Joint Liquidity Farming Initiative for MIN + OPTIM on OADA/ADA Pool

Proposals
1

Following feedback from the Minswap Community on previous OADA proposals, the Optim DAO presents the following proposal:

Optim DAO will commit to a 50/50 liquidity farming arrangement with Minswap for 6 months, with the mutual understanding that Minswap’s technical team is working towards delivering an ADA-compatible stableswap solution within that time frame.

Without the integration of a proper stableswap, a standard OADA/ADA liquidity pool lacks significant utility for the Cardano DeFi ecosystem. It would function more as a farm box, with low volume but contribute to Minswap TVL. It would unlikely generate much real yield or see pool growth, however it would function to hold liquidity within Minswap from liquidity partners until the proper ADA-compatible stableswap is deployed.

Dexhunter intends to incorporate OADA minting and token-to-token routing into its platform. This integration would enable OADA/ADA stableswap pools to act as hubs for routing liquidity on trades involving tokens paired with OADA.This would, in turn, drive higher volume and generate increased fees for the pool.

The institutional liquidity provider LPing the current OADA/ADA pool has indicated flexibility regarding the required APY for sustained liquidity provision. They are willing to maintain liquidity at a 3.5-4% total APY, while efforts are made by Minswap’s technical team to create the necessary Stableswap pool. Upon launch of the proper OADA/ADA stableswap, terms of the 50/50 farming agreement between Optim DAO and Minswap DAO should be reevaluated. If creation of the MIN/OPTIM Double Farm and eventual OADA/ADA stableswap are not provided, the Optim DAO cannot guarantee that current TVL will not move elsewhere.

APY Calculation for MIN/OPTIM Farm:

The projected financials are as follows:

940k ADA in the pool
Current ADA price = 0.3636

Expected APY = 3.5%

(940,000 ∗ 0.3636) ∗ 0.035 = $11,962.44 total cost of the farm for an entire year

  • Divided by two: $5,981.22 per DAO
  • Divided by two for the 6-month period: $2,990.61 per DAO

Token Breakdown:

  • MIN Tokens:

Price per token: 0.015

2990.61 / 0.015 = 199374

199,374 tokens

  • Optim Tokens:

Price per token: $0.1216

2990.61 / 0.1216 = 24593.81

24,593.83 tokens

Rounded Figures:

  • Approximately 200,000 MIN and 25,000 OPTIM tokens to be provided by each DAO respectively.
2

As I understand there are 2 steps in this:

  1. Creating a “normal” pool ADA-OADA.
    As I understand this is a temporary measure until the stableswap supports ADA as a posible input.

And im guessing this from previous iterations but, for this is Optim hoping Minswap to put up the ADA for the pool?

If that is not the case there is no need to vote anything, pools are permissionless meaning everyone can open one.

  1. In 6 month things will be reevaluated

So there is not much to say about the issue now, and we will see after the period if the technical difficulties have been solved.

So to sum up, I guess this proposal is mostly to ask Minswap to grant 500K ADA to Optim, so they can provide liquidity. For this facility (which is a loan) Minswap is getting only the volume.

Not only that, but as I undestand it OADA price is “guaranteed” to 1 ADA by mostly arbitrage on the upper end, and a constant demand/minting on the lower end. As of today I have always seem demand of OADA to be increasing so this bound is not really tested, and the current “depeg” can be explained by high fees, as of now that I just tested buying 1K OADA costs me 999.724808ADA, whereas minting it in the platform would cost me 1K. So this is mostly working as of today, but if demand should stay constant or decrease this may be an issue. If that is the case OADA price will “lose its peg”, if this happens it will mean that ADA-OADA pair has more OADA than ADA, and in 6 months when we have to take it out Minswap may end up getting back way less ADA was put in originally.

To sum up, I think a loan is a good idea, but since Minswap is the one that would be holding the downwards risk in my opinion there should be rewards. Im all for putting the DAO money to work, but the ADA is now incurring staking rewards, and putting it into this pool would mean having an increased risk, but no possible reward for the DAO. It is true that stakers may benefit slightly, but in my opinion risks far outweigh rewards (mostly because rewards are few), and we have seen with iAssets that issues with pegs are tricky, so we cannot be oblivious to the risk.

To sum up, if the proposal is asking for 500K ADA from the DAO to put in the pool I personally would vote no for the reasons exposed above. I however would not be against this being put to a vote, since I know lots of people want to see DAO funds deployed. But I feel the proposal is not clearly expressing the risks the transaction has, or maybe there is something I’m not understanding. If those risks where explored I would vote it to go on chain, but would vote no.

Also please note that this is not the right approach if you want something to get onchain, you need to do a temp check discussion, and then a poll, and then it can proceed onchain.

3

Reposting Zygomeb’s comment from the older thread so it doesn’t get missed here:

I’ve decided to reply myself since the comments I made internally were not being relayed here.

A few points:

  • The Minswap Pool is not a stableswap we can use for ADA/OADA, and this is acknowledged as a shortcoming on the design of it
  • Volume on the Actual Stableswaps is the relevant part, and while not being ‘astronomical’, it pulls in consistent numbers. On average, ~45k ADA daily volume, where it comes and goes in spikes as people wind down their positions in the system. (Attached image from a pool live for the last 23 out of 30 days tracking)
    image

There are two paths for this proposal to go, assuming that there is interest in following it.

  • Thinking about it like a farm box, where there’s parked ADA+OADA and Minswap DAO benefits from more ADA to vote with and redistribute staking, while catching no volume (as it isn’t a stableswap, and as such, can’t support any volume)
  • Thinking about it as a partnership, where it has long term benefits for Minswap DAO by working with the Optim DAO on supporting liquidity and volume going through OADA pairs. This would involve making it an actual stableswap we can use, that can support volume through it and not simply an ADA farm box.

Personally I prefer thinking about it as the second version, given the potential for extension into working together on leverage trading facility and OUSD pairings. I’m less interested in farming, as more benefit is yielded by integrations. Of them, to make this pair into anything real and meaningful beyond a farm box, would require either an adjustment to the code of the stableswap, or a routing through a “wrapped ADA” token internally on the Minswap side.