Discussion about Liquidity Mining Round SHANG

Round SHANG

Half of the current round (XIA) of liquidity mining has been carried out. It is time for us to discuss the next round.

In this round, we managed to Half of the current round (XIA) of liquidity mining has been carried out. It is time for us to discuss the next round.

The next round is named after the SHANG(商) Dynasty (about 1600 B.C. ~ 1046 B.C.)

In this round, we managed to attract liquidity providers. Until now, there is over $4M liquidity in the AMM. Because AMM’s liquidity is vital in MCDEX, we should continue to incent the liquidity providers.

I have received many suggestions from the community. @johnbrooks33 gave an insightful proposal A Boost In The Economic Richness Within The MCDEX Ecosystem to suggest:

  • The mining rewards should be vested in 3 Months.
  • Give an additional 20% MCB to the miners who add liquidity to the MCB Balancer pool.

And some guys from the Chinese community also suggest introducing some staking mechanism of MCB to reduce the impact of the inflation of MCB. Our community gives these suggestions/proposals because the MCB has a significant inflation rate in the early days, and we should incentivize who contributes long-term value to MCDEX.

Besides, someone suggests dividing the trading fees to the MCB holders who stakes the MCB to some smart contract.

I call on the community to discuss the following issues:

Issues:

  1. How long should the next round Shang last? Two weeks or four weeks?

  2. How many MCB should be released in the round Shang?

  3. Who should be incentivized? What’s the portion?

    • Perpetual AMM liquidity providers
    • MCB AMM(i.e Uniswap/Balancer) liquidity providers
    • Traders of Perpetual
    • MCB staking holders
  4. Should the mining reward have a vesting period? If so, how long?

My thoughts

I am glad to share some of my thoughts on these issues. Note: These are only my own opinions, not final decisions.

Although the inflation rate of MCB seems enormous, the circulation of MCB is only 6M (excluding the MCB held by the foundation) in the first six months, which should be carried by the market. And I think MCDEX will grow fast in the next few months, which will increase the demand for MCB. What’s more, I’m worried about market manipulation more than inflation. Because of the small circulation, it is easy to manipulate the price of MCB in the early days, which makes the MCB investors suffer. As a result, I suggest keeping the mining reward unchanged, thus 2MCB/block.

The Perpetual’s AMM is essential. We should continue to incentivize the liquidity providers. However, current the Perpetual’s AMM pool is still not large enough. It is because the mining rule does not encourage people to bring more people to mining. The more people join, the less portion they get. Maybe we should set some KPI of the liquidity target, and make the mining rewards relative to the KPI.

We should encourage people to hold MCB rather than sell out. And it is also essential to make the MCB have good liquidity. Rather than just staking the MCB, I prefer to incent MCB holders to add MCB liquidity to the Uniswap pool. As the Uniswap pool has the most massive MCB liquidity now, we should not spread it elsewhere. We should allocate some mining rewards to the MCB Uniswap liquidity providers. Considering that the MCB pool has only $63k while the Perpetual AMM has $4m, the mining reward allocated to the MCB Uniswap should not be too large, maybe 10% is good for the next round.

The daily trading volume from traders who are not AMM LP is still tiny ( around $150k). As the trading volume is the source of value for the Ecos-system, maybe we should incent the traders? However, I don’t want MCDEX to be another FCoin. If we don’t find a reasonable way to do this, we should do nothing. We have the MC-Fund production in our roadmap, which could increase the trading volume. However, the audit of MC-Fund is scheduled for September because the audit agency is bustling. We have advanced the R & D plan of Mei, which should also increase the use case of ETH-PERP.

I don’t know whether the vesting is necessary. I hope to hear more suggestions from the community about investing.

P.S.

There are the real Oracles in SHANG(商) Dynasty:

.

3 Likes

The current released of MCB tokens is very small, and Round SHANG encourages add liquidity to uniswap, so I personally recommend vesting to be implemented later

1 Like
  • 4 weeks would be optimal. - Gives a sense of stability instead of having to seek another round of opinions in 2 weeks.

  • Mirroring the Round of XIA and keeping the rate at 2 MCB / Block is optimal

  • I believe all 4 groups benefit from a strong MCB token. Probably starting Fee sharing for MCB token + MCB rewarded to traders based on volume on the platform is a good incentive to boost exchange volume (Perhaps fixed awards of MCB just for the top 100 traders?).

  • Dont see the point in vesting the token. The token price will naturally be resilient if there is sufficient use case. Limiting the liquidity only serves to delay the inherent issues.

1 Like
  1. The next round should last at least 4 weeks.
  2. We should release slightly more MCB per block, perhaps 3
  3. We should incentivize all LP’s! I’ll make the case below for modifying the proportions to allow smaller LP’s to be incentivized as well (more below).
  4. If any vesting period is used, it should be about a week

Change Proportions of Incentives
The problem with the current, proportional way of incentivizing MCB Liquidity Mining is you will probably end up with a poor token distribution. Poor distribution makes it easier for a single user or small group of them to collude to pump and dump the MCB markets. From the gov perspective if there’s a “1%” type of issue where the lions share of the tokens are owned by a few wallets - the governance model will not remain community focused for long after voting begins.

MCDEX should carefully consider how to ensure the governance token is distributed as widely and as fairly as possible while still rewarding top LP’s appropriately. Initial wealth distribution curve the coin has will effect how well governance works later on. While we cannot control LP’s who sell MCB out on Uniswap or other markets - we can provide a smoother distribution to people who are less likely to collude and dump / vote against the majority of other wallets . We can also impose a vesting period to delay these actions by a period of time. Rewarding people providing MCB liquidity in Balancer or Uniswap may assist in keeping tokens locked in one platform or the other, protecting price from more sellers if you don’t incentivize it. If you go that route I would suggest that when voting with MCB you must stake for at least 7 days. That should prevent people from taking out mega large flash loans to manipulate the vote.

I think the team should investigate how to weight rewards so that the smaller LP’s are getting a slightly bigger piece of the pie. For instance if you add 1 more MCB and make it 3 / block, you could pay out the first two as we are now, and the remaining 1 could be split up among the smaller LP’s. That would help the overall distribution and make governance perform better with a wider audience voting than if a few top LP’s end up with the lions share of tokens.

3 Likes

Thanks @turbobamboo. I agree we should investigate how to weight rewards to the smaller LPs. However, it is not easy, because the large LPs can split their account into many smaller accounts. It costs nothing to split the account on Ethereum.

Thanks! @Edm Maybe the MCB rewarded to traders who open position on AMM? Because it is easy to self trade on the order book but not on AMM.

Personally I have never liked the term APR cause it keeps changing we should go down to a steadier version of Monthly Percentage Rate(MPR)

  • How long should the next round Shang last? Two weeks or four weeks?
    -> we need to find the perfect balance while bootstrapping our machine. It shouldn’t be too long nor too short, 4 weeks seems to be a perfect balance. This will give us a good result.

  • How many MCB should be released in the round Shang?
    -> Same as what’s been released as of now.

  • Who should be incentivized? What’s the portion?
    -> Liquidity providers at uniswap/balancer. I would suggest balancer cause then we would get additional boost from the ‘$bal’.
    -> Liquidity Providers at the AMM.
    -> Traders of MCDEX who trade with the AMM’s. limited fixed supply distributed to all based on their volume.
    -> If we provide the liquidity providers with Mcb, it will acts like staking reward, so why should we reward everyone else?
    Only Liquidity Miners bring in the majority of inflation, we are already rewarding them with MCBfactor already which will act like staking.

  • Should the mining reward have a vesting period? If so, how long?
    -> yes the mining rewards should have a vesting period cause, if we don’t the LP’s are just going to dump the token. This will cause a skewing of the distribution curve, which won’t be healthy, Not to mention bad price will be followed by bad pr. To me 3 months seems to be a lil shorter to me to be honest. We should experiment with this number to get the best result. The liquidity providers will not only get vested tokens but will also get additional tokens when they provide liquidity onto uniswap/balancer. It makes sense to me.

If vesting and other incentives were to be activated, how would the inflation look like after this month? My suggestion is we should manage to keep it bound below 100 somehow, slowly take it below 5 percent by continuing to cut inflation rate a little rate off every month.

In that way the ecosystem will be bootstrapped and later on MCDEX would be able to raise sufficient money from the investors without fearing to flood the market with tokens.

3 Likes

Doesn’t incentivising the liquidity providers at uniswap take care of good distribution of the token.

2 Likes

In my opinion requiring MCB vesting would be counterproductive as it would make liquidity worst when we are already suffering from a liquidity problem.

The most rational thing to do would be to target a certain amount of liquidity that we are comfortable with, say for example a 1 million dollar pool on uniswap, and start rewarding the pool with roughly (1 million dollar* rate of reward of the MCDEX AMM), this way you sort of find of balance towards the amount of liquidity you are happy with (I recommend an overshoot due to the risk in MCB exposure compared to USD exposure). This is the line of thinking that SNX used for their incentives and it has proven to be quite effective. Also I would stick with uniswap instead of balancer as imo the low gas cost vastly outweigh the balancer rewards to create liquidity.

On a different note, the system benefit greatly from scaling since the gas fees are flat that’s why i feel that the rewards should be quite generous until one rich the volume at which MCDEX fulfill it’s full potential. This will create a virtuous cycle and MCB price will follow. Futureswap alpha managed to get 20 million daily volume , there is no reason why MCDEX could not, It’s just a matter of marketing and incentives.

2 Likes

Several points:

  1. The rule for AMM miners could be changed to something like: If the ETH in AMM is over 30k, 1.2MCB/block; if the ETH in AMM is over 40k, 2MCB/block. Of course, there should be a up limit of distribution.
    Reasons: miners are not competing with each other but cooperating.
  2. The goal of liquidity in AMM is to have lower slippage, which can provide better price for traders. If the better price attracts more trading volume, this will generate more profit for LPs, which is a virtuous cycle. The key here is the traders. For a trader, he already enjoys a bette price generated by the pool, imo, we shouldn’t incentivize trading volume any more. Also it’s really hard to tell whether it’s wash volume or not.
  3. I strongly agree to incentivize holders to add liquidity in uniswap/balancer. As a token, after all its price should be decided by the market. We could set a goal of liquidity needed in uniswap, and rewarded to holders who add liquidity within that range.
  4. If Mining has a vesting, imo, that will stop those who are looking for quick money and attract those who are more long-term holders. Meanwhile, MCDEX is also competing with other liquidity mining projects/staking projects, this might have negative effects for being competitive. It’s a trade-off depends on MCDEX current goal - more long-term holder or more liquidity.
3 Likes

How long should the next round Shang last? Two weeks or four weeks?
Four weeks

How many MCB should be released in the round Shang?
The amount released per round could slowly decrease, until it reaches an agreed upon plateau. The amount it decreases by could be used for LP incentives, below.

Incentives:
Perpetual AMM liquidity providers
yes, as per normal

MCB AMM (i.e Uniswap/Balancer) liquidity providers
yes, i believe we should create an MCB pool on Balancer.

Anyone who submits their MCB liquidity to the pool (remember: Balancer has Single Asset provision, so you don’t need to have the ETH to match your MCB) will receive a BPT Token in return. Pool can be any weight/mix of tokens: eg 50/50, 33/33/33, 20/20/20/20/20, etc.

MCDEX should offer an incentive to BPT holders, which is 50% (or other agreed upon %) extra on their Mining Rewards.

Traders of Perpetual
no, flat/cheap fees is best here

Should the mining reward have a vesting period?
not vesting, but incentivised hodling through the Balancer pool/BPT scheme.

I believe incentivising prolonged liquidity in the MCDEX AMM is important to consider, also.

1 Like

Totally understand.
I think I have a semi-baked solution (might not be good enough, but it will illustrate the idea I had) here:

The idea is to group liquidity providers together based on a log (Ln or Log10) of the liquitidy qty they put in, rounded to 0 decimal places. Each unique number is a group/tier. Then add another 1MCB to the block reward for the tiers and pay them out as equal members. I’ve broken it down 3 ways, LN with 1 extra MCB for Tiers, LN with 2 MCB for tiers (and only 1 regular), and a Log10 (for comparison).

This isn’t perfect by any means - if there’s a small number of people in a given group that person might get more than the other groups - but I think that could be fully resolved by someone that has a better idea how to massage this data than I do.

Additionally if we’re log’ing the liq provided and using that to group people together, I don’t think that dividing up your stack to multiple wallets is really going to help a person out that much - I may be wrong but I wanted to try to show that there might be a way work this out without fearing a Sybil attack on liquidity mining.

1 Like

To me it sounds like it would mostly keep the Uniswap pool stacked, I can see it maybe helping by allowing some non-LP’s to buy in, but that doesn’t mean there won’t be a small number of people buying most of it - which would still skew the distribution.

The best thing to do is to distribute more fairly at the get-go before the token sale to get as many unique token holders as possible.

Also I don’t think a vesting period is going to help distribution - if the effect of LP’s dumping (and thereby hurting distribution) is going to be felt, you’re just delaying that effect. Also the perceived help to distribution would be during a period where no one could move them - so that’s kind of moot. You’d be looking at hampering the supply a lot and only those people who bought on a market would be able to move their tokens around.

I think the next round of mining should first solve the meaningless behavior of selling MCB directly after LP mining.
I have a few ideas for your reference!
1.***** (This is very important) pledge a certain amount of MCB to increase the rate of LP mining. For example, pledge 1000MCB to increase a certain share coefficient. There are two advantages to this. The first one can increase LP The second reason for the willingness to hold MCB is to reduce the LP mining efficiency gap caused by the funding gap.
2. Increase the output of MCB, so that the circulation of MCB is rapidly increased to 5-10% of the total (to be honest, this is already very small)
3. Incentivize MCB holders to expand the uniswap fund pool!

Hi, I am Shen Deng, a loyal fan of mcdex. I have been mining since the first day mcdex launched. Currently I am the main liquidity provider of uniswap, due to the rise of price, pooled MCB now losses a lot. The reason is that many Defi players are optimistic about the development of MCdex, they will directly buy MCB to obtain the benefits of MCdex development. However, the current MCB released by MCdex is still too small, resulting in MCB deflation. In this case, I have the following two proposals.

  1. It is suggested that more rewards should be given to uniswap’s mcb liquidity providers to encourage mcb holders, and uniswap liquidity providers can be rewarded with a ratio of 20%.
  2. The next round of mining cycle coming in four weeks, the releasing mcb pool should be slightly increased, and the mining must be settled immediately on the same day to supplement the demand for mcb in the trading market.
2 Likes
  • The mining rewards should be vested in 3 Months. *

I really think this would be an precocious action.
Time in crypto moves really fast, people want their money for now, for today.
1x per week already is a long time, 3 months would be extremely harmful to MCDEX in my humble opinion.

“And some guys from the Chinese community also suggest introducing some staking mechanism of MCB to reduce the impact of the inflation of MCB. Our community gives these suggestions/proposals because the MCB has a significant inflation rate in the early days, and we should incentivize who contributes long-term value to MCDEX.”

I agree totally with this, I think it’s very reasonable to give more functions/use for the token, beyond mining it and dumping on market… Also, doing this, we solute the “mining rewards vesting” that I just counter-discussed.

Incentivizing people to not dump their tokens by staking and/or giving it more utility > locking their money for 3 months

1 Like

I think that a long (e.g., 3 month) vesting period would be extremely harmful to MCDEX. The better solution, in my opinion, would be to provide serious incentives for people to hold MCB.

One option would be to take some of the MCB set aside for liquidity mining, and to distribute it slowly to people who have staked their MCB.

Another option would be to give staked MCB some portion of the fees generated from the exchange/AMM. I understand that the fees collected from the exchange and some percentage of the fees collected from the AMM will go toward buying MCB (thereby reducing the supply). I propose that most (if not all) of that money should instead go to those LPs who have staked their MCB.

Thoughts?

2 Likes
  1. 2 weeks
  2. half of round one ( 205,000)
  3. LPs and MCB staking holder, because if it happen staker and LPs also trade will there imo
    4.novesting needed, i just sugeest to stop mining reward by round 2, and change it to use MCB for provide liquidity to get shares fee.
1 Like
  1. How long should the next round Shang last? Two weeks or four weeks?
    Four weeks,
  2. How many MCB should be released in the round Shang?
    The current rate is right. It should stay the same.
  3. Who should be incentivized? What’s the portion?
    The AMM liquity providers, the MCB holders and the LPs in Uniswap should be incentivized. It´s important to incentivize the MCB holders too, because many people is not attracted to be a LP. The proportion should be 65%-15%-20%, but it should be analized. A distribution 90%-10% would be harmful because it wouldn´t provide enough benefit to hold the MCB due to the volatility of the price and the best choice when we receive the tokens would be still dumping them.
  4. Should the mining reward have a vesting period? If so, how long?
    Only 2 weeks. It´s clear that if someone is gonna dump the tokens now, they are gonna do the same in 2 weeks, but it will help to the price of the MCB, so it will draw the attention from the crypto community and it will attract much more investors for the the AMM LP and the MCB token. Hence the reason of the vesting would be for marketing reasons and attract many people looking for the next $YFI.