LEAP-4: Incentivise Uniswap sUSD / Dai Round 2

Author	Ksett
Status	Implemented
Created	2021-09-22

Simple Summary

Distribute LYRA tokens to users who provide liquidity to the following pool: This LEAP includes modified paramaters for V4.1

Uniswap sUSD / Dai

This program will run from Monday, 27 September through Monday, October 4th.

V4.1 will run from Monday, 4th October through Monday, October 11th.

V4.2 will begin Monday, 11th October, end date to be determined by council with 72 hours notice to LP's.

Abstract

LEAP-4 is intended to be a continuation of Lyra's liquidity mining program on Uniswap's sUSD/DAI pair. Users who provide liquidity will receive LYRA tokens in proportion with their share of the total liquidity. The tokens will be distributed on a date yet to be determined. This will likely be around the initial token distribution, which is planned to occur in late October.

Pool	Weekly Rewards	Begining	Ending
Uniswap sUSD / Dai	150,000 LYRA	Monday 27 September 00:00 UTC	Monday 4 October 00:00 UTC
Uniswap sUSD / Dai	150,000 LYRA	Monday 4 October 00:00 UTC	Monday 11 October 00:00 UTC
Uniswap sUSD / Dai	112,500 LYRA	Monday 11 October 00:00 UTC	TBD

Motivation

LEAP-3, the first liquidity mining program, has been successful in migrating millions of sUSD liquidity over to L2 but the sUSD/DAI peg has become an even greater issue. sUSD demand skyrocked and both Lyra and Synthetix are doing what they can to move the peg closer to a 1/1 ratio.

Synthetix community has successfully lowered the c-ratio to 600 (SCCP-137) and continues to work on launching the ETH wrapper and diverting inflation from L1 (SCCP-136). While we wait for ETH wrapper or for an additional injection of sUSD liquidity from synthetix, we can offer a new liquidity mining program with a lower range to work towards acheiving a liquid and stable peg ratio.

Continuing LYRA rewards for a lower and symetrical liquidity range will provide incentive for stakers to migrate their debt from L1 to OE and for current LPs to sell some sUSD for DAI or bring more DAI over from L1 to continue liquidity providing. This should lead to the following outcomes:

Moving the upper bound of the liquidity range closer to the current market.
Requiring equal parts sUSD/DAI to liquidity provide in the range.
Reduce the cost of acquiring sUSD on OE for non snx stakers, enabling liquidity providers and traders from the broader community to access the platform.
Reduce the time frame to allow more flexibility to change with market conditions.

Specification

Since the LYRA token is not live, it is not feasible to use the popular staking rewards contracts. Instead, rewards for the pool will be computed off-chain using a script that determines the average liquidity provided by an address over the period. The work required in this LEAP is determining the eligibility criteria and implementing the script.

Rationale

It is not easy to determine how many tokens to distribute without a market valuation. It is also still relatively difficult for stakers to move debt from L1 to L2. Given the total supply of 1B tokens (verifiable here), a distribution of 150,000 over one week for sUSD/DAI pool represents a 20% decrease in lyra rewards from the previous two weeks layed out in LEAP-3. The decrease in rewards is to signal a desire to still incentivise the sUSD/DAI pool to support Lyras user experience, but the intention to not do so in perpituity. By running a one week program, we can observe:

What happens to the sUSD/DAI ratio 
How much the sUSD supply expands 
What % of the sUSD supply goes to the Uniswap pool 
What % of the sUSD supply goes to the ETH Market pool

V4.1 will extend the existing liquidity mining program for an additional week while we continue to evaluate market forces and conditions.

V4.2 will lower and tighten the trading range and extend the liquidity mining program for an additional week. The rewards will continue to be reduced by an additional 10%, 18,750 LYRA each week while the program is in effect. We will continue to evaluate market forces and conditions during this program. Council may change the range required to receive rewards at any time with 24 hours notice or discontinue the program at any time with 72 hours notice. Any changes will be announced via discord

This information will help inform future incentive programs.

Technical Specification

Uniswap sUSD / Dai

Address: 0xA14e5b3BA5dd981b536E0950390b03972B795018
Amount: 150,000 LYRA
Start: 1632700800 
End: 1633305600

V4.1 Uniswap sUSD / Dai

Address: 0xA14e5b3BA5dd981b536E0950390b03972B795018
Amount: 150,000 LYRA
Start: 1633305600 
End: 1633910400

V4.2 Uniswap sUSD / Dai

Address: 0xA14e5b3BA5dd981b536E0950390b03972B795018
Amount: 112,500 LYRA
Start: 1633910400 
End: 1634558400

An algorithm will be used to determine the range to be eligible for the rewards, the selected ratio will be announced in Lyras discord channel. Liquidity must be provided with the following bounds:

Current Ratio = Uniswap sUSD/DAI spot price snapshot 1 hour before the incetive launch
maxPrice = Current ratio + .05 (rounded to the nearest .01)
minPrice = 1 - (maxPrice - 1)

V4.1 will use the same range calculated using the algorithm in LEAP-4

Min price: 0.80012 DAI per sUSD (-2230 mintick)
Max price: 1.1996 DAI per sUSD (1820 maxtick)

V4.2 will use a lower and tighter range than V4.1

Min price: 0.8496 DAI per sUSD (-1630 mintick)
Max price: 1.1503 DAI per sUSD (1400 maxtick)

Although fixing the bounds reduces the flexibility afforded by Uniswap V3, it simplifies the logic for determining who is eligible to receive rewards. It will also ensure that people are providing liquidity on both sides of the market and not trying to game the rewards system by not making their liquidity active. The symetrical range attempts to entice current liquidity providers to swap their sUSD for DAI to remain in the pool as it will require roughly equal parts of both. While users can easily bridge DAI to OE quite easily, its likely that these LPs already have as much liquidity on OE as their risk tolerance allows.

The start and end period will be broken up into 3 hour chunks, where the following algorithm is applied:

1. Find all mint events at the pool address
2. Find all nft ids using transfer events that are at the same block number as the mint events
3. Find all "increaseLiquidity" events for the nfts in step 2
4. Find all "decreaseLiquidity" events for the nfts in step 2
5. Get "liquidity" per nft as at the snapshot period end block number
6. Get "owner" per nft as at the snapshot period end block number
7. Discard any nfts that were transfered or had liquidity modified between snapshot start and end block numbers
8. Allocate share of tokens for the snapshot period to each nft/owner

Test Cases

The script will be open sourced and available for anyone to run and verify.

Configurable Values

LEAP-4

Uniswap Rewards = 150,000
Uniswap Start = 1632700800
Uniswap End = 1633305600

V4.1

Uniswap Rewards = 150,000
Uniswap Start = 1633305600 
Uniswap End = 1633910400