Proposal to Reallocate INV rewards and Migrate INV-DOLA Liquidity
Background
At the time of writing, the Inverse DAO is spending 970 INV per month on incentivizing INV-DOLA sushi liquidity on Frontier, this is currently earning depositors an APY of 120% from around $265k in liquidity depth. We believe that this spend is very inefficient, in large part due to Frontier not being an active product meaning very little traffic is currently passing through the website and viewing the opportunity. The TWG believes stopping incentivizing INV-DOLA SLP on Frontier and reallocating a smaller amount (less than 970 per month) to bribes on Balancer/AURA for the new INV-DOLA LP gauge will be far more effective in terms of attracting liquidity.
Motivation
Currently, bribing vlAURA holders on Hidden Hands yields around $1.6-$2.0 in incentives per $1 spent. This means if the monthly INV spent on INV-DOLA is reduced to 800, then with this bribe efficiency the real amount of incentives directed towards INV-DOLA pool is the value of 1,280 - 1,600 INV per month. Also, as there is far more traffic on Balancer and Aura, with many users searching for yield opportunities, we believe that the APY on the pool will be significantly lower than the currently seen 120%. If we model this new APY as being 60%, and bribe efficiency as being $2 of incentives per $1 bribe, then we can expect 4x more liquidity after this reallocation of INV emissions (while saving 170 INV per month!).
The Inverse Finance DAO Treasury currently owns $450k in INV-DOLA liquidity that is currently on UniSwap V2. With this migration of rewards to Balancer, the TWG could migrate the protocols INV-DOLA liquidity to Balancer/Aura in order to farm these new rewards. This means that the monthly bribe that is directed towards the new LP is accretive to baseline, as the DAO will be clawing back a significant portion of the bribe spent in AURA and BAL rewards. Using the 800 INV per month example earlier, if the DAO’s PoL position is able to farm back the value of 600 INV per month, then the real net spend of INV is actually around 200 INV per month. This is a real net spend savings of 80%, while bringing greater depth for INV.
In order to carry out this liquidity migration, an allowance for the Uniswap V2 LP tokens needs to be granted to the TWG.
In order to carry out these bribes, the TWG request an additional 2,400 INV allowance (800 * 3) for the next 3 months of INV-DOLA liquidity incentivization. Currently, the TWG has an INV allowance of 3,830, so the new allowance will be 6,230 (3,830 + 2,400).
Actions
- Set INV rewards for INV-DOLA to 0
- Set TWG INV allowance to 6,230
- Set TWG INV-DOLA Uniswap LP allowance to 23,000 ($450k)