Strategic Ecosystem Support Mechanism (SESM)

Proposal for the Strategic Ecosystem Support Mechanism (SESM)


This proposal introduces the Strategic Ecosystem Support Mechanism (SESM), an innovative initiative designed to enhance collaboration and mutual support among projects within our blockchain ecosystem. The SESM aims to provide projects with the opportunity to benefit from exceptions to standard operational norms, such as fee structures, in exchange for a partnership fee. The first potential application of SESM could be a collaboration with LQ, a lending and borrowing platform, to help them address the challenge of maintaining a deeper liquidity pool.

Background and Rationale

In response to LQ’s identified need for enhanced liquidity, we propose a potential exception in the fee switch mechanism for LQ’s pool. This exception would allow revenue to be retained as Protocol-Owned Liquidity (POL) instead of being distributed to stakers. Acknowledging the potential impact on MIN stakers’ rewards, we suggest a compensatory mechanism through SESM, where LQ could contribute a monthly partnership fee to maintain this exception. This approach would not only mitigate any negative impact on stakers but also provide a novel solution to LQ’s liquidity challenges.

Strategic Ecosystem Support Mechanism (SESM) Details

  • Mechanism Overview: SESM could allow for strategic operational exceptions in exchange for a partnership fee, fostering enhanced collaboration within the ecosystem.
  • Potential Application with LQ: As an inaugural participant, LQ would have the opportunity to contribute a monthly fee based on the notional value of the fee switch revenue from their pool. This innovative approach aims to offer a balanced solution to ecosystem support.
  • Fee Structure and Terms: The partnership fee would be modest and calculated relative to the generated revenue by the fee switch from LQ’s pool. An initial agreement term could be proposed for 6 months, with a clause for review and assessment of the initiative’s impact. The fee could be just symbolic (1LQ) during this period as to see and analyse the results.

Governance and Execution

  • Engagement and Voting: This proposal, along with the SESM concept, would be presented to the community for feedback and a vote, ensuring a transparent and inclusive decision-making process.
  • Preliminary Agreement with LQ: An agreement outlining the partnership fee, expectations, and terms could be drafted, providing clarity and transparency on the SESM’s application.

Expected Benefits

  • Addressing LQ’s Liquidity Challenge: This mechanism could directly enhance LQ’s pool liquidity, offering a targeted solution to their needs.
  • Innovative Ecosystem Collaboration Model: SESM represents a new model for ecosystem collaboration, where strategic benefits are exchanged for contributions to the platform’s health and growth.
  • Protection and Benefit for Stakers and LQ Holders: By introducing a partnership fee, the interests of MIN stakers are safeguarded. Additionally, this mechanism could suppress selling pressure on LQ tokens, offering another layer of value for LQ holders. With current data suggesting LQ pool only accounts for 1,2% of the revenue generated by the fee switch and ammount that seems low given the protocol’s impact on the community (third protocol with the largest TVL) makes LQ a prime candidate to try this new mechansim with.

Case Scenario: LQ and the SESM

Context: Within a 24-hour period, the total trading volume on the platform was 4,000,000 ADA, with the LQ pool accounting for 51,000 ADA of this volume. The fee switch mechanism, under normal circumstances, applies a 0.05% fee on transactions, which is then converted into rewards for MIN stakers selling the LQ part of the fee however this vlume accounts only for 1% of the current rewards, so impact to stakers would be not noticable. However, under the proposed SESM, this fee from the LQ pool would be retained as Protocol-Owned Liquidity (POL) to directly enhance the pool’s liquidity, instead of being distributed.

Operational Exception for LQ: For the LQ pool, instead of distributing the collected fees, the DAO decides to retain these as POL. Given the 0.05% fee rate and the LQ pool’s 51,000 ADA volume, the fee collected would be:

Monthly Fee=25.5 ADA×30=765 ADAMonthly Fee=25.5ADA×30=765ADA

Compensatory Mechanism: In exchange for this exception, LQ agrees to contribute a monthly partnership fee to the DAO. This fee is calculated based on the notional value generated by the fee switch mechanism from their pool’s transactions, ensuring the DAO and MIN stakers are compensated for the redirected benefits.

Benefit for LQ: The direct benefit for LQ includes enhanced liquidity in their pool, making it more attractive for users to lend, borrow, and trade, while potentially reducing the selling pressure on LQ tokens done automatically by the fee switch. This increased liquidity and stability can attract more users to LQ, contributing to its overall growth and success within the ecosystem. This could lead to higher volumes and therefore imporve the volume traded.

Long-Term Ecosystem Impact: This partnership and the SESM set a precedent for future collaborations, demonstrating the DAO’s commitment to supporting ecosystem partners through innovative mechanisms. It fosters a spirit of cooperation and mutual growth, enhancing the blockchain ecosystem’s attractiveness and functionality. And in for future integrations the DAO has already a stake in the protocol, that could help.


The Strategic Ecosystem Support Mechanism proposes a forward-looking framework for ecosystem development and partnerships. By considering SESM’s application with LQ as a starting point, we envision a more collaborative, supportive, and innovative blockchain ecosystem. This proposal not only seeks to address LQ’s immediate liquidity needs but also opens up new avenues for growth and collaboration across the ecosystem for token that suffer the same problems, giving our platform a new source of income.

Should this issue be futher investigated by the team/ proposed to LQ to see if they could be interested?

  • Yes
  • No
0 voters
1 Like

Thank you for taking your time to draw a proposal based on the current LQ situation.

Although I do think this works technically, it does not solve the issue for projects looking for a higher & faster liquidity injection given the current state of cardano DeFi.

Nonetheless this mechanism can become attractive for other situations that can afford to or are actively looking to “slow cook” their POL.


There is a lot going on right now. I do not have the brain capacity to digest this properly. I also do not want to dismiss it. I will delegate my thinking power to @CWSchub for this one. I may take it back in a couple days after all this is calmer.


This is indeed a slow and steady approach, I see it potentially as something to be added to some “faster” measures. I think it fits a lot with project providing their tokens for farming, where they provide a certain ammout of tokens that at some point run out, if additionally they incur on this service this injection of capital could allow for short term liquidity, while the SESM in the backround may porvide long term solution, and whenever they feel the service is not needed the DAO has had its service fees and also increased its POL, then it can decide what to do with it.

1 Like