Currently, Astroport’s liquidity pool emission rewards are in $ASTRO allocated from its supply. This makes it very easy and straightforward for liquidity pool providers and/or yield farmers to just farm and dump $ASTRO, creating a consistent sell pressure on $ASTRO.
With inspiration from Trader Joe’s recent move to revamp its claimable governance staking rewards from $JOE to $USDC, I would like to know the community sentiment about my suggestion as stated in the title: to replace Astroport’s Liquidity Pool (LP) emission rewards to $UST instead of $ASTRO
This means that Astroport will have to sell the allocated $ASTRO for the liquidity pools to $UST before it is send for emissions. While this may seem to put immense selling pressure on $ASTRO, I believe that the benefits of such a move may significantly outweigh the cons.
Most of the reasons are similar to why Trader Joe implemented this revamp but with a few key differences:
Improve User Experience by allowing users to calculate their earnings more easily in $UST
Providing the option for users to buy $ASTRO with the $UST rewards instead of giving them another reason to dump $ASTRO for other assets
Catering to the wider Terra Community by providing rewards in $UST, which will definitely be a more popular option, thereby removing the sentiment that Astroport is “just another farm pumping out inflationary farm tokens”
Further increasing the widespread adoption of $UST
I believe that with this implementation, Astroport will be widely marketed as the DEX that provides LP rewards in stablecoins ($UST) instead of its own farm token, which is seldom heard of. This can strongly incentivize users to provide liquidity to farm a non volatile asset ($UST) which they do not have to worry about dumping it immediately for the fear that the emission rewards will lose in value, attracting deep liquidity in the process. This also puts $UST into the hands of many users, further driving up its adoption as mentioned in point 4.
I also believe that Astroport can reach even further heights when the Terra Ecosystem is taken into consideration for its own enhancements and revamps and not just purely with the goal of optimizing itself as the top DEX, which is also one of my main pointers for suggesting the above.
The current concept of $xASTRO will not need to be changed in conjunction with the above changes as the value accrual of $xASTRO will not be negatively affected by changing the type of LP emissions.
The increased emission rewards from gauge voting can still be remained as $ASTRO as voters who voted for the LPs to receive increased emission rewards are likely $xASTRO and/or $vxASTRO holders who have a stake in the respective LPs. Hence, they will less likely dump the $ASTRO rewards for other assets.
Do let me know what you think! Constructive feedback and criticisms are also highly appreciated!
I can understand the advantages you point out. However, this proposal would guarantee constant selling pressure on ASTRO, whereas under the alternative (current) system, while it is true some will farm and dump, not everyone will. Currently, users receiving ASTRO can sell for UST–thus, the current system affords them the same benefits as your proposal (for those who want to sell), without punishing those who choose to hold ASTRO.
True, under your proposal the UST recipients could choose to buy ASTRO with the UST, but they could also buy many other things.
ASTRO is like a form of system equity–I think it makes sense that the governors of the Astroport system can continue to be rewarded in the equity of the system they use and govern; similar to how the board of directors and executives of a company accumulate more of its stock based on their management successes. We want these participants to accumulate more ASTRO so that the heaviest users of the system also become its governors, not to disincentivize them from holding ASTRO because it is constantly being sold by the system for UST.
I think with Mars and Levana launching leverage farming there is going to be further automatic sell type mechanisms in place which will place even more selling pressure on the Astro token as the leveraged farms will sell Astro to compound the LPs.
However in theory that should benefit the LP providers of Astro-UST as they will earn more swap-fees and should $Astro price go down then they’ll get more $Astro right?
Thank you so much for taking your time to input! I do completely agree with you with regards to the analogy of how the board of directors and executives of a company will accumulate more of its stock based on their management successes.
If that’s the case, do you think that having the option to either claim your LP emissions rewards in $ASTRO or $UST can further enhance the user experience on Astroport?
Having such an option can potientially accommodate both populations: the true AstroChads that wants to accumulate more $ASTRO and the yield farmers who are just there to earn rewards.
In theory yes! The APR of the $ASTRO-$UST pool should increase due to increased swaps (selling of $ASTRO).
Yes as well. If $ASTRO were to dip, the $ASTRO - $UST pool will automatically rebalance by selling $UST for more $ASTRO to ensure that both sides of the pool have the same value!
It would be best to institute 2 staking contracts for Astro: xAstro would stay as is with value accruing back in the form of astro. A second staking contract can be setup to accrue value back in the form of ust, call it xsAstro.
By giving people a choice, you reduce selling pressure the most. Those who want to compound Astro will stake in xAstro and those who want to get income will stake xsAstro. You can mix and match as you see fit.
That might not work to be honest! If I’m not wrong, how $xASTRO accrues value, is actually coded into the price of $xASTRO itself, meaning to say that $xASTRO will grow more expensive over time as compared to $ASTRO, similar to how $aUST to $UST is. It does not allow us to claim rewards directly like how it is like with the liquidity pools.
Personally, I don’t see any improvements required for the $xASTRO staking mechanism! My suggestion is more of having a choice to claim your Liquidity Pool rewards in either $ASTRO or $UST.
It definitely works. xAstro accrues value by Astro taking fees and purchasing Astro on the open market. The purchased astro is deposited into the staking contract and xAstro is your share of staking contract. As more Astro is deposited, your xAstro becomes worth more Astro.
xsAstro as described above by me would skip the step of purchasing Astro and instead deposit the ust fees directly into the xsAstro staking contract where stakers can claim the accumulated ust fees.
There should be a short lockup period (24hrs) on staking to prevent arbitrage and stakers in either pool should retain governance rights.
Ah I see! However, the justification of needing an xsASTRO function where users can directly claim the swap fees in $UST is that there is actually increased selling pressure on $ASTRO because users do not like that concept of having the current mechanism of having value accrual to $xASTRO. I personally do not think that that will be the case though.
Not exactly. The main idea for this thread is to suggest allowing liquidity pool providers to have a choice to claim their emission rewards in $ASTRO or $UST to improve the user experience and possibly facilitate better $ASTRO tokenomics by decreasing the sell pressure from farming and dumping haha.
Choosing to receive ust over astro is more of a convenience than a way to preserve good tokenomics and perhaps even will be detrimental to astro. I believe the sell pressure wins in the end in the ust method being discussed here.
I’m thinking about a situation where 80% of astroport users choose ust over astro. There would be significant, constant sell pressure.
The only way this could work is if non-astro assets in staking wallet could be swapped for ust and replaced by an equivalent amount of astro from emissions. There would be no sell pressure on astro this way. I wont call it a warchest but an intermediate wallet of some sort would help add flexibility in executing something like this.
If there were two staking pools, one for fee distribution in ust and one for fee distribution in astro, there would never be sell pressure due to staking in the ust contract. Fees are collected in ust and dispersed in ust. The distribution for the astro contract would take fees in ust and buy astro. There is no selling astro involved
The scenario you are describing takes place when astro stakers can only recieve fee distributions in astro, which is the current setup in the white paper. This would lead to people who want income from staking selling the astro rewards for ust. These are the people that would be happy to stake in the ust distribution staking contract.
But the main topic that I was proposing here was never about the $xASTRO staking. It was about the Liquidity Pool emission rewards that you get for providing liquidity.
I definitely could be confused but i dont think i am. There is a generator and staking contract. Both access Astro from two places: generator from astro’s allocation, staking from accrued swap fees.
Youre right. It seems like it would be easy to institute a second staking contract where not all accrued swap fees purchase astro and some are left as ust and i dont have any issue with this.
But it’s more complicated when we’re asking to take astro from lp emissions and replace a portion of it with ust. We dont want to sell any of this for ust so to avoid selling it, ust would have to come from the maker wallet. An equivalent amount of astro from the generator would replace it (an OTC trade, more or less). There is no selling or buying this way. Seems complicated but i dont know how to code.