ARC-9: Incentivise Stablecoin Pools with ASTRO

[MaxCallisto]

Summary

Incentivise Astroport stablecoin pools to build up liquidity. The purpose of this proposal is to create a deep liquidity pool of weUSDC/UST, wavUSDC/UST, wsoUSDC/UST, wpoUSDC/UST, bUSD/UST to bring swaps from USDC/bUSD to UST and vice versa from Curve Finance to Astroport.

Abstract

The weUSDC/bUSD pools are currently available in Astroport with a shallow liquidity of ~$2mil. Compare this against the other UST-USDC pool in various chains:

1. Pangolin Exchange (Avalanche): $43mil
2. Excalibur Exchange (Fantom): $8.43mil
3. Saber (Solana): $67.6mil

Since Astroport is the only DEX with a stableswap invariant pool on Terra for now, this places Astroport in the prime position to solidify itself as the cheapest and deepest liquidity of USDC, bUSD & UST swaps. This sentiment is resonated by Luke, the CTO of Delphi, in his tweet.

Although UST is the default stablecoin within Terra, attracting liquidity of other stables such as USDC, bUSD, USDT, FRAX and DAI/MIM could make Astroport a primary DEX for many who believes that Terra is the ecosystem with the deepest liquidity for DeFi.

Motivation

Although this could be speculative, but creating a deep stablecoin pool in Astroport may one day be useful should Astroport decides to build cross-chain via xAstro and allowing users swapping USDC to UST directly from the Ethereum chain as I’ve explained in this Twitter thread.

As the trading APR for weUSDC/UST pool is approx. 2.5%, the pool should be aggressively incentivised for the first 3 months, with the renewal pass 3 months being subjected to the price of Astro 1 month before the expiry of the Astro emissions. As the trading APR improves alongside the price of Astro, the actual emissions beyond 3 months could be significantly lower. The reason for aggressively incentivising this pool is due to the fact that this pool is in direct competition with Anchor (before it’s dynamic earn rate kicks in). As Anchor Earn drops, the need for aggressive emissions can be tapered down.

Specification

In order for us to provide a deep enough liquidity, the pool should aim to build up to total liquidity of at least $50mil. I propose that the Astral Assembly provides Astro emissions as per the following table:

With an Astro price of $3.50 at writing, I would propose the following:

USDC-UST Pools	Mth 1 Astro Emissions	Mth 2 Astro Emissions	Mth 3 Astro Emissions
weUSDC-UST LP	214,000	214,000	214,000
wavUSDC-UST LP	214,000	214,000	214,000
wpoUSDC-UST LP	214,000	214,000	214,000
wsoUSDC-UST LP	214,000	214,000	214,000
bUSD-UST LP	214,000	214,000	214,000
Total Emissions	1,070,000	1,070,000	1,070,000

With the above emissions, the estimated rewards APR will be revised to:

Liquidity in LP Pool	Astro APR
$10,000,000	89.9%
$20,000,000	44.9%
$50,000,000	18.0%
$100,000,000	9.0%
$200,000,000	4.5%

(estimated APR values assume that $ASTRO = $3.50)

Given that the annual emissions for Year 1 is 100mil ASTRO, I propose to allocate 1,070,000 Astro to all 5 stablecoin pools for the first 3 months or until gauge vote is launched. This will direct 12.84% of the Astro tokens to the stablecoin pools.

Copyright

Copyright and related rights waived via CC0 .

Update 17th Apr 2022: Added bUSD-UST LP into the proposal, transaction volumes of LPs and impact of redirection of Astro cf rest of Astro Generator LPs

[stefan]

Thank you for posting this

Remember to make a PR on the AIP Github repo as well with this AIP’s details.

[FarmerTuHao]

Well written proposal! No objections from me. I believe that having the above pool is not only beneficial for Astroport but for Anchor as well.

If the yield is high enough, this can be a good alternative for users to deposit their $UST to earn yield as compared to putting it into Anchor Earn. A win-win scenario will occur where the pool gets deep liquidity rapidly and the Anchor Yield Reserve will last longer due to a migration of $UST from Anchor to Astroport.

[0xDoot]

Hopefully when 3 months is up we will be onto vxastro determining emissions and in the beginning stages of a robust bribe economy

[MaxCallisto]

Listing down various feedbacks I’ve received from various channels:

1. Target liquidity of $20mil may be too shallow
2. There are 3 types of USDC LP pools which will require deep liquidity
3. Incentives could originate from the Terra community pool in which rewards can be paid in Luna / UST

While I agree that a deep liquidity pool for USDC-UST will be beneficial for Terra, I would suggest to hold off incentives from the community pool until Retrograde / Reactor / Apollo goes live, where bribes can be paid with Luna or UST to direct emissions to these pools, thus, improving the efficiency of Astro votes / UST bribe. Astro emissions to the pool can be easily redirected if there voters are not keen on continuing on with the emissions to these pools, hence, I’d hold off this until the Convex-like protocols are launched.

As for the first 2 points, I do agree on incentivising all 3 pools to a target of $50mil value at a target APR of 18%. Since the Dynamic Rate for Anchor Earn poll has been passed, we can expect that in the first month, the APY for Anchor Earn will drop from 19.5% to 18%. Therefore, depositors will be looking for an alternative to deposit their UST.

With an Astro price of $2.35 at writing, I would propose the following:

USDC-UST Pools	Mth 1 Astro Emissions	Mth 2 Astro Emissions	Mth 3 Astro Emissions
weUSDC-UST LP	320,000	320,000	320,000
wpoUSDC-UST LP	320,000	320,000	320,000
wsoUSDC-UST LP	320,000	320,000	320,000
Total Emissions	960,000	960,000	960,000

With the above emissions, the estimated rewards APR will be revised to:

Liquidity in LP Pool	Astro APR
$10,000,000	90.2%
$20,000,000	45.1%
$50,000,000	18.0%
$100,000,000	9.0%
$200,000,000	4.5%

(estimated APR values assume that $ASTRO = $2.35)

To avoid further dilution to the 1st year’s emission of 100,000,000 tokens which currently emits 8.33mil Astro tokens per month, I propose to reduce the emissions for all pools listed below by 11.52% to accommodate for the 920k ASTRO emissions to the 3 stablecoin pools above.

Post 3 months, we might expect that Astro price has risen and Astral Assembly has gone live for gauge voting, the renewal of emissions can be decided by Astral Assembly.

[MaxCallisto]

Hey @stefan, would this go for a vote since it’s been more than 7 days since it was last proposed (The dawn of the Astral Assembly. Any xASTRO holder anywhere in the… | by Astroport | Apr, 2022 | Medium) and available for comments?

[stefan]

Just made proposal #11 that should be processed before all others in order for Assembly to claim ownership over 4 core contracts.

After that, the other AIPs can be voted on in the order they were submitted.

[MaxCallisto]

Re-adjusting the proposal based on March’s transaction volume for stablecoin pairs, unfortunately, I wasn’t able to obtain the transaction volume of wpoUSDC-UST LP:

1. weUSDC-UST LP: $7.67mil
2. wavUSDC-UST LP: $1.935mil
3. wsoUSDC-UST LP: $1.33mil
4. bUSD-UST LP: $872.61k

I have updated the original post based on my past two posts.

[defiPunk]

please include CADC stablecoin pool! weCADC:UST

[AndrewB]

this proposal is exactly what we need in order to fulfill the ASTRO wars narrative , and bring more liquidity to the protocol

[stefan]

@MaxCallisto this should go on-chain, we’ve been waiting for a while. Do you want to revise anything? What alloc_points would you like to see?

[MaxCallisto]

Based on the above proposal, the proposed alloc_points for the pools will be:

Stablecoin Pools	Annual ASTRO Emissions	% of Emissions	Alloc_points
weUSDC-UST	2,568,000	2.568%	30,532
wavUSDC-UST	2,568,000	2.568%	30,532
wpoUSDC-UST	2,568,000	2.568%	30,532
wsoUSDC-UST	2,568,000	2.568%	30,532
bUSD-UST	2,568,000	2.568%	30,532

Thanks, Stefan!

[astro-orbiter]

I think USDC liquidity is extremely important, but unfortunately the 4 flavors of USDC create fragmentation which is bad for both traders and LPs. To handle USDC liquidity, Astroport should consider a 4pool of all the USDC flavors either as a stableswap or a constant-sum pool. Then, the LP token of that pool acts as generic USDC that can be redeemed for any of the 4 flavors, and Astroport can incentivize a metapool of usdc4poolLP-UST.

Creating a 4-token pool (either stableswap or constant sum) would require new smart contracts as well as frontend updates, but I think the effort is well worth it and superior to incentivizing each flavor independently.

[MaxCallisto]

I do agree, hence, the reason why I propose to raise a bounty for external devs in my follow-up proposal since the immediate roadmap for the Astroport team is vxASTRO. That being said, even with a $2mil pool, the 24H utilisation has gone up to 75% (see wsoUSDC-UST pool in the image below). The proposed amount serves as a temporary measure until 4pool USDC (all flavours) are created, and liquidity can be migrated over.

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