ARC-3: LunaX<>Luna Pool Addition to Astroport with Dual Incentives

Summary

Add LunaX-Luna pool to Astroport and reward LPs with dual incentives ($SD & $ASTRO token emissions). Based on the community’s feedback and updated market conditions since the earlier proposal, we have updated the proposal.

Abstract

LunaX is an auto-compounding accrual token (similar to aUST) that can be minted when users stake with Stader using the liquid staking pool. Launched on December 9th 2021, LunaX received tremendous traction from the Terra community. Stader proposes to bring the LunaX-Luna pool to Astroport users.

Motivation

With over 20,000 wallets minting LunaX, LunaX is a widely used aUST style liquid staking derivative. LunaX is already used as a collateral on Mirror (Poll link here) and Edge protocol while several DeFi integrations are in the pipeline. Here are a few key details about LunaX:

  • Total Staked Luna: 1.9 M Luna (155 M UST as on April 12th 2022)
  • Total size of LunaX <> Luna LP Pool: 1.6 M Luna (130 M UST as on April 12th 2022)

Luna <> LunaX pool is the largest pool on Terraswap. Stader would like to work with Astroport & bring the LunaX-Luna liquidity to Astroport (if governance approved) benefiting both the Astroport and Stader communities.

With this dual incentives proposal we expect the LunaX-Luna LP pool to grow 2-3x compared to its current size. With increasing utilities for LunaX across Terra, we also anticipate significant transaction volumes on the pool.

We will ensure that LPs who move their liquidity from Terraswap or Loop to Astroport will continue to vest their farmed SD tokens.

Specification

Based on feedback from our community, we would like to add additional SD rewards to the Lunax-LUNA Astroport pool. We propose an increase in Stader rewards to 7500 SD per day (2.5x of initial proposal). SD rewards would be determined and changed by Stader governance after it is live.

In order to further grow the LunaX-Luna pool, we propose a dual incentive mechanism.

We propose that the Astral Assembly rewards the Luna <> LunaX LPs with 26,027 ASTRO tokens per day (9.5 M ASTRO per year). This results in an alloc_point value of 105,000 in the Generator contract.

The estimated APY is shown below for various levels of liquidity.

Liquidity in LunaX-Luna pool Stader Rewards APR Astro APR Reward APR to User
$150,000,000 9.2% 19.5% 28.7%
$200,000,000 6.9% 14.6% 21.5%
$250,000,000 5.5% 11.7% 17.2%
$300,000,000 4.6% 9.8% 14.4%

The Stader (whSD) rewards contract address on Columbus is terra1g683f7ddlc4zfpwvk93sdky9q53jc6g3uwj09l.

Update Based on Astro Community Feedback

Thanks a lot for sharing your thoughts about the proposal. After hearing Astro community’s feedback, we are revising the proposed Stader and Astro emissions as detailed below:

  • Bumping up SD token rewards by 60% to ~12000 SD tokens/ day
  • Reduced proposed Astro emissions by 40% to ~16500/ day (makes Alloc_pointer ~66650)
  • Makes the rewards composition 1:1 from SD and Astro emissions

Happy to hear any thoughts/ suggestions from the community.

  • Total SD token supply is 150 Mn.
    ** Transaction volumes on Luna <> LunaX are lower vis-a-vis other pools as farmed SD tokens are vested over 6 months from Feb - Jul ’22. Volume is expected to increase over time as farmed SD rewards vest.
    ***whSD is wormhole SD

Copyright

Copyright and related rights waived via CC0.

17 Likes

For me it’s a welcoming development, it will bring more users to astroport

1 Like

Would also agree for this. This may also be a highly likely traded pool given the increasing utility of $LunaX, increasing Astroport’s revenue source.

4 Likes

Great idea. The Stader LP would be a fantastic addition for the ecosystem.

2 Likes

Will SD token emissions stop after community farming event ends? If so, will the LunaX-Luna pool stop receiving SD token at this point?
That’s the only issue i see here. Astro emissions are continuous (not community farming event) but sd token distribution may end (after comm. farming event ends).

1 Like

Actually, ASTRO token emissions are meant to change, first by Astral Assembly vote and later by vxASTRO holder votes.

1 Like

This brings us to the estimate that the Terra city population has around 120k/150k to 4.7M current users (old data). This is a large range but if I had to narrow it down to one figure, I’d lean towards the lower limit.
This bring estimation more or less 10 to 20% pareto probability forecast active vxastro future votes , as more engagement kick in.

The SD rewards mentioned here are separate from the community farming event, the LunaX-Luna pool would receive continuous SD rewards similar to ASTRO token emissions.

1 Like

Adding LunaX<->Luna pool is a good a idea, I’m absolutely in support of it, however u dont think the Astro APRs’ should be higher than SD rewards, or at least not this much higher…
If this is the only way to get the pool with SD rewards then im ok with it otherwise i think the Astro APRs should be decreased to at most the same % as SD rewards

I’m glad that Stader is open to moving their LUNA-LunaX pool to Astroport and are also open to providing SD incentives. I understand that it is easy to compare LunaX to stLUNA as well as compare their respective pools, however I do not believe they deserve equivalent ASTRO incentives.

stLUNA is readily convertible to bLUNA, both of which have incredible amounts of TVL across Terra. Primarily we see the utility of bLUNA/stLUNA with holding in a wallet for staking yield, on Anchor as collateral, on Nexus in a higher yielding vault, and on various DEXes for providing liquidity. While LunaX has utility on Mirror as collateral and DEXes for LPing, the TVL is much lower. stLUNA and bLUNA together have over $4B UST worth of LUNA staked which is 45 times the TVL as Stader’s LunaX.

The current incentives at a price of $0.75 per ASTRO are about USD $70685 per day while 1/45th of this value (commensurate with TVL and relative utility across Terra) would be $1570 USD worth of ASTRO per day. While I do believe LunaX is growing at a greater rate than bLUNA/stLUNA I do not believe Astroport should be providing the level of incentives you have described nor do I believe Astroport should provide more incentives than Stader.

I do not have a specific calculation that will provide us with a reasonable estimate of appropriate incentives but I believe if Stader provides $13500 USD worth of SD tokens per day then Astroport should provide around $5000-7000 USD worth of ASTRO tokens per day. If Stader were to remove LP incentives from Loop and migrate those incentives to Astroport it would be beneficial as well.

Thank you for your proposal and I look forward to discussing this further.

4 Likes

Can’t wait until vxAstro holders can direct the astro emissions and lido and stader can compete via bribes for emissions

I agree with the incentivisation of Luna-LunaX pools in Astroport.

The current pools in Terra:

  1. Incentivised Loop Pool: $17.62m TVL with $3.3k fees (7d fee) approx. 16.93% APR with both SD & LOOP tokens
  2. Non-incentivised Terraswap Pool: $115.12m TVL with $12.2k fees (7d fee) approx. 1.33% APR

The above two pools are constant product pools, and Terra lacks a stableswap invariant pool for Luna-LunaX.

The demand for a stableswap incentivised pool can bring much needed volume into Astroport, as shown in the screenshot above for bLuna-Luna pool where Astroport pool has close to 95% of all trading volume in this pool, surpassing the incentivised pool in Loop.

LunaX has recently been included as collateral in Mirror Protocol and Edge Protocol and in the near term, could be added into Mars Protocol. Setting the stage with deep stableswap liquidity will definitely capture most of the trading volume in the near term.

2 Likes

I believe having LunaX dual rewards takes our TVL up by 10% and open up the arbitrage opportunities which can lead to substantial changes in the volume.

Also, LunaX is one of the synthetics , with FTMX HBarX SolanaX and PolygonX launching in April. They could bring substantial TVL and volume across pairs.

This should be implemented through governance ASAP as we look forward to see Astroport taking charge of our ecosystem growth.

-Yash (TFL)

3 Likes

The executable message for this proposal looks like this:

[
   {
      "order":"1",
      "msg":{
         "wasm":{
            "execute":{
               "contract_addr":"terra1zgrx9jjqrfye8swykfgmd6hpde60j0nszzupp9",
               "msg":"eyJhZGQiOiB7ImxwX3Rva2VuIjogInRlcnJhMWs3bGV4eDM1djRsdXRuZmRmN243bHVmM2htdDJ3cGhuNjMzZmF1IiwiYWxsb2NfcG9pbnQiOiAiMTA1MDAwIiwicmV3YXJkX3Byb3h5IjogInRlcnJhMWc2ODNmN2RkbGM0emZwd3ZrOTNzZGt5OXE1M2pjNmczdXdqMDlsIn19",
               "funds":[
                  
               ]
            }
         }
      }
   }
]

The value in msg is the base64 encoded version of:

{"add": {"lp_token": "terra1k7lexx35v4lutnfdf7n7luf3hmt2wphn633fau","alloc_point": "105000","reward_proxy": "terra1g683f7ddlc4zfpwvk93sdky9q53jc6g3uwj09l"}}
2 Likes

I’m all for this proposal but I think requesting 10% of Astro emissions is a bit high. Especially when considering that 2/3 of the overall yield to that pool will be from Astro emissions and 1/3 of the yield will be from Stader emissions

1 Like

I agree on the value that having Astroport as the main liquidity pool for LUNAX-LUNA will bring. However as per @AstroChad69’s point, would stader labs consider matching ASTRO incentives in value instead?

1 Like

The LunaX-Luna LP would be a valuable addition for the DEX. I’m less concerned about the precise % of Astro emissions going into this LP, because that is going to get adjusted every 2 weeks anyway once gauge voting gets implemented.

The goal right now should just be to onboard the right LPs (assuming the % Astro emissions aren’t crazy), and then we can adjust the precise emissions through gauge voting once vxAstro is implemented.

1 Like

@vbrpm Posting here on behalf of a large private group with enough ASTRO to possibly overturn the vote (at the current moment), with a leaning toward voting against. We wanted to open a dialogue as we believe there’s a lot of potential here, but we’d like to see either a revision to the proposal or stronger justification for these terms in order for us to vote to accept it.

Asking for basically 10% of annual emissions to be redirected toward this new pool seems unfavorable for the ASTRO protocol and hard to justify based on the following points:

  1. SD rewards are significantly lower than proposed ASTRO rewards, when many protocols with farming incentives are paying out the lions share of the rewards with ASTRO as a supplemental boost. This proposal puts a bulk of the burden on ASTRO.

  2. Current stats for Luna/LunaX pair are very weak: https://app.terraswap.io/pairs/terra1zrzy688j8g6446jzd88vzjzqtywh6xavww92hy.

With current stats, trading volumes would only generate about $200k in fees for ASTRO stakers, yet the proposal asks for $30m~$40m in annual emissions (and quite likely a lot more since we’re all bullish on ASTRO).

Take stLuna-Luna for comparison- pool size on Astro is significantly larger ($234m~ vs. $140m~) and generating roughly 3x the daily fees for xASTRO stakers, yet if this proposal passes the Luna-LunaX pool would be receiving 12%~ more in emissions than the stLuna-Luna pool.

As your proposal states, these metrics could likely change over time as SD rewards vest, but at present day it is difficult to justify the proposed emissions especially when the chasm is so large and significant growth is not necessarily guaranteed. It would be more reasonable to propose a smaller number and revise this as conditions become more positive down the road.

  1. Gauges have no ETA so these terms could be in place for a considerable length of time.

We are excited at the prospect of partnering with and investing in the Stader protocol, but our goal is to align with and protect the best interests of xASTRO stakeholders, and giving up such a large portion of emissions to this proposal sets a dangerous precedent especially since it would be the first to dilute the existing pool emissions. You would have our full support if you chose instead to revise this to a more justifiable percentage (say, 3~5%), and we’d be fully open to exploring future revisions as the Stader protocol matures.

6 Likes

Hi @cryptoc20

Sorry for the delayed response as we were launching our Fantom beta. Thanks a lot for sharing your thoughts and suggestions. I think the points you mentioned are reasonable from an Astro holder point of view. I am happy to work with your group and figure out a win-win for us.

Key points to consider from our perspective on why we believe LunaX <> Luna pair and all future synthetics pairs would be a great addition:

  1. Overall TVL of LunaX is around ~190 Mn USD today (and quite dispersed across #Lunatics) and as several utilities for LunaX go live, we expect this to grow manifold. And many of the utilities are quite unique such as Degen vaults (beta already launched), Sigma, POMMs, lending market integrations etc. LunaX already has the highest utility across Terra including Mirror, Edge.
  • All of these strategies rely on AMMs for liquidity and Astro will become the default place driving these transactions. It has both benefits for Astro including significant increase in TVL and increase in transaction volumes.
  • I think a large part of the above sentiment is reflected in the current voting % for Yes.
  1. We do think the LunaX <> Luna pair TVL (as a result Astro TVL) will go up significantly with increased rewards structure as we can attract several of our large institutional holders to DeFi for the first time who have otherwise been just staking.

  2. As we are building cross-chain derivatives (already live/ beta in Ftm, Matic, Hbar), we would bring them to lending markets on Terra and all the pairs to Astroport. This would expand the TVL and transaction volumes on Astro significantly.

  3. We believe staking derivatives will potentially be the preferred port of entry for new users and LunaX has the best proposition to users giving staking rewards + air drops + utilities. This drives a lot of transactions to Astro as new users would buy LunaX directly (several reasons like lower price/ tax efficiency etc.)

  4. I think we should look at the overall future potential of what Astro <> Stader can generate and arrive at a conclusion rather than looking at the current transaction volumes (lower due to vesting).

I am happy to discuss this further over a chat/ call and discover a win-win situation if you are open to it. My TG handle is @vbrpm

2 Likes

Hi everyone, hi @vbrpm,

Quick disclaimer: I work at Lido, so my opinions may be biased. I am not writing on behalf of Lido, though, and the following opinions are my own only.

I’ll keep it short, IMO:

  • Migrating the LunaX <> Luna pool from Terraswap to Astroport and enabling dual rewards is beneficial to Stader, Astroport and to the user. I fully support this.
  • The current terms are far from palatable, for the reasons @cryptoc20 and @SunnySolutions presented. @vbrpm’s latest response relies on numerous hypothetical developments.
  • The proposal should be revised to lower ASTRO emissions, and to a shorter term. Incentives should be increased later, as liquidity and trading volume and fees start to pick up.

Happy to discuss further,
Spaydh

6 Likes