Proposer – Terraform Labs
Disclaimer – I am employed by TFL.
TFL is proposing a broad-based amplification of LUNA-denominated liquidity mining (LM) incentives from the Community Pool for UST pools across several leading apps and protocols on major layer ones. The proposal details below will serve as a baseline for potentially expanding the program should it prove effective after re-evaluating its results in 3 months.
The goal is to deepen UST liquidity in strategically important pools that serve as hubs of DeFi activity for users on these chains. The LM execution plan below will increase the overall demand for UST, simultaneously augmenting UST’s cross-chain network effects as the premier decentralized, inter-chain stablecoin. Magnifying exposure to Terra across different user sets localized to specific layer ones is also a valuable knock-on effect that will result.
As a key growth metric for Terra, the outstanding supply and growth rate of UST is a barometer for the health of the Terra economy at large. The progressively larger and more rapid expansion of the demand for UST begets net positive effects across the Terra ecosystem induced by accelerating seigniorage, value accrual to network stakeholders, and protection against contractionary cycles.
In a highly competitive crypto market for capturing specific users as long-term proponents and users of Terra, LM incentives denominated in a highly attractive asset to hold, LUNA, stimulate the growth of UST at a strategically important time. Cross-chain bridges are gaining traction and establishing UST as a viable and liquid base pair in diverse pools is critical for ossifying UST’s position as a leading stablecoin.
This proposal conveys that the potential long-term benefits of LM incentives for UST allocated in LUNA from the Community Pool at this stage of the broader crypto market cycle outweigh the short-term increase in the circulating LUNA supply for the incentives below released from the locked Community Pool.
This proposal is also intended to establish a reference template for how TFL considers effective LM incentives in size, length, and scope. By following the parameters outlined below, we encourage the LUNAtic community to more actively engage in the discussion, proposal, and execution of similar LM incentive programs from the Community Pool where effective.
LM High-Level Overview
The plan for each app/protocol below is defined via a 3-month LM incentive period denominated in LUNA, with matching incentives from target projects in their native asset incentives to promote augmented UST liquidity.
The target yield for each base pool is 20% with matched incentives in line with previous LM incentive proposals.
- Source – Bringing Terra stablecoins to Solana)
LM Incentive Program Length – 3 months from the time of the on-chain vote execution (should it pass).
Total LUNA to deploy over 3-months – $3 million of LUNA (at the price of proposal execution) over 3 months. At current prices, this entails ~60K LUNA.
LUNA Per-App/Protocol – $85K in LUNA incentives per month per project = $255K in LUNA over the 3-month period per project.
Incentives will be re-evaluated after the 3-month LM period concludes.
LUNA Incentives Distribution
All LUNA incentives requested for this proposal should be matched by equal native asset incentives from the target apps/protocols.
Unlocked LUNA from the community pool will be withdrawn to the following address controlled by TFL and distributed to the pools below accordingly:
The total LUNA over 3 months for each pool is $255K, equating to $85K in LUNA per month unless otherwise denoted and evenly distributed over multiple pools.
- UST (Wormhole)/USDT
- UST 3-Pool (Wormhole UST, USDT, USDC)
- UST (Wormhole)/USDC
Binance Smart Chain (BSC)
- UST (Wormhole)/BUSD
- Wormhole 3-Pool (Curve.fi)
- Make UST a routing pair
Cosmos (via IBC)
Proposal for LM incentives here.
To streamline the above strategy, TFL’s opinion is to implement the above LM incentives to begin, followed by several factors to consider for future LM proposals benefitting UST liquidity:
Provision 1 month-worth of incentives for any $100M+ TVL project that reaches out, re-evaluating incentives on a quarterly cadence.
Provision $10,000 in grants to any project that integrates $UST on any chain, distributed every month.
New projects requesting LM incentives or grants must create a proposal on Agora first to elicit feedback from the community stakeholders.
Pending community feedback and discourse, we will potentially adjust this proposal to match the suggested changes. A revised proposal will be communicated once ready to initiate as an on-chain governance vote based on accepted community stakeholder input.
Please allow for open discussion regarding the proposal above.