V2 Launch, POL Migration, & Fee Discount [MIP 2.0] - Temp Check

Background

Minswap Labs has been working on Minswap V2 since before it was announced in November 2023 at the Cardano Summit. This new Smart Contract brings a set of improvements in scaling, composability, new features and more which you can find here.

Migration to a new Smart contract requires two main verticals:

  • Detailed instructions around the V2 contracts and the ways Liquidity can be migrated, as well as migrating DAO owned Assets.
  • Detailed incentives strategy to encourage V2 adoption using Farming Rewards and discounted Batcher Fees.

We describe both below and seek DAO approval.

Scope of Change

By voting affirmatively, the DAO will:

  • Approve the launch of Minswap V2 contracts
  • Approve the 2 Liquidity Migration options given to LPs
  • Approve migration of DAO-owned POL to V2
  • Approve the Yield Farming Allocation strategy to incentivize V2 migration
  • Approve a 50% Discount on Batcher Fees for 3 months after Launch

Launching V2 contracts

Minswap V2 was audited twice, once by CertiK, and once by Anastasia Labs. In addition, a 30-day Bug Bounty was completed where Cardano developers had the chance to review the code, report bugs and get compensated. Here are the key resources for Minswap V2:

  • Audit report by Anastasia Labs:
  • Bug Bounty Findings: one minor level finding and one medium level finding were found. They have been addressed and updated in both Audit Reports above. We will publish an additional article explaining them and showing the compensation TX IDs on July 1st.

Liquidity Migration mechanism

Liquidity migration to Minswap V2 can be performed in two ways:

  • Automated Liquidity Migration: This method automates the process of transferring liquidity from V1 to V2. It involves Minswap Labs acting as an intermediary during the migration process, for the handling and temporary custody of assets. Here are the technical details:

    • Process: Users make 2 transactions one by one, one for Withdrawal and one for Deposit. On the Orders page interface, users will first see the Withdraw transaction, followed by the Deposit transaction once the Withdrawal is completed. Users can cancel either transaction to stop the process anytime. The Automated Liquidity migration supports the LPv1 in both Wallet and Farm. For more details:

      • LPv1 in Wallet: Withdraw LPv1 → Deposit to Pool v2 → Users receive the new LPv2
      • LPv1 in Farm: Withdraw and Harvest LPv1 in Farm → Withdraw LPv1 → Deposit to Pool v2 → Users receive the new LPv2
    • Notes:

      • The Liquidity Migration progress may be affected by the Slippage Tolerance settings as they are still DEX transactions. This means the Withdraw or Deposit transaction could be pending due to being out-of-price (over slippage selected). If its pending for too long, you can cancel it anytime.
      • There is a chance that the Pool V2 price might vary slightly from the Pool V1 price because of price volatility (due to low slippage selected), as they are separate pools. This could result in users receiving slightly more or less in V2 than in V1.
      • If users are migrating a large amount of tokens, we recommend using Manual Liquidity Migration as the safest approach
    • Interface Steps:

  • Manual Liquidity Migration: For liquidity providers whose LP Tokens are staked in the farm, the process involves several steps. First, LP Tokens must be unstaked from the farm. Subsequently, liquidity providers need to execute withdrawal requests from V1 and then deposit these funds into V2. This method offers more control over the migration process but requires more steps and active management from the liquidity providers.

Migrating Minswap DAO POL to V2

Minswap DAO owns about 30% of the MIN/ADA Liquidity both from the LBE and the Fee Switch. The DAO also owns other Assets in LPs, such as FLDT/ADA LP Tokens, INDY/ADA LP Tokens, SPTX/ADA LP Tokens or MCOS/ADA LP Tokens.

All those DAO owned LP Assets are to be migrated to V2 shortly after deployment.

Yield Farming Point Allocations

After the establishment of the new Liquidity Pools in V2, an automated system will adjust the reward allocation points between V1 and V2 based on their respective Total Value Locked (TVL). It is important to note that the dynamic adjustment of allocation points will apply to all farming rewards including MIN, ADA and project token rewards. This approach ensures that these key incentives align with market Minswap’s strategic objectives, maintaining fairness and competitiveness in rewards distribution.

The automated system will last for 2 weeks. After the initial 2 weeks, the same system will apply, but with 50% less farming rewards on V1. After 4 weeks, rewards will fully switch to V2.

Batcher Fee Discount

A Fee Committee has been informally set up to study Minswap V2 Fees. We suggest a period of experimentation for the 3 months after Minswap V2 launch where Batcher Fees are discounted 50%. Meaning the current 2 ADA Fee will be 1 ADA. The MIN Discount will apply in the same way as before, with the max discount being 25%. In other words, the batcher fee will range from 1 ADA to 0.75 ADA based on how many MIN tokens users hold (maximum discount of 0.25 ADA for 50,000 MIN).

Once the 3 month period is over, a Proposal will be posted on the Minswap Forum to present the findings of the Fee Discount, establish a Fee management strategy and a Fee management committee with several responsibilities.

14 Likes

Congrats on the bug bounty finish!
Team has built a good UX (but custody) liquidity migrator. Users with large amount of funds should migrate manually to be on the safe side.
MIN/ADA POL migration is obvious.
YF alloc point shifting strategy is very nice, it gives people enough time to react and will more heavily incentivize V2 migration later
Batcher fee discount might affect revenue but it’ll make Minswap more competitive and give traders more incentives to use V2 on launch

All in all I can’t find any complaint about the proposal and I think we should launch v2 asap

9 Likes

Very proud of the work the whole team has been doing. V2 launch is a huge step for Minswap!

Its important to give LPs enough time and resources to go about their Liquidity migration, as its a big step. We also want to ensure a shift of liquidity to V2, that’s what the yield farming strategy is all about.

Also, personally, most curious about how that huge 50% Batcher Discount will affect volumes…will it be enough to kickstart a legendary Cardano DeFi summer? :eyes:

8 Likes

full support on all points from me. congrats team

6 Likes

bloody fantastic. just be sure to make it super obvious in the UI that the automatic migrator is custodial, perhaps set a parameter that triggers a suggestion for manual migration if theres 1000s of ada worth of liquidity.

new financial year, lets get after it

7 Likes

Proud to be Chicken amongst some of the best cats around. Amazing job guys! :blush::heart:

4 Likes

Very excited about V2 launch. Eveerything looks great. Maybe we should add some type of Pop up message when someone is adding liquidity on V2 in case they are unaware that a better option will exist

5 Likes

Very happy congratulations you guys are the best! Release the monster!

5 Likes

Looks good to me, I’m in! Lets do this thing

4 Likes

full support
let’s goooooo

3 Likes

what about burned LP tickets (meme coins)? will that liquidity get migrating automatically?

access to the lp token is required for migration, if the access is lost forever (burnt) then the liquidity can never be moved to V2