Following Columbus-5 and the enabling of IBC, there is an opportunity to increase Terra exposure to the Cosmos ecosystem by encouraging liquidity into new pools in the Osmosis DEX through their Incentive Matching Program.
What is Osmosis?
An AMM built on its own IBC enabled chain, Osmosis is currently the largest IBC enabled cross-chain DEX with ~$450m in locked liquidity at time of writing. Osmosis rewards its governance token, $OSMO, to liquidity providers to incentivise bonding liquidity to certain pools.
Unlike other DEXs, Osmosis has the ability to offer external tokens to pools as additional incentives to encourage organic liquidity. Osmosis will also match the value of any external incentive provided to a liquidity pool, massively increasing the Liquidity Mining rewards on those pools and attracting even more liquidity than either reward program alone.
As the first IBC enabled USD stablecoin the timeline couldn’t be more perfect for Terra USD to establish itself as the dominant trusted stablecoin across the IBC by encouraging all traders who want to lock their gains into a stable coin to choose UST on Osmosis.
Previous external incentives have included Akash, E-Money and Juno, with Juno currently offering a value of ~$27,000 per pool per day for 180 days.
We are requesting 3,976 LUNA from the community pool as incentives for liquidity provision to the following pools on Osmosis.
Incentivising these pools will bootstrap liquidity during the Osmosis Incentive Onboarding process to establish a useful base level of liquidity for UST to become the trusted dollar stablecoin of choice on Osmosis, which in turn will benefit LUNA.
This request works out at 71 Luna per pool per day for 28 days. All LUNA used for these liquidity incentives should be matched with an equal value of OSMO incentives (Governance pending).
The total value of this request is ~$170,000 at current market price, approximately in line with previous incentive proposals:
Bringing Terra Stablecoins to Solana ($167,000)
Bringing Terra stablecoins to Solana pt. 2 ($170,000)
With matched incentives in Osmo this allocation causes the selected pools to reach a targeted bonus 20% APR at $11m TVL. This gives a useful base level of liquidity for UST to become the trusted dollar stablecoin of choice on Osmosis.
This governance proposal was delayed due to a change in the Osmosis incentivisation model. Externally matched incentives will now be additive rather than the minimum once this has passed ensuring external incentives gain the maximum benefit of matching even after the onboarding period.
Third party incentives to pools such as ATOM/UST and AKT/UST may obtain matches with LUNA in future proposals to encourage further UST liquidity.
The recipient wallet is owned by Marko Baricevic of the Interchain Foundation (ICF) who will perform the IBC transfer and deposit to the Osmosis liquidity gauges, after which point the funds are completely non-custodial.