Title: [MIP-6] Re-balancing of MFAM/MOVR Token Liquidity Incentives
Author(s): Fechuky
Submission Date: 10/28/2022
This proposal has been submitted to governance and is now up for voting! Check it out: https://gov.moonwell.fi/apollo/proposal/2
Summary
The Moonbeam Foundation has provided a grant of 23,822.4 MOVR to Moonwell Apollo liquidity providers for November in order to fuel the growth of the Moonriver ecosystem. I am proposing reward speed adjustments that fully distribute these liquidity incentives to the Core lending protocol, as well as adjustments of MFAM liquidity incentives to the Core lending protocol, the Safety Module, and the Solarbeam MFAM<>MOVR farm.
As a part of this proposal, I have included a 100,000 MFAM grant to my wallet address. This is in line with the precedent set by community member not-taco in his first proposal on Moonwell Artemis MIP-2, where he encouraged new people to create and maintain the protocol through governance.
I have also used MIP-2 as a foundational work to help guide the creation and formatting of this proposal (MIP-6)
Proposed Updates
Reward Speed
- Safety Module:
- 1.36 → 1.56 MFAM per second
- Target APR: 80%
- 1.36 → 1.56 MFAM per second
- DEX LP:
- 5.31 → 5.2 MFAM per second
- Target APR: 100%
- 5.31 → 5.2 MFAM per second
- Core:
- 285,000 MFAM per day
- Target APR: ~1-8%
- 850.8 MOVR per day
- Target APR: ~1.05-8.3%
- 285,000 MFAM per day
Moonwell Contributor Grant
- 100,000 MFAM → 0x87E1e08eDAfD16346d8328e2CF260ff8Bdad9e84
Upon execution, these new rates will come into effect and Moonwell Contributor Grant will be transferred on [tbd]
Definitions
MFAM - The Moonwell Apollo governance token.
Liquidity Incentives - MFAM and MOVR tokens used as rewards to incentivize liquidity growth.
Core - Moonwell Apollo protocol.
DEX LP - Solarbeam MFAM<>MOVR farm
Safety Module - Smart contract that backstops the Moonwell Apollo protocol in case of a “shortfall event”. Users are able to stake their MFAM and receive MFAM rewards.
Reward Speed - The rate at which MFAM and MOVR are distributed to DEX LPs, Safety Module, and Core protocol.
Overview
500,000,000 MFAM have been designated as liquidity incentives for Moonwell Apollo and will go to the Core protocol, Safety Module, and DEX LP. These tokens are intended to be allocated over a four-year period, beginning from the launch of the Moonwell Apollo protocol on 02/22/22. The ratio between these 3 components needs to be adjusted regularly to properly balance rewards and incentivize liquidity.
Below I have provided screenshots showing the previous balance of liquidity incentives between the 3 components and my proposed updates.
Safety Module
I will begin by covering the Safety Module. The Safety Module’s main function is to backstop the Moonwell protocol in case of a “shortfall event”, and rewards MFAM stakers for doing so. Safety Module rewards are distributed on a per-second basis and are rewarded evenly amongst staking wallets. This rate at which MFAM is distributed is known as the reward speed.
The last time that the Moonwell Apollo Safety Module reward speed was updated (10/03/22), there was ~45.8M MFAM staking in the SM, valued at around $102,547.59. It was estimated that the TVL in the Safety Module would grow to roughly $120,000 by 11/03/22 (4 weeks). Like on Moonwell Artemis (MIP-2) the target APR for the Moonwell Apollo Safety Module is 80%, so the reward speed was set to 1.36 MFAM/second.
On 10/26/22, there was ~56.5M MFAM staking in the SM, at a valuation of $137,765.26. Since 10/03/22, the price of MFAM has risen from $0.0022 to $0.00244. It is estimated that Safety Module TVL could grow to around $150,000 by 12/01/22. Therefore, it’s recommended that the reward speed for the SM be raised from 1.36 MFAM/second to 1.56 MFAM/second in order to maintain the target 80% APR at the estimated TVL of $150,000.
DEX LP
The MFAM<>MOVR farm on Solarbeam DEX provides the liquidity that allows for users to buy or sell the MFAM token on their exchange. Incentivizing TVL in this farm is important as higher liquidity equals lower slippage for those swapping MFAM tokens. LPs earn rewards for adding liquidity to the pool and staking their LP tokens (tokens received for adding liquidity to pool). This proposal will update the “reward period” for the farm, which includes both the reward speed (number of MFAM/second that are distributed to stakers) and an ending timestamp (which defines when the reward period will end).
On 10/03/22, the MFAM<>MOVR farm on Solarbeam had a TVL of ~$348,990 and it was estimated that it would grow to around $375,000 by 11/03/22. The target APR for the farm was 100%. This resulted in a reward speed of 5.31 MFAM/second and an end timestamp of 1667532600, which signifies Fri Nov 04 2022 03:30:00 GMT+0000.
On 10/26/22, the TVL in the farm was $373,673. The price of MFAM had risen from $0.0022 to $0.00244. It is estimated that the TVL in the farm could increase to approximately $400,000 by 12/01/22. Therefore, it is recommended that the reward speed be adjusted to 5.2 MFAM/second, with an end timestamp of 1669951800, (Fri Dec 02 2022 03:30:00 GMT+0000).
Core Protocol Rewards - MFAM
Core protocol rewards are the rewards that are paid to suppliers and borrowers in Moonwell Apollo’s money markets and can be claimed at any time from the rewards modal at the top of the dapp. Core Protocol rewards are important as they incentivize LPs to provide useful liquidity to the protocol. Rewards can be split between each of the money markets and also between suppliers and borrowers at any arbitrary ratio.
As of 10/06/22, these were the reward emission ratios set for the Moonwell Apollo protocol:
Though it is not recommended that the total emissions be altered (285,000 MFAM/day), it is recommended that the weightings are adjusted in order for the rewards to more closely match the TVL changes in the below markets:
- MOVR 15% → 13%
- KSM 10% → 8%
- FRAX 18% → 20%
- USDC 33% → 35%
Core Protocol Rewards - MOVR
The Moonbeam Foundation has provided a grant of 23,822.4 MOVR to Moonwell Apollo liquidity providers for November in order to fuel the growth of the Moonriver ecosystem. Anyone that supplies or borrows on Moonwell Apollo will be able to claim these rewards from the Rewards modal found at the top of the Moonwell Apollo app. Like the Core Protocol MFAM rewards, these MOVR rewards are intended to incentivize LPs for providing useful liquidity to the protoco, and can also be split between each of the money markets/suppliers and borrowers at any arbitrary ratio.
As of 10/06/22, these were the reward emission ratios set for the Moonwell Apollo protocol:
Though this proposal will not alter the total emissions, it is recommended that the weightings are adjusted in order for the rewards to more closely match the TVL changes in the below markets:
- MOVR 15% → 13%
- KSM 10% → 8%
- FRAX 18% → 20%
- USDC 33% → 35%
Conclusion
Thank you for reading my recommended updates to MFAM and MOVR liquidity incentive distributions. I hope you have taken the time to read through and understand my proposal. Please feel free to give me any feedback or questions that you may have!
I’ve followed the lead of not-taco and his proposal MIP-2 to adjust WELL liquidity incentive distributions on Moonwell Artemis. I would like to encourage other community members to take an active role in governance. You can share your ideas in the forums and create proposals for the betterment of the protocol! Like not-taco, I have also requested a grant for my labor and time spent in the preparation of this proposal. I would also encourage other members of the community that take on similar work to do the same!
Finally, though I am an independent member of the Moonwell community, I have consulted with other Moonwell contributors regarding reward distribution data and generating/verifying proposal call data.