0.Summary
Proposed changes to LP Staking VP generation from the original BIP-51 have been moved to this proposal and adjusted based on DAO feedback.
TL;DR: BIP-53 proposes to increase VP generation per LP share by 33%, from 150 to 200 VP per week, maintaining a fixed rate per UNI-V2 token staked.
1. Rationale: Incentivizing LP Stakers
The previously passed BIP-42 has effectively increased the duration of staking for liquidity providers (LPers). The proposed VP increase aims to better incentivize LPers to maintain or increase their stakes while potentially attracting new ones. This aligns their efforts of providing liquidity with Botto's strategic needs of building sustainable long-term liquidity and fostering a stable token environment to sustain Botto’s future.
The protocol-owned liquidity (POL) position currently comprises approximately 27.84% of the total liquidity in the BOTTO-ETH Uniswap V2 pool. The DAO has already committed to executing strategic measures for building long-term liquidity, such as potential listings on centralized exchanges or OTC token sales earmarked for POL, as set out in BIP-42. It is important to note that this VP increase for LPers does not substitute these measures, but is an additive measure proposed to incentivize them.
2. Proposal Specification
2.1. Adjustment
LP tokens staked in the Liquidity Mining contract will now generate 200 VP per week.
2.2. VP Calculation
VP per week = Number of LP tokens staked × 200.
2.3. Implementation Time
10 minutes.
3. Criteria of Success
- Retention: Improved retention of existing LPers.
- Engagement: Increased acquisition of new or returning LPers.
- Liquidity Stability: Retention of, and potential increase in, overall liquidity within the pool.
4. Disadvantages / Risks
- Risk of Over-Incentivization: May attract purely DeFi-driven participants, potentially reducing active and meaningful curation and governance participation.
- Complexity in Understanding VP System: The increased and fixed nature of VP might require clearer communication and onboarding for new LPers, and timely project documentation updates.
- Selection of Increase Percentage: The decision for a 33% increase lacks extensive quantitative analysis but is designed to balance significant incentive with sustainable project economics.
