State of KPI liquidity mining

This post was originally published on UMA

Chandler

Sep 29 · 4 min read

Background

UMA introduced Liquidity Mining 2.0 (LM 2.0) in a previous article which outlined how a smarter liquidity mining program would look like using KPI options. This is a model that Andre Cronje has also announced his support for.

Three LM2.0 Programs Live

After sharing this piece, DAOs have reached out and developed such programs on UMA. Three teams that have already launched are:

Each program was customized to suit the DAO’s particular needs.

BarnBridge

The launch of BarnBridge’s new SmartAlpha product comes with a 10,000 $BOND reward program for the WBTC and ETH pools. Rewards are distributed to depositors of either side of the Smart Alpha pools. The value of the options is determined by the total value locked (TVL) in the pool along with a scaling scoring factor. The target for scaled TVL will be $19,900,000 for each of the WBTC and ETH pools.

The scoring factor will score each weekly epoch on the ratio between senior and junior tranches. If junior dominance is lower or equal to 50%, the epoch score will be calculated by multiplying the junior dominance share by four. Alternatively, if junior dominance is above 50%, the epoch score is calculated by multiplying the senior dominance share by four. The overall KPI metric is a function of TVL scaled by the average epoch score over all the epochs.

Yield Enhancement Labs (YEL)

YEL’s liquidity mining program will run for three consecutive monthly periods on Ethereum and Polygon. It will reward KPI options tokens to liquidity providers for their stake in the YEL pools. The target value for each chain is set for a goal of $2 million. The rewards emission schedule per milestone will be as follows:

biswap
  • $500,000 —50 000 YEL per day
  • $1 million — 120 000 YEL per day
  • $2 million — 250 000 YEL per day

YEL’s approach pays out rewards at an emission rate that is determined after each month. The rewards are paid out retroactively based on the total TVL for the given month. The design achieves the same outcomes as a standard KPI option program while allowing YEL to set more attractive emission rates if it reaches certain milestones.

For example, if the pools reach a $1.1 million value in one month, the KPI will expire with an emission rate of 120 000 YEL per day. This means that 3.6 million $YEL will be unlocked and claimable to option holders in a 30 day period. Reaching over $2 million will mean 7.5 million $YEL is claimable.

B.Protocol

B.Protocol is aiming for $150 million in TVL. The 90 000 $BPRO program will pay options the same way their current liquidity mining program distributes rewards, with an added bonus if the protocol crossed the TVL milestone.

If B.Protocol reaches $150 million TVL, each option is worth 3 $BPRO and 1 $BPRO if it does not. This design ensures that liquidity providers still get the same rewards under a normal liquidity mining program and bonuses if the protocol reaches the TVL threshold.

More details on the project can be found on the B.Protocol’s docs site.

How Your DAO Can Participate

As the examples above show, KPI options are flexible and customizable to the needs of a protocol. Teams can create custom payout logic, bonus rewards and set specific timelines on their reward programs.

No lines of code are required to launch a KPI option. The main requirement is for teams to think about how they want to be smarter about rewards. Sketching out the details of the program involves finding a metric, choosing a target, and a payout function associated with the target. From here, the UMA team can help finalize the details and parameters.

If you want to create your own KPI-based smart rewards program, contact the UMA team at [email protected], on Twitter, or join our Discord, where our SuperUMAn community can get you the help you need. You can also get more info KPI options product page.

Leave a Comment