Summary:
This proposal aims to adjust MIMO tokens incentives repartition on Ethereum & Polygon.
Rationale:
The Parallel governance recently voted to add new collateral (wstETH, sfrxETH, rETH, cbETH) on Ethereum & Polygon, allowing to increase the decentralization of the PAR but also the efficiency of the protocol thanks to the introduction of productive collateral.
Moreover the governance also approved the deployment of paUSD on Ethereum & Polygon.
As a stablecoin-issuing protocol, the Parallel Protocol is constantly on the lookout for liquidity, enabling reduced slippage and increased liquidity depth for PAR & paUSD holders, while increasing their supply to generate additional revenue.
The protocol currently remunerates the simple minting of PARs against collateral tokens (ETH, WBTC, USDC, etc.), which may be a good idea in the short term to bootstrap the protocol, but is actually counter-productive, as the user is remunerated without taking any risk.
There is a misalignment between the interests of the protocol and those of the users.
With the aim of realigning the interests of the protocol and users, we propose to stop rewards in $MIMO for PAR minting and reallocate them for liquidity incentives.
In the past few months, Mimo Labs and the DAO have experimented with Balancer to increase PAR liquidity on Polygon (and its depth) without increasing $MIMO inflation, by buying and locking AURA tokens to redirect some of Balancer’s $BAL inflation into the PAR/jEUR pool. There is currently $800k of liquidity in the pool generating around 10% APR (paid in $BAL) without any $MIMO given in rewards, i.e. $1,500 of selling pressure avoided each week.
We have seen many benefits:
-
significant increase in PAR liquidity on Polygon (+130%)
-
PAR liquidity depth increased (enabling bigger swaps with lower slippage)
-
lower $MIMO inflation
-
new users (via display directly on Balancer + co-marketing with Jarvis)
-
strengthened collaboration with Jarvis, Balancer & Aura
Encouraged by this success, we propose to make Balancer the main DEX for PAR and paUSD by migrating the current incentives to new Balancer pools.
Ethereum Incentives:
Current MIMO tokens incentives on Ethereum:
(More Details here)
Proposed adjustment of MIMO tokens incentives distribution on Ethereum:
(More Details here)
TL;DR:
- PAR & paUSD minting (all tokens as collateral): 0%
- vMIMO holders: 5%
- PAR Staking: 0%
- Liquidity: 95%
- DAO Treasury: 0%
The liquidity incentives would be divided into 3 different pools on Balancer:
- e-cs-kp-usd (wUSK, paUSD, USDC): 35%
- Pool name: KUMA Parallel wUSK/paUSD/USDC composable stable pool
- Pool symbol: e-cs-kp-usd
- Pool type: Composable Stable
- Amp Factor: 200
- Swap fee: 0.05%
- Pool Owner: Delegate Owner (Balancer DAO)
- e-cs-kp-eur (wFRK, PAR, EUROC): 40%
- Pool name: KUMA Parallel wFRK/PAR/EUROC composable stable pool
- Pool symbol: e-cs-kp-eur
- Pool type: Composable Stable
- Amp Factor: 200
- Swap fee: 0.05%
- Pool Owner: Delegate Owner (Balancer DAO)
- MIMO/e-cs-kp-usd 80/20: 20%
- Pool name: 80-MIMO/20-e-cs-kp-usd
- Pool symbol: 80-MIMO/20-e-cs-kp-usd
- Pool type: Weighted
- Swap fee: 0.3%
- Pool Owner: Delegate Owner (Balancer DAO)
Note: Balancer doesn’t support rebase tokens. To solve the problem Mimo Labs built ERC-4626 wrapper on top of KIBTs (wUSK, wEGK, wFRK).
We propose the creation of 2 composable stable pools, one for USD related stablecoins, one for EUR related stablecoins.
The composable stable pools are built to become the core pools of the Parallel & KUMA ecosystem. They give the access to DeFi liquidity (via USDC & EUROC) for paired tokens, intrinsic yield thanks to KUMA KIBTs are fully composable within the Balancer ecosystem. It means that instead of pairing a token, let’s say PAR, with EGK in a pool, you can directly pair a liquidity pool with EGK (e.g cs-kp-eur). It increases the liquidity of the cs-kp-eur without any additional rewards and for the token paired the access to 3 tokens liquidity easily in one pool (wFRK, PAR, EUROC) instead of one (and create 3 different pools with 3 different tokens), intrinsic yield and potential additional rewards (if they have vMIMO locked, to vote for their pools with vlAURA owned by the DAO).
Additionally we propose the creation of a 80/20 weighted pool MIMO/cs-kp-usd. The current structure of MIMO liquidity on Ethereum only pair the token with PAR. The proposed new implementation of the MIMO token liquidity would pair the cs-kp-usd liquidity pool with it. It increases the cs-kp-usd liquidity without any incentives and gives to MIMO token the access to 3 tokens liquidity (wUSK, paUSD, USDC) with the intrinsic yield associated (from wUSK), increasing capital efficiency.
Polygon Incentives:
Current MIMO tokens incentives on Polygon:
(More Details here)
Proposed adjustment of MIMO tokens incentives distribution on Polygon:
(More Details here)
TL;DR:
- PAR & paUSD minting (all tokens as collateral): 0%
- vMIMO holders: 5%
- PAR Staking: 0%
- Liquidity: 95%
- DAO Treasury: 0%
The liquidity incentives would be divided into 3 different pools on Balancer:
- p-cs-kp-usd (wUSK, paUSD, USDC): 35%
- Pool name: KUMA Parallel wUSK/paUSD/USDC composable stable pool
- Pool symbol: p-cs-kp-usd
- Pool type: Composable Stable
- Amp Factor: 200
- Swap fee: 0.05%
- Pool Owner: Delegate Owner (Balancer DAO)
- p-cs-kp-eur (wFRK, PAR, jEUR): 40%
- Pool name: KUMA Parallel wFRK/PAR/jEUR composable stable pool
- Pool symbol: p-cs-kp-eur
- Pool type: Composable Stable
- Amp Factor: 200
- Swap fee: 0.05%
- Pool Owner: Delegate Owner (Balancer DAO)
- MIMO/p-cs-kp-usd 80/20: 20%
- Pool name: 80-MIMO/20-p-cs-kp-usd
- Pool symbol: 80-MIMO/20-p-cs-kp-usd
- Pool type: Weighted
- Swap fee: 0.3%
- Pool Owner: Delegate Owner (Balancer DAO)
We propose the same liquidity structuration on Polygon as on Ethereum with 2 “core pools” (EUR & USD) and one weighted pool for MIMO token liquidity.
Incentives Distribution:
There are 2 ways to distribute MIMO tokens incentives to liquidity providers:
- Simple staking contract (rewards in MIMO token): We implement staking contracts on top of LP shares to distribute MIMO token.
- Pros:
- Possible less seller pressure
- Cons:
- Need deployment of a new staking contract the underlying pool change
- Rewards in BAL too (if there is)
- Possibly less people are aware of liquidity incentives
- Pros:
- Vote Incentives through Paladin (rewards in BAL token): We use Paladin to vote incentives vlAURA & veBAL holders to vote for our pools and receive BAL tokens rewards.
- Pros:
- More flexible than staking contract
- Possible higher yield (the pool receive more rewards in $ than the protocol vote incentives)
- Yield directly show on the Balancer, Aura & StakeDAO frontend (so possibly more LPs)
- Yield Boost from Balancer (as well as Aura & StakeDAO)
- Cons:
- A possibility to don’t distribute all of our $MIMO incentives depending on votes from vlAURA & veBAL holders.
- Pros:
After considerations we propose to use Paladin instead of our own staking contract to incentive liquidity pools on both Ethereum & Polygon. According to the latest estimations (they vary at each gauges weight round) we could get 10.40% more rewards (in $) if we use the voting incentive system rather than give the rewards in MIMO tokens directly. (see table)
Note: It will only be possible to vote incentives pools if the DAO gets gauges on pools. This decision depends on Balancer governance. If we are unable to obtain gauges on the selected pools, proposal number 1 will automatically be chosen.
(Ethereum, More Details here)
(Polygon, More Details here)
In terms of liquidity (in $), at 10% APR (without intrinsic yield from KIBTs) we could get 2.4M$ on Ethereum and 430k$ on Polygon (it doesn’t count vlAURA held by the DAO and Mimo Labs).
Paladin currently accept quests creation only on Ethereum (even for pools on other chains), in line with this we propose to modify the MIMO inflation repartition:
- Current:
- Ethereum: 80%
- Polygon: 20%
- Proposed:
- Ethereum: 99%
- Polygon: 1% (for vMIMO incentives)
The DAO Multisig, in collaboration with the Paladin Core team will create associated quests every 2 weeks (or less/more) with appropriated parameters and use MIMO tokens claimed from treasuryMiner contract deployed on Ethereum to incentivize quests with voted repartition by the DAO.
vlAURA held by the DAO (and Mimo Labs)
Following MGP-13, which gave voting power of tokens held in the DAO treasury (as well as tokens delegated to it) to vMIMO holders (to be implemented soon). The DAO is currently controlling around 121k vlAURA, which gives the possibility to vMIMO holders to influence gauges weights, and their rewards on Parallel & KUMA related pools.
Let’s take an example: You’re a liquidity provider on the cs-kp-usd pool on Polygon and you have 100k vMIMO, let’s say that these 100k vMIMO controls 5k vlAURA tokens. As a user you will be able to vote for your pool to get more BAL tokens rewards.
The vlAURA will help to grow the liquidity (around 1.2M$ of additional liquidity at 10% APR) on pools without any MIMO tokens incentives.
The strategy behind the liquidity restructuration
By creating core pools (cs-kp-usd & cs-kp-eur) on Ethereum & Polygon, enabling any token to be paired with these liquidity pools, we offer the possibility for any protocol wishing to obtain more efficient liquidity via intrinsic yield (via KIBTs), while being connected to the rest of the ecosystem and reducing the risks for the latter (via the 3 different tokens with which the token is paired) we create a new kind of flywheel in the space for both protocols (B2B) and users (B2C).
Let’s take an example: Paladin wants to diversify and increase the liquidity of its token (PAL) on Ethereum at lower cost. To do this, the protocol creates a PAL/cs-kp-usd pool (already 1% APR with no incentives thanks to wUSK) for which it obtains a gauge on Balancer. He can then decide to acquire MIMO (market purchase, token swap, etc.) and lock it in the form of vMIMO, thus obtaining vlAURA voting power with which he votes for the PAL/cs-kp-usd pool. He then obtains rewards in BAL token on his pool without spending any money.
Conclusion
This proposal, by restructuring Parallel & KUMA liquidity, marks the beginning of a deep restructuring of the protocol economy.
Means:
- Human Resources: Multisig signers will need to sign and execute transactions to adjust MIMO tokens incentives on the Polygon & Ethereum multisig.
- Treasury Resources: There is no cost for the treasury to adjust MIMO tokens incentives on Polygon.
Technical implementation:
- Deploy a treasuryMiner contract on Ethereum (to receive MIMO inflation)
- Adjust the MIMO tokens incentives distribution through the MIMOdistributor contract
Voting options:
- For the adjustment
- Against the adjustment
- Abstain
Authors: @JeanBrasse from Mimo Labs
Community poll:
- For the adjustment
- Against the adjustment
- Abstain