Warden Finance - Base Liquidity Incentives

Warden Finance - Base Liquidity Incentives

Hi everyone,

Upon the passage of the proposal to promote Warden Finance as market rewards manager on behalf of the DAO, we wanted to share our rewards distribution plan for the upcoming year and also provide an update in regards to the first changes we have made.

We are happy to answer any question or provide further details if you need. Feel free to follow up in this thread or reach out to me directly (TG: @hboisselle, Discord: @hboisselle)

Base Rewards Distribution Plan

In order to provide better user experience, our rewards distribution model aims to be as consistent as possible through time. We will use an emission schedule with epochs of fixed duration (28 days) with a gradual increase in allocation.

Total amount: 217,500,000.00 WELL
Epochs: 13
Epoch duration: 28 days

Epoch # % per epoch Total per epoch Start timestamp Start date
1 5.000% 10,875,000.00 1691791200 Fri Aug 11 2023 22:00:00 GMT
2 5.449% 11,850,961.54 1694210400 Fri Sep 08 2023 22:00:00 GMT
3 5.897% 12,826,923.08 1696629600 Fri Oct 06 2023 22:00:00 GMT
4 6.346% 13,802,884.62 1699048800 Fri Nov 03 2023 22:00:00 GMT
5 6.795% 14,778,846.15 1701468000 Fri Dec 01 2023 22:00:00 GMT
6 7.244% 15,754,807.69 1703887200 Fri Dec 29 2023 22:00:00 GMT
7 7.692% 16,730,769.23 1706306400 Fri Jan 26 2024 22:00:00 GMT
8 8.141% 17,706,730.77 1708725600 Fri Feb 23 2024 22:00:00 GMT
9 8.590% 18,682,692.31 1711144800 Fri Mar 22 2024 22:00:00 GMT
10 9.038% 19,658,653.85 1713564000 Fri Apr 19 2024 22:00:00 GMT
11 9.487% 20,634,615.38 1715983200 Fri May 17 2024 22:00:00 GMT
12 9.936% 21,610,576.92 1718402400 Fri Jun 14 2024 22:00:00 GMT
13 10.385% 22,586,538.46 1720821600 Fri Jul 12 2024 22:00:00 GMT
Total 100.0000% 217,500,000.00

2023-09-01 Rebalancing of Base Token Liquidity Incentives

On September 1st 2023, we have rebalanced the reward rates for the ongoing epoch ending on Sept 8. (epoch #1)

Issues addressed by the update

  • ETH utilization is high (has spiked close to 100% and currently stands at 75%, at kink)
  • DAI borrow activity is non-existant even though supply is quite high
  • cbETH supply is non-existant. cbETH IRM and rewards are prohibitive and non-attractive.

Description of changes

  • Allocate supply-side rewards to cbETH market to help bootstrap liquidity. The proposed allocation has high probability to attract >$1M total cbETH supply given the aggresive yield:
    • 16% APR supply-side rewards at $1M cbETH total supply
    • 8% APR supply-side rewards at $2M cbETH total supply.
    • 4% APR supply-side rewards at $4M cbETH total supply.
  • Maintain ETH rewards high to stimulate more supply in order to decrease ETH market utilization
  • Allocate supply-side rewards to DAI market to keep liquidity levels high until borrow activity is bootstrapped

Specification

Reward distribution cbETH DAI USDbC ETH
WELL supply rewards (% of allocation) 0% β†’ 20% 0% β†’ 20% 55% β†’ 25% 45% β†’ 35%
WELL borrow rewards (% of allocation) 0% 0% 0% 0%
Reward speeds cbETH DAI USDbC ETH
WELL supply rewards speed (WELL per second) 0 β†’ 0.90 0 β†’ 0.90 2.47 β†’ 1.12 2.02-> 1.57
WELL borrow rewards speed (WELL per second) 0 0 0 0

Transactions

4 Likes

love to see it, looks good to me.

Rebalancing of Base Liquidity Incentives (2023-09-08)

We have reviewed the impact of the rewards allocation for epoch #1 and subsenquently applied minor updates for epoch #2.

Epoch #1 Review

  • :green_circle: cbETH market liquidity was successfully boostrapped with over $2M supply once rewards were allocated to the market on Sept 1st.
  • :green_circle: DAI total borrows increased by 700k (+660%) once supply-side rewards were added.
  • :red_circle: ETH market utilization remained high throughout the epoch, even with the relatively aggressive rewards allocation.

Epoch #2 Updates

Issues addressed by the update

  • ETH utilization is constantly high (>75%). High utilization poses risk for ETH lenders and makes it harder to fulfill liquidations.

Description of changes

  • Increase ETH rewards share to stimulate more supply in order to decrease ETH market utilization.

Specifications

Epoch # % per epoch Total per epoch Start timestamp Start date
2 5.449% 11,850,961.54 1694210400 Fri Sep 08 2023 22:00:00 GMT
Reward distribution cbETH DAI USDbC ETH
WELL supply rewards (% of allocation) 20% 20% 25% β†’ 20% 35% β†’ 40%
WELL borrow rewards (% of allocation) 0% 0% 0% 0%
Reward speeds cbETH DAI USDbC ETH
WELL supply rewards speed (WELL per second) 0.90 β†’ 0.98 0.90 β†’ 0.98 1.12 β†’ 0.98 1.57 β†’ 1.96
WELL borrow rewards speed (WELL per second) 0 0 0 0

Impact

We are already seeing a decrease in WETH utilization immediately after increasing WETH market rewards allocation.

References

Dune Analytics - Moonwell on Base dashboard

Transactions

Rebalancing of Base Liquidity Incentives (2023-09-14)

Hi everyone,

We’ve a made two changes to Base market reward rates since the last time we gave updates.

On September 14 2023, native USDC market was successfully launched on Moonwell Base deployment. In order to help bootstrap initial liquidity for the market, we have shifted rewards from other markets towards native USDC. We also started reducing USDbC rewards to as a soft deprecation measure for the market.

We plan on fully deprecating USDbC rewards on November 3rd (epoch #4).

Reward distribution (Sept 14 2023) cbETH DAI USDbC USDC ETH
WELL supply (% of allocation) 20% β†’17.5% 20% β†’ 17.5% 20% β†’ 10% 0% β†’ 20% 40% β†’ 35%
WELL borrow (% of allocation) 0% 0% 0% 0% 0%
Reward speeds (Oct 6 2023) cbETH DAI USDbC USDC ETH
WELL supply (WELL per second) 0.98 β†’ 0.86 0.98 β†’ 0.86 0.98 β†’ 0.49 0 β†’ 0.98 1.96 β†’ 1.71
WELL borrow (WELL per second) 0 0 0 0 0

2023-10-06 Epoch #3 allocation updates

On October 6 2023, we applied minor tweaks in order to further encourage migration from USDbC to USDC.

Analysis

  • Native USDC market liquidity was successfully bootstrapped with over $1M TVL once rewards were added (~$2.8M supply / ~1.8M borrow). Market remains at healthy levels of liquidity.
  • Utilization for ETH market was mostly below the interest rate kink throughout epoch #2. Keeping utilization closely below the kink is ideal from a risk perspective.
  • Utilization for DAI, USDbC, USDC and cbETH markets were largely below kink throughout epoch #2.


Specifications

  • We have further reduced USDbC rewards to encourage users to migrate to USDC.
  • We have increased supply-side rewards for ETH market, as supply activity on the market is very elastic to rates and utilization remains high.
Epoch # % per epoch Total per epoch Start timestamp Start date
3 5.897% 12,826,923.08 1696629600 Oct 06 2023 22:00:00 GMT
Reward distribution (Oct 6 2023) cbETH DAI USDbC USDC ETH
WELL supply (% of allocation) 17.5% 17.5% 10% β†’ 5% 20% 35% β†’ 40%
WELL borrow (% of allocation) 0% 0% 0% 0% 0%
Reward speeds (Oct 6 2023) cbETH DAI USDbC USDC ETH
WELL supply (WELL per second) 0.86 β†’ 0.93 0.86 β†’ 0.93 0.49 β†’ 0.27 0.98 β†’ 1.06 1.71 β†’ 2.12
WELL borrow (WELL per second) 0 0 0 0 0

Next steps

  • In order to encourage users to migrate to USDC, we will fully deprecate USDbC rewards starting next epoch (Nov 3 2023) if it is safe from a liquidity risk perspective.

Rebalancing of Base Liquidity Incentives (2023-11-03)

Hi everyone,

We have applied minor allocation changes for to start epoch #4. In order to encourage users to migrate from USDbC in favor of USDC, we have now fully deprecated USDbC rewards.

Note that Base have effectively started to deprecate USDbC. The token can no longer be minted from the Base bridge UI. As a consequence, we expect on-chain liquidity for USDbC to rapidly migrate to native USDC in the months to come.

Reward distribution (Sept 14 2023) cbETH DAI USDbC USDC ETH
WELL supply (% of allocation) 17.5%β†’20% 17.5%β†’20% 5%β†’0% 20% 40%
WELL borrow (% of allocation) 0% 0% 0% 0% 0%

By applying this change, we expect TVL for USDbC to significantly surpass USDC with little to no net TVL loss.

Next steps

  1. Rewards will need to be rebalanced once wstETH market is deployed.
  2. We will monitor USDbC and USDC markets over the next few days to measure the impact of this change.

Rebalancing of Base Liquidity Incentives (2023-11-29)

We have applied 3 changes over the last 25 days:

1) Nov 13 2023 - wstETH market launch

We have allocated rewards to wstETH market upon launch to help bootstrap liquidity.

  • ETH: 40% β†’ 38%
  • wstETH 0% β†’ 2%

2) Nov 20 2023 - rETH market launch

We have allocated rewards to rETH market upon launch to help bootstrap liquidity.

  • ETH: 38% β†’ 36%
  • rETH: 0 β†’ 2%

3) Nov 29 2023 - Enable USDC reward stream

We have enabled the USDC reward stream using the same allocation as WELL rewards. A total of 38,600 USDC is set to be allocated per 28 days epoch.

Reward distribution (% of allocation) cbETH DAI USDbC USDC ETH wstETH rETH
WELL supply 20% 20% 0% 20% 36% 2% 2%
WELL borrow 0% 0% 0% 0% 0% 0% 0%
USDC supply 0%β†’20% 0%β†’20% 0% 0%β†’20% 0%β†’36% 0%β†’2% 0%β†’2%
USDC borrow 0% 0% 0% 0% 0% 0% 0%
Reward speed (token/s) cbETH DAI USDbC USDC ETH wstETH rETH
WELL supply 1.14 1.14 0 1.14 2.05 0.11 0.11
WELL borrow 0 0 0 0 0 0 0
USDC supply 0 β†’ 0.0030432 0 β†’ 0.0030432 0 0 β†’ 0.003043 0 β†’ 0.005478 0 β†’ 0.0003043 0 β†’ 0.0003043
USDC borrow 0 0 0 0 0 0 0
1 Like

Rebalancing of Base Liquidity Incentives (2023-12-29)

We have applied two sets of updates over the last 30 days

1) Dec 01 2023 (Epoch #5)

Analysis

As rewards epoch #5 started on Dec 01 2023, we assessed that market health indicators were within optimal levels for all markets (utilization, on-chain liqudity vs market usage).

Specifications

WELL rewards emission rates have been scaled for all market. Rewards share per market were kept the same for USDC and WELL reward streams.

Epoch # Total per epoch Start timestamp Start date
5 14,778,846.15 WELL (6.795% of total)
36,812.46 USDC
1701468000 Fri Dec 01 2023 22:00:00 GMT
Reward distribution (% of allocation) cbETH DAI USDbC USDC ETH wstETH rETH
WELL supply 20% 20% 0% 20% 36% 2% 2%
WELL borrow 0% 0% 0% 0% 0% 0% 0%
USDC supply 20% 20% 0% 20% 36% 2% 2%
USDC borrow 0% 0% 0% 0% 0% 0% 0%

1) Dec 29 2023 (Epoch #6)

Analysis

We observed the following change in market conditions over the course of epoch #5:

  • Sizeable supply positions have been pulling out of USDbC market, causing utilization to often fluctuate above optimal levels during the last 28 days. Total supply for USDbC decreased from 2M to 591k from Dec 21 to Dec 29.

  • USDbC circulating supply has significantly increased since the launch of USDbC lending market on Seamless Protocol. USDbC can currently be bridged via Stargate bridge, but cannot be bridged via Base native UI, as it has been deprecated in favor of Native USDC. Unless the community decides otherwise, we propose to maintain the current measures that aim to deprecate USDbC in favor of Native USDC.

  • Demand for lending wstETH significantly increased (>3X TVL increase). On-chain liquidity levels for the token have also increased sufficiently to sustain this growth.

  • DAI market usage has remained high relative to the token’s circulating supply (~9.5M token circulating supply vs 5.15M total supply on Moonwell). DAI lending market growth is currently limited by this factor.

Specifications

Given these observations, we decided to shift some of the DAI supply-side rewards in favor of wstETH supply-side rewards. We also maintained deprecation measures for USDbC.

Epoch # Total per epoch Start timestamp Start date
6 15,754,807.69 WELL (7.244% of total)
36,812.46 USDC
1703887200 Fri Dec 29 2023 22:00:00 GMT
Reward distribution (% of allocation) cbETH DAI USDbC USDC ETH wstETH rETH
WELL supply 20% 20%β†’18% 0% 20% 36% 2%β†’4% 2%
WELL borrow 0% 0% 0% 0% 0% 0% 0%
USDC supply 20% 20%β†’18% 0% 20% 36% 2%β†’4% 2%
USDC borrow 0% 0% 0% 0% 0% 0% 0%
1 Like

Rebalancing of Base Liquidity Incentives (2024-01-27)

Key observations

  • Moonwell markets utilization
    • rETH and cbETH markets are underutilized (15% utilization vs 45% kink). Demand for borrowing on such markets has historically been not very elastic to rates.
    • All markets other markets are at optimal utilization level (slightly below kink)
  • Moonwell markets total supply vs on-chain circulating supply
    • DAI and rETH have low circulating supply on Base relative to the current total supply on Moonwell Base deployment. (total supply > 50% circulating supply) Low on-chain liquidity increases the risk of accumulating bad debt when users hold very concentrated positions.
    • wstETH and Native USDC circulating supply have steadily increased over the last month. Increased on-chain liquidity reduces the risk of accumulating bad debt for the protocol, allowing for more growth to be sustained on lending markets.
    • USDbC on-chain circulating supply (75M) has been on a strong downtrend as users have started to migrate more aggressively towards Native USDC (210M).

Analysis

The set of changes we have rolled out on Jan 27 aim to address the following concerns:

  • Address low on-chain circulating supply for DAI and rETH
  • Sustain growth for ETH and wstETH

Applied changes

Reward distribution (% of allocation) cbETH DAI USDbC USDC ETH wstETH rETH
WELL supply 20% 18%β†’10% 0% 20% 36%β†’40% 4%β†’8% 2%
WELL borrow 0% 0% 0% 0% 0% 0% 0%
USDC supply 20% 18%β†’10% 0% 20% 36%β†’40% 4%β†’8% 2%
USDC borrow 0% 0% 0% 0% 0% 0% 0%
2 Likes

Rebalancing of Base Liquidity Incentives (2024-02-23)

Key observations

  • DAI circulating supply on Base critically low vs. total market supply. In order to mitigate risks of accumulating bad debt when liquidating large collateral positions, we generally recommend lending market supply to be capped to a maximum of 50% of on-chain circulating supply. In the case of DAI, total supply on Moonwell’s market is currently standing at 110% of circulating supply.
  • rETH circulating supply does not allow for more growth to be sustained at the moment. Total supply for rETH lending market is currently standing at 55% of circulating supply on Base.
  • Utilization for USDC, DAI, WETH and wstETH is currently at optimal levels (equal or slightly below kink). rETH and cbETH are currently underutilized.

Applied changes

  • Major decrease in rewards for DAI market to help reduce supply and borrow activity on the market.
  • Shift of cbETH rewards towards WETH and USDC to promote growth of markets that generally have stronger borrowing demand elasticity to rates.

Specifications

Reward distribution (% of allocation) cbETH DAI USDbC USDC ETH wstETH rETH
WELL supply 20%β†’15% 10%β†’5% 0% 20%β†’25% 40%β†’45% 8% 2%
WELL borrow 0% 0% 0% 0% 0% 0% 0%
USDC supply 20%β†’15% 10%β†’5% 0% 20%β†’25% 40%β†’45% 8% 2%
USDC borrow 0% 0% 0% 0% 0% 0% 0%

Other notes

  • USDC rewards will be terminated at the end of current epoch. USDC rewards allocation is set to be fully disbursed by Mar 22 2024.
1 Like