distribute at a slightly lower APR than currently distributed if we don’t renew at the same distribution
  • Slower more sustainable APR over 9-12 month
  • Concentrated 1-2 month high APR
  • Mixed, first 1-2 months higher APR then following 4 months at a lower rate
  • other

0 voters

What APR should we target? Currently distributing 225 000 $BRIGHT or about $99k in rewards on xDAI, APR’s assumes all things constant and no matching $STAKE
  • More than 225 000 $BRIGHT per month
  • Same 225 000 $BRIGHT per month (~290% APR & 85% for gBright)
  • ~100% APR & 30% for gBright
  • ~50% APR 15% for gBright
  • ~20% APR 6% for gBright
  • Discontinue

0 voters

Balance between LP and gBright These APRs assume only if everything is constant including the current amount payout and not price decay among many other variables that will likely not stay constant.
  • Keep same reward distribution 75% to LP, 25% to gBright (using same numbers this resulted in 290% APR and 85% APR)
  • Stop gBright rewards give 100% to LP (385% APR)
  • Evenly distribute 50% / 50% (190% for LP , 170% APR for gBright)
  • Less to LP 25% / 75% (95% LP, 255% APR for gBright)
  • No LP only gBright (340% APR for gBright)

0 voters

For More Details

Olympus Pro - is a form of Liquidity Mining (LM) that helps to stabilize price while allowing growth in token circulation through a LM that sells the BRIGHT token at a discount while accumulating ‘whitelisted tokens and/or LPs’ the dao wants to accumulate assets in it’s reserve. The allocated LM tokens that would normally be used for farming which often results in direct sell pressure. Instead Olympus Pro uses what would be normally used for farm rewards to help offset the cost of the BRIGHT token to allow buyers to buy the token at a discount. Secondly, the bonding mechanism sells the BRIGHT token when the token value is greater than the backed assets to help stabilize price while accumulating a reserve.

7 Likes

Thank you for the post @Monstrosity . Just finished the poll. Looking forward to seeing how this progresses. :beers:

2 Likes

Where can we find out more about what the Olympus Pro liquidity mining would look like - are there other projects using it for LM we can look at? And are they on xDai?

The documentation is super interesting but I don’t see anything in there for how other projects can offer liquidity mining with their bonds: Introduction - Olympus

Here is olympus pro list they do all the work and pretty plug and play. you select the LP you want to incentivize so we could:

  • pair with a stable bright-xdai
  • pair with the king bright-weth
  • pair with a partner bright-stake or bright-hny
    It’s possible in the future to offer multiple assets but Olympus is currently only offering liquidity bonds right now.

another option which would require some dev work is forking Olympus like how kilmaDAO did. They’re basing their token on carbon credits instead of monetary value.
It is worth noting that a fork of Olympus would not be supported by Olympus

2 Likes

I am in favour of investigating the Olympus Pro route further. I presume that would mean that much of the APR calculations in your questions wouldn’t exactly apply. From my understanding Olympus Pro is basically a program that buys LP tokens from contributors and puts them under the DAOs control, essentially guaranteeing long term liquidity. In return the contributor would get $Bright back at a discounted rate on a vesting schedule to help mitigate the sell pressure/ability to game the offer.

I like this option from a price/liquidity stability stand point, but I think it may in fact be riskier for the contributor. With LPs if you feel the market shifting a particular direction you can take an action to remove liquidity and make an adjustment in the position, but with this you are locking in your investment at what ever discounted rate we give $Bright out for, and if the price drops below that discounted rate the contributor is at the whim of the liquid market, unless there is an oracle mechanism involved that adjusts for that. I am basing this off of my understanding of how Olympus Pro works, which came from a verbal explanation I got from someone. I’m with @paul and would like to read the documentation on this.

Whatever we choose, I think that we should always aim for the rewards for gBright to be significantly lower than any other Liquidity program we offer. IMO gBright rewards target should be about 5% of the target for any other rewards program. In general I think we should aim for sustainable low yield rewards for liquidity programs. We discussed this at length pre-launch and it was agreed that we don’t want to attract too many speculators by having large APRs, and the rewards for wrapping $Bright should just be a small token to incentivize people for taking the first step in the governance process.

2 Likes

Yes, and no. These numbers are related in a sense on how much we are allocating for rewards. So APR isn’t applicable here but the amount of incentives set aside to achieve this APR we would just use for Olympus program. So its semi-related and good information.

Most locking periods are only 7days and the contributor would still be able to use their bright and add to LP or stake as gBRIGHT. The contributor doesn’t have to hand over their LP.

I agree, I think there can be a comfortable balance between rewarding holders but not attracting farmers just dumping. It’s okay to see a bit of that in the beginning as you would expect to see a bunch of trading volume in the beginning so ideally the majority of tokens can move from the farmers and speculators to the eventual actual community.

What do you mean they wouldn’t have to hand over their LP? I think that’s the whole point…they are selling their LP tokens to the DAO for more of the DAO token. In this way, the DAO can ensure long-term liquidity on top of the other potential benefits.

I think the locking period is a key parameter here. I’ve read through some of their documentation now, and they have based this on some research that shows 70% of LP mercenaries abandon the pool within 3 days. I think this is great data to use, but I also think it is generated under the current game theory conditions. I am curious what happens when the mercenaries learn the new rules of the game.

Having a short vesting period means that the token price is still susceptible to short-term price depreciation. If a mercenary understands that they just need to wait a few more days in order for their position to be fully liquid again, they just need to take that into account when assessing the risks. So the vesting period just changes the length of the game and the POL program ensures they will have a larger more stable liquidity pool to sell into. Any mercenary knows they are taking a gamble by entering a pool, but the current typical farming program provides a variable per-block reward, with significantly diminishing returns early on (which is probably why many leave within 3 days). With Olympus, the return is still variable based on the Bond price/BCV but once a person buys a bond, that return is locked in, and they need only wait the vesting period. So the gamble then becomes; am I willing to bet that the price of the token won’t drop more than the per cent return that I got from buying the bond before the bond has vested

If we give a 5% discount on $Bright for selling us LP tokens and the price doesn’t drop by more than 5% during the vesting period then as soon as the $Bright is vested, the bond purchaser can just dump it at a profit, or rinse and repeat for as long as the program is running. In either case, the DAO would essentially absorb the brunt of the loss. For comparison, the returns that the xDai farm is getting right now are ~5.48493151% weekly returns non-compounded (286% APR / 365days * 7days a week).

The downside of increasing the vesting period though is what I mentioned in my last post. So I think there would need to be lots of time taken to consider and balance this out. It may also benefit us to only run the campaign for as long as 1 vesting period lasts to avoid the rinse and repeat scenario.

I just want to say that I think liquidity is a huge issue for most projects and I think innovation is desperately needed, and I only bring these points up because I hope I am wrong or I am missing something.

I reached out to the team on Discord to get some more information and it turns out their first cohort using PRO started at the beginning of Oct and is currently running.

They have a Dune analytics dashboard for it here: Dune Analytics
And you can track the price of the projects involved here: https://www.coingecko.com/en/categories/olympus-pro

Again I know we are not (only) optimizing for the price here, but it is definitely a driving factor for LP mercenaries, so we do need to take this into consideration in our decision.

Also important to know that Olympus is a Mainnet project…might be some time before they support xDai. I don’t think I would be in favor of this being run on Mainnet with gas as high as it is these days.

UPDATE

I was debating on this being a new forum post but felt to keep it here

I finished a call with Olympus on Wednesday. Since launching Olympus pro they’ve been flooded with multiple dozens of requests. Which means xDai isn’t really a priority unless we can get 3 other projects to deploy OlypmusPro on xDai and at all around the same time. I think this is doable as I’ve spoke with several other projects that could be interested.

OlympusPro Overview

One way to simplify olympusPro is it allows you to buy liquidity rather than rent the liquidity. Traditional farming you are renting liquidity through paying farmers to dump our token and in some cases auto-compound. Protocols using OlympusPro pays potentially these same users to buy the liquidity. Once the rewards are done in the later case BrightDAO will have at least ended up with some liquidity in its reserves where as in the former there is no guarantee the liquidity will stay. The protocol acts as a Dutch auction where the discount offered increases while no one bonds then the discount offered decreases while users bond. BrightID would have full custody of contract and can deposit rewards as often as BrightID community would like. The protocol also has a vested period for the discounted tokens which can be set by BrightID. This is default set to 7 days, a few protocols have used 14 days but we could use more or less even 365 days however you might see users reluctant to bond and thus see a very large discount.

What is Needed?

If BrightID performs a trial using the OlympusPro approach there are a few questions we probably need to answers to.

What asset does Bright community want to acquire in their reserve? So far all projects using OlympusPro have paired their token with wETH. We have an opportunity to share rewards with STAKE and thus we could be the first to build our reserve with a BRIGHT-STAKE LP. Given the overwhelming vote to desire a STAKE incentive I will assume this is the pair we should pursue. As of now there is no way to do incentives using both STAKE and BRIGHT.

To make this dual reward work we could continue a traditional BRIGHT-STAKE farm rewarded in STAKE. Then match the rewards deploying the OlympusPro protocol bonding BRIGHT-STAKE for $BRIGHT.

  • Yes, deploy both
  • Other suggestion

0 voters

How long should the vesting period to be.
  • Default 7 days
  • 14 days
  • 60 days
  • 120 days
  • Longer

0 voters

You only really addressed my last point about Olympus Pro not being on xDai.

I am not in favour of this proposal until we can discuss and clear up the other points I brought up.