LEAP-44: Incentives for LYRA-ETH Mainnet Liquidity

Author
StatusProposed
Created2022-03-08

Simple Summary

This LEAP proposes 5m LYRA in annual incentives for LYRA-ETH Uni v3 liquidity on Ethereum mainnet via Arrakis. It also proposes removing LYRA-ETH incentives for the same program on Optimism.

Motivation

Following LEAP 42 and the migration of LYRA staking to mainnet, we need a liquid venue for users to acquire LYRA on mainnet to participate in governance. This is particularly important for migrating more DAO functions to on-chain governance (such as token voting) that will only be feasible on mainnet due to cross-chain messaging constraints.

Additionally, with majority of LYRA moving from Optimism to Ethereum mainnet, there is not presently a use case for holding native LYRA on Optimism or any L2. The DAO should save its OP tokens for programs with protocol utility.

Specification

Overview

  • A LYRA-ETH Uni v3 pool with 1% fee will be incentivised with an annual rate of 5m LYRA.
  • A liquidity range of (0.2x, 5x) spot will be used as a starting point and can be updated by Council with 1 week notice.
  • The Arrakis Protocol, which offers easy management of Uni v3 liquidity, will be used similar to the previous program proposed in LEAP 21.
  • To ensure smooth migration of token liquidity, when LYRA-ETH incentives on Ethereum mainnet start, LPs will be given 2 weeks to migrate before incentives on Optimism are disabled.

Rationale

  • At time of writing, 5m LYRA should attract ~$1.2m TVL for 50% APY, a reasonable depth to bootstrap token liquidity.
  • A Uniswap v3 range of (0.2x, 5x) current spot offers a ~180% improvement in capital efficiency relative to Uniswap v2 (https://uniswap.org/blog/uniswap-v3).
  • A 2 week migration window gives LPs 2x the 7 day challenge period to bridge their LYRA from Optimism to Ethereum mainnet.

Test Cases

N/A

Configurable Values

Proposed range for liquidity: \((0.2spot, 5spot)\ where spot is the LYRA price on program launch.