Deploy $3 million of Community Pool LUNA for UST Liquidity Mining Incentives Across Strategic Apps and Protocols on Major Layer Ones

Proposer – Terraform Labs

Disclaimer – I am employed by TFL.

Context

TFL is proposing a broad-based amplification of LUNA-denominated liquidity mining (LM) incentives from the Community Pool for UST pools across several leading apps and protocols on major layer ones. The proposal details below will serve as a baseline for potentially expanding the program should it prove effective after re-evaluating its results in 3 months.

The goal is to deepen UST liquidity in strategically important pools that serve as hubs of DeFi activity for users on these chains. The LM execution plan below will increase the overall demand for UST, simultaneously augmenting UST’s cross-chain network effects as the premier decentralized, inter-chain stablecoin. Magnifying exposure to Terra across different user sets localized to specific layer ones is also a valuable knock-on effect that will result.

As a key growth metric for Terra, the outstanding supply and growth rate of UST is a barometer for the health of the Terra economy at large. The progressively larger and more rapid expansion of the demand for UST begets net positive effects across the Terra ecosystem induced by accelerating seigniorage, value accrual to network stakeholders, and protection against contractionary cycles.

In a highly competitive crypto market for capturing specific users as long-term proponents and users of Terra, LM incentives denominated in a highly attractive asset to hold, LUNA, stimulate the growth of UST at a strategically important time. Cross-chain bridges are gaining traction and establishing UST as a viable and liquid base pair in diverse pools is critical for ossifying UST’s position as a leading stablecoin.

This proposal conveys that the potential long-term benefits of LM incentives for UST allocated in LUNA from the Community Pool at this stage of the broader crypto market cycle outweigh the short-term increase in the circulating LUNA supply for the incentives below released from the locked Community Pool.

This proposal is also intended to establish a reference template for how TFL considers effective LM incentives in size, length, and scope. By following the parameters outlined below, we encourage the LUNAtic community to more actively engage in the discussion, proposal, and execution of similar LM incentive programs from the Community Pool where effective.

LM High-Level Overview

The plan for each app/protocol below is defined via a 3-month LM incentive period denominated in LUNA, with matching incentives from target projects in their native asset incentives to promote augmented UST liquidity.

The target yield for each base pool is 20% with matched incentives in line with previous LM incentive proposals.

LM Incentive Program Length – 3 months from the time of the on-chain vote execution (should it pass).

Total LUNA to deploy over 3-months – $3 million of LUNA (at the price of proposal execution) over 3 months. At current prices, this entails ~60K LUNA.

LUNA Per-App/Protocol – $85K in LUNA incentives per month per project = $255K in LUNA over the 3-month period per project.

Incentives will be re-evaluated after the 3-month LM period concludes.

LUNA Incentives Distribution

All LUNA incentives requested for this proposal should be matched by equal native asset incentives from the target apps/protocols.

Unlocked LUNA from the community pool will be withdrawn to the following address controlled by TFL and distributed to the pools below accordingly:

  • terra1wqmfu6w725sal3nvr0ggy49mmtwqgc6tyf4anp

The total LUNA over 3 months for each pool is $255K, equating to $85K in LUNA per month unless otherwise denoted and evenly distributed over multiple pools.

Solana

Saber

Pool Details:

  • UST (Wormhole)/USDT

Mercurial

Pool Details:

  • UST 3-Pool (Wormhole UST, USDT, USDC)

Apricot

Pool Details:

  • UST (Wormhole)/USDC

Binance Smart Chain (BSC)

Planet Finance

Pool Details:

  • UST (Wormhole)/BUSD

Ethereum

Curve

Pool Details:

SushiSwap

Pool Details

  • UST/ETH

Polygon

QuickSwap

Pool Details

  • UST/USDC
  • UST/ETH
  • UST/LUNA
  • UST/MATIC
  • UST/QUICK
  • Make UST a routing pair

DFyn

Pool Details

  • UST/USDC

Cosmos (via IBC)

Osmosis

Proposal for LM incentives here.

Secret Network

Pool Details:

SecretSwap

  • sUST/sSCRT
  • sUST/sSEFI
  • sUST/sUSDC

Moving Forward

To streamline the above strategy, TFL’s opinion is to implement the above LM incentives to begin, followed by several factors to consider for future LM proposals benefitting UST liquidity:

  1. Provision 1 month-worth of incentives for any $100M+ TVL project that reaches out, re-evaluating incentives on a quarterly cadence.

  2. Provision $10,000 in grants to any project that integrates $UST on any chain, distributed every month.

New projects requesting LM incentives or grants must create a proposal on Agora first to elicit feedback from the community stakeholders.

Pending community feedback and discourse, we will potentially adjust this proposal to match the suggested changes. A revised proposal will be communicated once ready to initiate as an on-chain governance vote based on accepted community stakeholder input.

Please allow for open discussion regarding the proposal above.

18 Likes

Seems like a great way to boost UST visibility on different (L1) chains. I would suggest upping the TVL requirement for projects that request LM incentives (or build a tiered system). It is my opinion that the crypto market (as a whole) will see tremendous growth in the coming months which may mean $100M TVL projects are untested (unaudited) newbies.

1 Like

Or perhaps an audit should be a requirement?

4 Likes

Agreed

This is another forward-thinking proposal to raise awareness of UST and accelerate usage whilst the community pool will replenish as the ecosytem goes from strength to strength.

Nice write-up @TheIntern. I don’t think you will be an Intern for long! :grin:

I’d prefer:

ETH L2s and Sidechains as priority
Arbitrum, Boba Network, Ronin, Polygon.

Solana: Apricot, Mercurial, Saber

BSC: Planet Finance

Osmosis

This is an excellent proposal. In fact Id say just $3 million is very modest.

I must ask for ONE key addition.

UST on Kadena. This is clearly where the future will lie.

Kaddex should be launching soon.

Please add UST-KDA pool support…we shouldn’t lose the opportunity to make UST the default base pair here.

3 Likes

Yes.
Also could include Synapse, which is a leading stablecoin bridge across most L1 chains.
Pools are composed of several stablecoins, including UST would force the pools to equalize with UST.

Completely agree, we need to take this opportunity for a UST-KDA pair.

Hi Brian/all, I believe this is a great idea! Is my understanding correct that all potential projects that have more than $100M TVL will be instantly considered? So to summarize, here are the potential projects/chains:

  • Solana - Saber, Mercurial, Apricot
  • Binance Smart Chain - Planet Finance
  • Ethereum - Curve, Sushiswap
  • Polygon - QuickSwap, DFyn
  • Cosmos - Osmosis, Secret Network

How about on these chains:

  • Harmony One (we’re already there)
  • Avalanche (under discussion)
  • Fantom - I believe SpiritSwap ($260M TVL) is looking at bringing in $UST
  • Terra on Thorchain also coming soon
  • Near Protocol

How can $LUNA tics help this further by proposing engagements with non-Terra projects we use?

Thank you!

Agreed.
Curve pool should be prioritized, as curve is where the whales/ institutions sits their stable coins. Providing higher incentive on curve will have two benefits:

  • expanding of UST LP position (and more UST will be minted)
  • allow insititutions to swap large amount of UST with low slipperage, and thus allow them to use Anchor.

Working with Curve/Convex should really become a priority. Besides simply providing Luna incentive, I think we should purchase CVX and/or CRV token, to vote for higher CRV/CVX incentives on top of the Luna incentive.

A recent Mochi/USDM case illustrate how it work (though Mochi took the strategy to a extreme and thus being banned by Curve).

The amount should be $10M.

sUST pretty much achieves the dream, liquidity should have decent incentives ASAP in order for it to grow.

There are L1s with ongoing or soon to start liquidity programs.

Avax, fantom, Moonriver are all young networks without a “brand preference” and we could get UST in near the ground floor.

Yea so this proposal is intended to augment UST liquidity on currently active pools and ones that will be imminently available (i.e., sUST/sSCRT) but, it’s also definitely both:

  1. Replicable for pools like UST/KDA once available.
  2. Scalable beyond $3 million in LUNA with further proposals after evaluating how effective smaller, more strategic LM incentives play out in the short-term with the above specs.

We just want to establish a baseline of incentives and encourage more active exploration of where they can be effective in various pools in DeFi like UST/KDA, with the community taking the lead on future proposals for LM incentives.

Agreed that making UST the default base in strategically important cross-chain pools where stablecoin penetration is low is a primary objective.

This is great

I would argue against putting UST primary against SEFI on SecretSwap (Secret Network).

Currently, SecretSwap has 2 pools to which we can compare;
sSCRT - sUSDT
SEFI- sUSDC

Currently the pool rewards and liquidity (excluding fees) for these pools are:
sSCRT - sUSDT
Liquidity - 5.127M
Current farm APR - 55%

SEFI- sUSDC
Liquidity - 2.317M
Current farm APR - 92%

We can see from these numbers that a person currently staking in sSCRT-sUSDT could switch to SEFI-sUSDC and get 67% higher APR rewards. One could even argue that reducing their risk to USDT while increasing exposure to USDC would be a wise risk-mitigation move in the current regulatory context of stable coins.

But they don’t do it. People prefer sSCRT - sUSDT, despite lower rewards, despite higher regulatory risk. From this comparison, it is clear that liquidity providers prefer the exposure to SCRT over SEFI.

Therefore, in order to maximize UST pool liquidity and utility, I suggest focusing UST incentives on SecretSwap to the sSCRT-sUST pair over the SEFI-sUST pair.

we need to help UST LUNA

The $255K in LUNA incentives for Secret Network over 3 months will be evenly distributed amongst the 3 pools on SecretSwap. We can examine rebalancing the incentives towards more productive pools between the 3 listed once live.

1 Like

First time poster but long time holder and voter in, I think, every single Terra gov vote so far and active Discord member since the start.
I vote no, due to that I think this money can be spend more creatively than going down the LM road.
TerraSwap for instance, one of the main building blocks of the Terra ecosystem, scored 40% (a Fail) on DeFi Safety, last 7-9-2021. With the comment (Telegram): "Strong documentation, Code and Team, Testing, but NO audit, and NO access control information. Access controls can be fixed fast if they make an effort.

Besides that, I think $3m is not a disaster for the community fund… it will survive. So I won’t be sad if it passes (which it will). But long term, I think spending community funds of Terra towards LM is a waste. These funds will not be held by long term users, just liquidity locusts.

1 Like

THIS ^^^… ASAP when it becomes Available…