Minswap LP Pool Staking Delegation Plan

The Minswap DAO currently has over 80 million ADA locked in its smart contract. As we work on a delegation strategy, this ADA currently remains unstaked. It is difficult to devise a coherent strategy on how to delegate this ADA, but rest assured Kitty Farmers and the Minswap Team are on it. However, currently this 80M ADA is unstaked, which at a conservative 4% APR, means the Minswap DAO is missing out on about 40,000 ADA every epoch if it were staked. After much discussion, it was proposed this ADA be staked temporarily to trusted FISO pools until we define a better strategy that has the full support of the community.

As you are probably aware, Minswap is an AMM DEX that is based on Liquidity Pools. This means, under the Cardano eUTxO architecture, each Liquidity Pool (e.g MIN/ADA, LQ/ADA…) is one separate eUTxO with one separate stake key. Thus, we can only delegate entire pools to SPOs, and sadly we cannot split our delegation in smaller amounts like IOHK does in their delegation program (for instance in chunks of 2-3 million ADA, in order to have the minimum a pool needs to mint blocks reliably).

For our delegation strategy it was evidently clear that in order to maximize staking rewards and minimize pool saturation, the largest Liquidity Pools needed to be delegated to the smallest FISO Stake Pool available, second largest to second smallest and so on. The nine largest Stake Pools, since they are receiving delegation from the smallest pools, will receive several LP delegations until all the pools over 2,000 ADA in TVL have been delegated. This ensures that stake pools receive the optimal benefit of this delegation distribution mechanism as well as providing the best return on the protocol’s capital allocation.

To help visualize this concept, I’ve broken this down in the following spreadsheet. Please take into consideration that the snapshot on this spreadsheet uses the parameters that were current during inception, and are therefore just an example. The parameters will be taken from live data at the moment this is implemented within the protocol. The Minswap engineers will need 1-2 weeks in order to optimize this process, divide pools into separate staking keys, and coordinate with DeFi llama to ensure they are tracking our data correctly.

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In conclusion, the Minswap DAO should be delegating the 80 million ADA currently not staked in their liquidity pools and accumulate ADA for the DAO Treasury. Until a satisfactory strategy (which we are working on) is devised, we propose to delegate to FISO pools following a quantitative method that allocates the biggest Liquidity Pool on Minswap to the smallest FISO pool in terms of delegation. During the delegation, Pools shall be actively monitored as in the FISO, to ensure no fees are raised.

This DAO Governance proposal was written by PurritoGeneral and Blocks. We would like to begin the conversation and community debate on a more permanent way to choose stake pools for delegation perpetually into the future.

28 Likes

Great idea! Way to find a clever way to use the unstaked ADA, put it to good use for the DAO, support SPOs and decentralization, and secure the network!

5 Likes

This is an absolutely great temporary solution. I think it makes sense balancing potential over-saturation and rewarding FISO SPOs. Well written and articulated. I 100% agree and would vote on this as a good temporary solution until the architecture allows LPs ADA to be delegated to multiple pools.

3 Likes

I am 100% in favor of this temporary strategy. I would also like an accounting from the Minswap team about what wallet and/or smart contract the rewards will be sent to, and who will have signing keys to that wallet.

9 Likes

I am an SPO and applied to be part of the selected few a long time, but I wasn’t lucky then and didn’t make it in the lottery. Why reward the same SPOs and not new ones? Some of the pools in your list are also part of ardana and milkyswap, and have been part of sundayswap. Is it really the fairest of choice?

2 Likes

I agree! Staking the ada for 4% return is still a lot of income for DAO. Idle Ada is a waste and big opportunity cost.

Each SPO has a huge sum of ADA. Who is holding the wallet key(s) for these ADA? Are there risks for ADA to be drained? If yes, what are steps to prevent/mitigate those risks?

5 Likes

@PGSargent any thoughts on his questions? Not sure how to answer them!

1 Like

It is truly a big risk…A SPO wo gets delegated 40mn ADA could ramp up variable fees to 99% and this would cost the DAO a lot. Hence, at least in the beginning, it might be better to start with a Private Stake Pool until a better delegatn strategy is set

5 Likes

Supported. Let’s get those ada to work with already trusted pools.

The ISPO have proven they can be trusted and if bad behaviour is displayed stake can be moved

this needs to be sorted out

using the pools of the alliance would not be a bad idea