VeNomics
A. Introduction
The goal is to attract additional liquidity and trading volume by introducing a more decentralized approach for yield farming. The basic concept is explained with the following image.
The Min/Ada pool token is locked for 1,2 or 3 years and in return the user recieves veMin (1/3, 2/3, 1). VeMin is able to vote for the total emissions every 6 months and votes for liquidity pool emissions every 2 weeks. Alternatively you can sell your voting power on the secondary market (i.e. you dont provide any liquidity to any pools other than min/ada). The secondary market replaces external farming rewards by buying votes with their token instead of distributing it to the pools. Total min emissions should be suggested by MinLabs and only vetoed by voters for now. Also it should be possible to vote for zero emissions with your voting power lowering total emissions by your voting weight.
B. Benefits
- First of all the whole process is automated and saves work hours for the team.
- MinswapDAO goes the first step to become a DAO and gives min meaningful voting rights.
- Time lock shows long term commitmend to the DAO.
- Increased trading volume due to the nature of the secondary market.
- Increased liquidity due to fair and transparent rules and higher APRs.
- Ensure deep liquidity for min
C. Risk management
A vested token also creates risks. Min holders could see an opportunity to extract value without providing any benefits to the AMM. Therefore i propose a pool rating system that ranges from A very good to F very bad. Every new pool gets assigned a F first. VeMin holders can then vote for pools and the average of all votes is applied to the pool every 2 weeks whereas A means full voting power is applied to the pool or put different their full share of emissions is granted to the pool. Every lower rating reduces emissions by 20% whereby F means 0%. Votes for a pool with F rating are lost.
Another risk here is IL. Staking pool tokens instead of plain min always comes with the risk that ADA or MIN outperforms each other. Current staking was able to stabilze min/ada a bit but it keeps dropping further with every downturn in crypto. Therefore current ADA emissions should not be given to stakers but used to keep an peg to ADA. The peg ratio should be voted on. If min keeps its peg no ADA should be spent at all until the peg breaks to the downside.