$MINomics Research Part 1: Exploring Tokenomic Models and Revenue Sources

Gm!

This Forum post is intended to have a space for the Minswap community to express their thoughts on Tokenomics, in the context of the recent article which was published and that you can find here. The article gives an overview of some basic tokenomics, and raises some questions for the community to answer, namely:

1. What does the staking of a revenue generating DEX token look like where the staking plays a necessary function in the protocol, and where people do not have to sell the DEX token obtained to take profits?

2. How could Bonding/Protocol Owned Liquidity be incorporated into $MINomics?

3. LP Fees: if 0.05% of swapping fees paid on the DEX go to a profit sharing treasury, what should be done with those assets, and how should they be redistributed? Some ideas: a whitelist of a series of assets (e.g. $LQ, $DANA, $WMT…); or all assets are sold and $MIN is bought and distributed; or same idea but with $ADA or $Stablecoin.

4. Batcher Fee: if some % of the $ADA Batcher Fee could be distributed as revenue, how much should it be and how should it be distributed?

5. Farming rewards from POL: should the POL be farming? How should farming rewards from POL be distributed? How can Minswap increase its POL?

6. $ADA staking rewards: Should all $ADA Staking rewards the DEX generates by staking the $ADA in LPs go to Liquidity Providers? Or could some be redirected as revenue to increase $MIN Utility?

7. Do you have any further ideas regarding $MIN Utility not mentioned in the article?

Looking forward to contributions!

17 Likes

I believe part of the ADA staking rewards generated by the min pool should support the MIN/ADA pair as well as part of the batcher fees and swapping fees.
This fee sharing could be accessed by providing liquity in the min ada pair and farming it whereby the farming would lead to an accumulation of all the rewards tokens rather than just Min.
I like the concept of reduced acquisition price of LP tokens as a reward for holding Min and preferential access to IDOs.

I am currently very bothered that Min is distributed as a freebie to those farming other pairs acting as an incentive to sell.

Once lending protocols come online a Conservative portion of the locked ada could be used to generate additional revenues to benefit the min/ada pair liquidity providers.

7 Likes

$min LP providers should receive discounted swaps. Maybe a NFT project to boost revenue rewards and create a pool of money for LP pay outs. Also direct secondary royalties to the LP payout. Allow minting of NFTs on the dex in $min would be a nice feature.

HErs a response - hope it helps, just my thoughts. Happy to clarify whenever needed, and also entirely possible I may not be understanding the implications correctly so feel free to correct me :slight_smile:

1. A) Perhaps providing liquidity in MIN/ADA trading pair? B) Providing protocol owned liquidity to utilize for growth initiatives. C) Is there really a need to stake at all? Could we just have the ability to claim rewards based on volume of MIN held in connected wallets? Making it super simple for end users may end up generating greater rewards, as there wouldn’t be a reason to lock anything up (less risk for end users) and you could gain revenue just from purely holding (benefit for holders). Have users have to come to Minswap to claim rewards and then have eyeballs on page where you can upsell/advertise other things for greater engagement (continuous web traffic)

2. I am guessing that if the protocol owns liquidity from staking volume, then they can take central decisions to provide additional farming bonuses to partner projects that can drive further adoption from select project groups. Thus generating additional trade volume, and therefore additional revenue return for MIN stakers.

3. Ideally redistributed as $ADA or $Stablecoin as a reward for having MIN. Seems most appealing from end-user POV.

4. % revenue share should be defined by protocol as they only know revenue needs for operation and growth balanced against value of rewarding MIN holders, but the distribution should be distributed the same way as LP fees revenue.

5. I don’t think POL should be farming. As that reduces farming rewards from end users by saturating the pool and just keeping rewards owned by the protocol when they should be going to LPs. Unless I’m understanding incorrectly. POL could be used as means to bolster the farming rewards for LPs. Though, ultimately all decisions of POL should be made with the mission of increasing $MIN utility and revenue for $MIN holders. If this is the mission, then the protocol will organically grow as there is more long-term holding and staking benefit to $MIN.

6. Some should be redirected as revenue to increase $MIN utility

7. Nope

5 Likes

What about a lottery? once a quarter, half of the treasury goes to LP stakers who staked for the whole Q and the other half goes to random user? Just a thought.

2 Likes

just look at Curve on Eth mainnet, make a veMIN token which needs to be locked up for different periods of time, which will give boosted governance based on how long you lock the token, same for % of swapping/trading fees distributed back to veMIN lockers, thus creating utility and incentivising users to lock their token instead of dumping it, you could also boost LP rewards for veMIN lockers. being one of the first dexes on cardano, coming up with a rewarding/antidumping vemodel could easily push MINswap to cardano s no1 dex. it very simple, something that pays people will get sold less!

5 Likes

Perhaps the revenue could be shared among those who hold their MIN for X amount of days? SundaeSwap seems to locking folks that provide LP for 30 days :see_no_evil: Doesn’t sound much Cardano ethos.

Revenue could be a share % that adjusts the longer you keep the token, thus encouraging people not to sell it immediately but to keep MIN for as long as they desire. Another option could be that MIN holders could stake MIN in exchange for several other tokens (maybe many at once - take that Ethereum! :thinking: ), bought with the revenue that is generated by the DEX and distributed that way to LP providers. The double YF would be replaced by this.

There are a lot of things you can do and I think the best approach would be a combination of several sources. I don’t have time right now to go through all the sources you mentioned in detail but I got the idea the other day which would be perfect for the AMM DEX model with batching that you & other Cardano dexes are using, now the only thing is I’m not sure how hard/ challenging it would be to implement but that’s for you guys to explore.

Since the batching is right now is mostly a centralized process this would help with decentralization + value to MIN. It goes like this, you implement the same/ similar method sundae is using for batching but instead of random/ voted pools you add MIN staking to the mix. If you wanna become a batcher you need minimum amount of X MIN that you need to lock up, the higher % of MIN you have locked up out of all batchers the higher chance & % of transactions your pool gets. Even slashing can be applied to misbehaving batchers…

I’ve been looking at sundae & it seems pretty unreasonable for the protocol to pay so much for such a basic and “cheap” service with scoopers basically taking on zero risk. This would be great for dex token, pool operators & overall decentralization, just not sure how technically challenging it would be.

4 Likes

Buy back and burn will be better. 2 billions min token is too much for dex.

This topic is not very reassuring. In fact, it establishes the situation for which it is not known exactly what the MIN token is useful for and which therefore will continue to decrease its value for a long time. Very bad. It’s sort of a MinSwap defeat.

1 Like

MIN holders and MIN/ADA LP providers should directly benefit from the ADA being staked in the MinSwap staking pool, instead of being put to the DAO treasury as it is currently.

  • Issue MIN/ADA LP providers and single staking MIN providers ADA token rewards after an epoch contract locking period (5 days). Get paid in ADA for having or staking MIN/ADA LP or MIN tokens.
  • These ADA tokens would be generated through ADA staking rewards received every epoch (5 days). +5% per year target (minimum).
  • The ADA staked would come from the ADA portion of all liquidity pools (~50% of total TVL) across the MinSwap DEX. Taking advantage of the liquid staking features unique to Cardano.
  • The ADA should be delegated to single pool operators elected by the community (as opposed to MinSwap stake pool) for a determined time period (example… 3 months) and would rotate thereafter (open for discussion here).
  • The ADA staking rewards earned over the 5 day contract locking period would be split by both MIN/ADA LP providers and MIN single staking providers according to their % MIN ownership of the total MIN staked. (Example… if staking MIN/ADA LP only your MIN portion of your LP position would count towards your % ownership, due to the fluidity of LP token ownership the MIN token snapshot would be taken at beginning or end of 5 day contract lock period).
  • MIN/ADA LP providers would still be eligible for Yield Farming MIN rewards in addition to getting ADA staking rewards (double dipping rewards) that exists today when you Yield Farm.

Another way to incentivize people to hold MIN or MIN/ADA LP and not get crushed by IL.

I’m not sure how to calculate the ROI% on this but I think it would be WAYYY more than 5% per year because the total ADA that MinSwap could stake is spread over EVERY pool and we’d only be talking about rewarding the MIN or ADA/MIN LP holders in ADA rewards vs everyone in other pools.

Are you in favor of having ADA rewards earned from stake pool delegation being paid out to MIN/ADA LP holders and MIN holders every epoch (5 days)?

  • Yes
  • No

0 voters

3 Likes

Incentivize people to hold their MIN token.
Reward people who supported you from the very beginning.
Maybe buy back and burn to reduce the token supply because it is huge number for a DEX.
I wish you all the best!!

2 Likes

I believe others would answer points 1-6 well. I would like to suggest something for point 7.

Air drops of other tokens on the Cardano block chain to MIN holders based on the amount of MIN they hold in wallet, in liquidity and MIN rewards unclaimed. This could be coordinated with other protocols providing liquidity on the pool to provide a percentage of their supply as an airdrop to MIN holders. Not too sure if the finer details. However I believe uniswap does something similar.

2 Likes

For the long term success of the Minswap DEX a bonding or vote-escrowed (ve) implementation which incentivizes long term holding are two possibilities where it would be nice to see a pro/con table of both approaches.

  1. Stake $MIN to earn $XYZ token ($XYZ could be $ADA / $Stablecoin / token from any project that are having partnership with). $ADA / $Stablecoin is more preferrable.

  2. Skip

  3. Redistribute in $ADA / $Stablecoin rather than in $MIN is more ideal. Otherwise, more people selling off their $MIN rewards just like now.

  4. The team will need to work this out and come up with a sustainable model in terms of how much % to distribute to $MIN holders and Liquidity Providers.

  5. POL should not be farming. Diluting the farming rewards is a big No.

  6. A bigger cut should go to Liquidity Providers where the rest should redirected to increase $MIN utility.

  7. Incorporate gamification for $MIN usage & earnings.

4 Likes

Hello frens! It’s wonderful to be able to provide input.

  1. Lets be real. Staking to receive revenue from the DEX is an artificial remedy to the problem of mercenary capital - a problem that is caused by flawed tokenomics from the outset. Incentivizing liquidity through inordinate token emissions in the early stages can only exert excessive pressure to the downside, since the value of rewards will always be greater yesterday than it is today. Although Min has a decreasing emissions schedule, this schedule is arbitrary and the supply squeeze is still outpaced by decreasing demand since there is no demand except that it lock in profits and hedge against Impermanent Loss. It exists solely to be traded away. In-fact, there may come a time when the price is so low and the emissions so pathetic that there will not be an incentive to LP given the volatility of market prices and LPs time preferences. This is the yield farming death spiral.

So then what is the solution? Again we circle back to staking. We need to close the loop between rewards and revenue so that there exists a relationship between the incentive to provide liquidity as well as participate in the revenue generated across the protocol. We need YFers to feel connected the health of the protocol as a whole rather than the myopia of the profitability of their farms.

The health of the protocol should be reflected in the valuation of its token. Directing protocol revenue to the purchase of its token creates buy pressure commensurate with the activity (volume) of the protocol. Thus, we will actually have a demand curve for the token and the market can begin making valuations based on earnings just as with any other business (Profit-Earnings ratio). However, directing revenue to a lock-up (staking contract) is indeed counterproductive. Since the goal of any DEX is liquidity, removing liquidity into a staking contract in which the revenue will be concentrated doesn’t make sense. Rather the revenue generated should go directly into the price action of the token itself and form a floor price based on protocol performance and participation.

Some quick maffs. There is approximately 100 million TVL on Minswap, so thats 50 million in Ada sitting in liquidity pools that can be staked, the rewards of which can provide buying pressure for Min. Thats (50 million x 4%) / 73 = 27397.26 ADA worth of buying pressure every epoch, roughly 2% of average volume on the min/ada pair in that time. As protocol TVL increases, this buying pressure remains commensurate with TVL while Min emissions decrease.

I wont go into liquidity bonding and POL since again, I think they are artificial solutions to mercenary capital which in turn is generated by flawed tokenomics from the outset. Until we can generate a basic price discovery mechanism for Min based off of the revenue generation of the protocol, then everything else is window dressing.

7 Likes

in my opinion the best way is the:

  1. Batcher Fee: the user should be able to pay it in ADA or in MIN but the MIN price should be fix like the ADA price. as an example 2 ADA or 6 MIN

this shows that minswap trus its own token.

1 Like

the second favorite:

  1. LP Fees: a part of LP Fees should used to buy back MIN and then just burn it.

but what incentive do batchers have to hold it? youre just moving the problem a step

In my opinion a model where ADA stacking rewards from the liquidity in the DEX, a % of the LP fees and a % of the batcher fees (ie 10% of the fees) are “given” to the DAO, and the DAO ZAPs in all this ADA int he MIN/ADA pool is the thing to do.
By doing that the use of the DEX and the valuation of MIN token would be correlated with the Liquidity of the DEX and also with the tx volume (use and the transactions held in the dex).
Besides that ideas to incentivise the use of the dex by rewarding loyalty (reduced fees? provide MIN token?) of end users could be analysed.
MIN token value should be fully correlated to the DEX (TVL, tx volume and volume exchanged)

1 Like