Stellaswap <> Interlay Governance Proposal
This is a proposal for INTR tokens to be used as incentives on StellaSwap’s iBTC-DOT pool and for Stellaswap to actively support the growth of iBTC on Moonbeam. This proposal differs from the prior one in that a proposed INTR-DOT pool has been dropped, per community feedback. If accepted this would run for 2 months, at which point both parties can evaluate the success of the program and take next steps.
Background on Stellaswap
Stellaswap is the leading dex on Moonbeam, generally capturing 80-90% of on-chain volume. We’ve recently launched Pulsar, a Uniswap v3-style concentrated liquidity dex which constitutes a unique offering on Polkadot.The capital efficiency of Pulsar is many times higher than a standard dex, allowing much larger trades to be made on the same TVL without compromising on slippage.
The Advantages of iBTC liquidity on Pulsar
There are two angles to explore in terms of how Pulsar incentives are uniquely positioned to promote the growth of iBTC.
Stellaswap Support for iBTC
Stellaswap has the deepest BTC liquidity on Polkadot, in the form of our wBTC pool. This is a pool incentivized by grants from Moonbeam in the form of GLMR tokens. wBTC is of course a competitor to iBTC with a $4 billion market cap, but has the disadvantage of being non-native to Polkadot. Stellaswap is prepared to help siphon wBTC liquidity into iBTC with the following strategy
- When a user selects wBTC as the target on our Swap interface, a link will appear saying “Learn more about Polkadot’s native BTC solution: iBTC”
- A similar message would appear when users look at their Pulsar dashboard’s wBTC position
- On the iBTC-USDT pool’s row on the main Pulsar page, include a link to Interlay
- Stella incentives (more details in table below)
We feel that with the right push, many wBTC users will explore iBTC and choose to make the switch. We’re projecting this would achieve roughly half a million dollars in TVL based on the INTR and Stella emissions being provided.
A key reason Pulsar is an excellent choice is efficiency. As aforementioned, concentrated liquidity can do a lot more than standard constant product pools. Whereas a Uniswap v2 style dex will only use ~5% of tokens in a day, we’ve seen some of our pools approach 100% on volatile days. This means that your incentives go farther on Pulsar in terms of reducing slippage on trades.
And that’s a key thing to consider. Slippage governs whether an asset is suitable for lending protocols. Slippage also governs how much money can enter a token at a time. Lower slippage leads to greater adoption.
Real Life Example of Slippage Reduction with Lower TVL
|AMM Type||Pool||TVL||Price Impact of $5k Trade|
In conclusion, we think this is an excellent opportunity to grow iBTC’s market share among Ethereum native users who are accustomed to wBTC.
Incentives and Projections
|Pool||Target TVL||Expected APR||$ INTR / Day||$ Stella / Day||Reward APR||Swap APR|
For reference, on our legacy v2 dex iBTC-GLMR averaged $200k TVL, peaking at $354k.
Deposit INTR to wallet controlled by Stellaswap: Interlay would send the tokens to the Stellaswap multisig, from whence they would be deposited into a smart contract for distribution as incentives.
Stellaswap Multisig: 0x4300e09284e3bB4d9044DdAB31EfAF5f3301DABa
Having used Pulsar a little to better understand Uniswap v3 "concentrated liquidity", I now realize that a user contributing LP is even more dangerous than typical xyk yield farming because you only 'concentrate' your liquidity in a small range so the price swings are likely to go outside that range. It seems to only work well if you tightly actively manage it, which isn't what normal retail investors will do.
Whereas HydraDX Omnipool limits IL instead of exacerbating it. I'll still support this proposal because I appreciate the Stellaswap team's efforts to educate users about iBTC. However, I propose that for this and every future liquidity mining incentive paid out to a dex to incentivize TVL, the same amount of INTR be deposited into the Omnipool as Interlay Treasury Owned Liquidity (TOL/POL).