IMC 2022/9/29-2022/10/27 budget

Incoming funds
We’re slated to receive ~5275 RPL this rewards period from the pDAO.

We’re also slated to receive 50% of built up funds, after the last bankless payment is executed, which will be in the range of 47k RPL.

Plan

  • 3375 RPL for bribes via hidden hand for rETH/WETH on mainnet balancer; rewards go live 10/6
  • 3250 RPL for bribes via hidden hand for rETH/WETH on mainnet balancer; rewards go live 10/20
  • 400 RPL for rETH/WETH on optimism BeethovenX/balancer
  • 150 RPL for rETH/WETH on arbitrum balancer; likely second half of the period only
  • 400 RPL for concentrated liquidity trial
  • 400 RPL for second concentrated liquidity trial?
  • 1600 RPL for coincentive programs
    • Main goal is to encourage tokens to start swapping from TheirToken/ETH to TheirToken/rETH
    • The rough target is 10% matching in the 100-200 RPL range, though we’re keeping significant wiggle room here, especially for early partners
    • ~72 RPL (matching a USD value) earmarked for mainnet rETH/RPL based on a 20% match
  • 500 RPL for Protocol owned liquidity (POL) full range rETH/WETH (probably uniswap)

Thoughts behind the plan

  • Thinking about what we can do sustainably. We’re receiving around 5.3k from pDAO per period. We’re proposing to use ~3k RPL from the accumulated war chest per period for a time period (until withdrawals maybe?) to help get the flywheel spinning.
  • We’re making a small decrease in mainnet incentives to help with long term sustainability.
  • Hitting the next biggest L2 (arbitrum). This will require a rate provider to get deployed by the team.
  • The concentrated liquidity trials are to get a better idea of what they can do for us. In the end, we’d likely only go for one provider and move some of the mainnet incentives over? It’s unclear when we’ll be able to actually kick something off here - we’ll communicate more as it gets concrete.
  • Ramping up some POL. We don’t want to do this too fast so we can understand what protection it buys us (full range liquidity prevents certain TWAP oracle attacks) and don’t dump RPL price. For this period we’re only doing rETH, though we may add RPL in the future.

See the rETH Liquidity Incentives thread in discord for live debate and to contribute your opinion!

Also shoutout to drworm.eth - their dune dashboard (Rocketpool) is saving me time on one of my metrics already, and being useful for other insights.

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Could you explain why we are considering building up the rETH/RPL pair? I understand rETH/ETH on other chains is useful, and ETH connects all tokens. rETH/RPL seems like liquidity fragmentation that only bots will benefit the most from (= take value from us) because most value for RPL is probably in the RPL/ETH pair.

Maybe we could consider setting aside some amount for grants and bounties?

Could you explain why we are considering building up the rETH/RPL pair?

The incentives for rETH/RPL in this period are part of our co-incentive strategy, the idea is that other protocols provide incentives to a token pair that includes rETH and in exchange we match those incentives by up to 10-20%.

There are a couple of target benefits to the co-incentives, firstly it raises awareness of the option of using yield bearing rETH instead of ETH as a pairing for other tokens increasing efficiency for liquidity providers.

They are also volume generating pairs. Most people who want rETH are comfortable holding it for a relatively long term, therefore the rETH/ETH liquidity pair generates very little back and forth volume apart from arbitrage.

This is a problem for a couple of reasons, firstly the trading fees generated for liquidity providers are very low, making liquidity more expensive to incentivise. Increased volume on pairs including rETH will ripple via arbitrage to the rETH/ETH pair making it more attractive.
The other benefit is that third parties ( chainlink for example) use metrics such as volume to evaluate rETH before committing resources and development time.

Normally these co-incentives would be OtherProtocolToken/rETH but in this case Balancer have generously funded incentives on the rETH/RPL pair to kick-start the pool. Since this pair is obviously of extra benefit to us, we have decided to match their incentives at 20% with a delay.

That being said, there are good reasons to encourage deep liquidity for RPL outside of this context so it is worth discussing the value of more general incentives for the pair in the future.

Maybe we could consider setting aside some amount for grants and bounties?

The IMC only spends funds earmarked for liquidity incentives, separate funds have been reserved for the purpose of grants & bounties.

The Grants Management Committee charter is in the draft stage at the moment, see https://dao.rocketpool.net/t/grants-and-bounties-rpip/

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We’re strongly supporting ProjectToken/rETH pools because we think that’s the long term path to liquidity that doesn’t need constant funding. RPL, unsurprisingly, is one we want to support a little extra. But… For this period we’re not actually providing any more coincentives than we’ve offered other early pools. There’s a long-term discussion about RPL liquidity here, but that’s not playing into it this period

As uisce said, the IMC only gets funds the pDAO explicitly budgeted for incentives. There’s another bucket for grants and bounties. See rpip-10 for overall budget and rpip-11 for the IMC charter. https://github.com/rocket-pool/RPIPs/tree/main/RPIPs

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My opinion (previously posted on discord):

I think replacing WETH with rETH on LP pairs is a great long term goal for IMC, and we should have a small % of the incentives directed towards new token/rETH pairs.

RPL liquidity, in particular, is essential for the protocol health, without it oracles can be manipulated attacking our min collateral or rewards calculations. Incentivizing LPs might not be necessary right now, but we should be ready to deploy emergencial solutions if we run out of altruistic whales.

Other possibilities such as using LPs as collateral (similar to Xer0.eth proposal Solving RPL illiquidity (Protocol Upgrade)) or protocol owned liquidity should be seriously considered.

because most value for RPL is probably in the RPL/ETH pair

On uniswap-v3 we have $4.93m TVL on RPL/rETH, $4.48m on RPL/USDC and $4.38m on RPL/ETH. rETH/RPL has been successfully driving up LP APR and rETH volume.