Ensuring sufficient liquidity with $xASTRO-$ASTRO-$UST Balancer Pool

Previously, @packformoon from Astroport’s Discord brought up a potential issue that Astroport may face with the launch of $xASTRO staking: the migration of liquidity from the $ASTRO-$UST Liquidity Pool (LP) to $xASTRO staking. While purely speculative, this may be highly likely due to the following reasons:

  1. Preference for single-sided staking vs providing liquidity due to the risk of impermanent loss

  2. Increased probability of $xASTRO staking offering a more attractive APR(yield) due to the accumulation of swap fees over approximately 3 months, awaiting distribution (currently sitting at $8.071 million worth of assets on 1/3/2022).

  3. Sub-optimal combined APR of 26.95%, which may not be sufficient enough to outweigh the impermanent loss

If such a scenario were to happen, this will result in low liquidity in the $ASTRO-$UST pool, resulting in high slippage, which may deter potential $ASTRO investors wanting to start a position.

To solve this potential issue, I propose creating a $xASTRO-$ASTRO-$UST Balancer pool instead of having $ASTRO-UST and $xASTRO-$ASTRO pools separately.

Given the mechanics of Balancer pools, users can choose to deposit just 1 asset or multiple assets into the pool. The $xASTRO - $ASTRO - $UST Balancer Pool can allow for automatic rebalancing of amount of assets in the pool. So if there is ever a scenario where liquidity is lacking for swaps between $ASTRO and $UST, the pool can rebalance $xASTRO for $ASTRO to ensure that swaps between $ASTRO and $UST have minimal slippage. When the demand for the trades have been met, $ASTRO can be automatically rebalanced back for $xASTRO according to the weightage set by the pool creator.

With just $xASTRO - $ASTRO - $UST Balancer Pool, the liquidity incentive rewards can just be focused on 1 pool instead of dividing it between the $ASTRO-UST and $xASTRO-$ASTRO pools. allowing the single pool to receive the more rewards, further incentivizing users to provide liquidity. It also allows for the ease of convenience where users will just need to deposit 1 asset instead of having to create 1-2 liquidity pairs to provide liquidity.

Constructive feedback and criticism is highly appreciated! Do note that this was drafted with my best attempt at understanding how Balancer Pools work. There is a chance that I misunderstood the mechanics of how a Balancer Pool work and that this idea is not feasible. In that case, I hope that this concept can at least create an inspiration on how we can innovate on liquidity pools to solve liquidity issues!

Actually the simplest way isn’t really a pool. xASTRO and ASTRO can be “swapped” instantly by using the staking contract.

If people withdraw from ASTRO-UST, the APR will just increase and the market should find a balance. Personally I’m not concerned.

Lastly, Balancer is currently on EVM chains. We’d need an implementation for Astroport which could be achieved through a bounty/grant.


Ah I see. thank you so much for your input! If lets say that in a scenario where the APR of the $ASTRO-$UST pool still isn’t attractive enough to draw in sufficient liquidity, will Astroport increase emission rewards for the said pool, or can that only be implemented through Governance?

That’s up to governance to decide, first through Assembly and then with vxASTRO. “Sufficient” here is also subjective.

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