Joint Plan for HOP Liquidity Incentives on Uniswap v3

Hey Hop Community!

In the past week, xToken, Gamma Strategies, and David Mihal (Uni v3 Staker) all presented unique and innovative solutions to incentivizing HOP liquidity upon the launch of the HOP token. Given the magnitude of the HOP token launch, we believe that the Hop community would best be served by managing liquidity through several providers.

Please see below for the each of the respective proposals:

Both xToken and Gamma Strategies similarly create ERC-20 wrappers around Uniswap v3 positions and make it easy for passive liquidity providers to provide liquidity without the hassle of rebalancing positions or incurring high costs to do so. The Uniswap v3 Staker contract allows individual providers to provide in their own range (based on a minimum range), and receive rewards so long as their position is in range.

For this collective proposal, we advocate for 4.5M HOP tokens as liquidity incentives split evenly (1.5M tokens) for xToken, Gamma Strategies, and those utilizing the Uni v3 Staker contract.

We strongly believe that the liquidity provisioning for the HOP token should be decentralized, and there shouldn’t be any single source of liquidity for the HOP token. We would love to gauge the community’s thoughts and feedback for this joint proposal.

13 Likes

If we split 4.5M evenly between 3 providers, each of who have designs to disburse their allocations over several chains/networks, will there not be a risk of liquidity dilution that will act against the express purpose of the proposal?

2 Likes

Given that governance is on Mainnet and also the claim is on Mainnet, I think that most of the liquidity should be on Mainnet.

We can condition that all the rewards be focused on Mainnet or in any other apportionment. However, there are a lot of L2s (Polygon, Gnosis, Optimism, Arbitrum) to choose from, so I think having a strong Mainnet liquidity base is key and also it shows the least amount of favoritism.

Happy to take hear any differing opinions though!

4 Likes

I agree. Liquidity should be concentrated on mainnet. L2 liquidity will no doubt appear organically on Uni V3, likely first on Optimism given Hop’s proposed use of their $OP allocation.

3 Likes

Deploy liquidity on mainnet and let the magic happen :space_invader:

5 Likes

I support this proposal, and spreading it out to a few platforms that have shown a ton of initiative in working with HOP is a great idea.

4 Likes

This is much needed and would be great to have sufficient liquidity on Ethereum to boost the ecosystem growth for HOP

3 Likes

Love the focus on keeping liquidity provision decentralized. I’m in support of this as a priority. Nice work!

1 Like

This is a fair enough point. I do think, given that Hop is a multichain protocol with interests on L2s, it makes sense to drive some liquidity to Arbitrum or Optimism, but not gonna die on that hill

Hey everyone! Glad to see the engagement on this issue. It seems that most people here are in support of Mainnet liquidity. The other issue to decide on is fee tier.

As of 6/13 8:30 PM EST, the above is the current state of Mainnet liquidity.

I say we make a collective decision to incentivize 1% or 0.3% ETH/HOP pool so that we do not split up the liquidity too much.

ETH/HOP 1%

  • Pros: Less IL-risk and more favorable fee tier for the LP - Therefore, you may incentivize more liquidity. If the 1% pool is incentivized, it is more likely to outcompete lower fee-tiered pools. Also, we can leverage the existing Uni v3 liquidity.

  • Cons: Can potentially be less profitable if a whale or someone else decides to fund the 0.3% pool, which causes all the volume to drain out of this pool. Also, the existing liquidity in 1% pool is still a very small amount

ETH/HOP 0.3%

  • Pros: This will likely have more longevity. I think in general, pools end up at the 0.3% pool. DYDX, PSP, RBN, OP and WRLD are pools that come to mind that started out at 1%, but eventually the 0.3% took over.

  • Cons: Given that the volume is slowing down, this pool may incur higher IL due to the lesser fees being earned to recuperate IL. But the point of the incentives is to mitigate IL risk, so not too much of a con.

My personal take is that we incentivize ETH/HOP 0.3% on Mainnet. I think if our goal is to sustain liquidity for the long-term, it’s end state will end up being at 0.3% anyways, so might as well start consolidating liquidity there now. Forcing people midway to switch to 0.3% pool later due to the lack of volume in the 1% pool could lead to people leaving the liquidity position altogether. Therefore, I think we should just incentivize the 0.3% pool from the start.

2 Likes

One other thing to consider is how much we should incentivize in terms of HOP tokens. There were 20M tokens set aside for more immediate governance decisions.

I think most of us had overestimated the potential HOP value prior to launch. Currently 4.5M tokens at the current price of $0.08 is around $366k USD. That may not be enough in terms of incentives to get us to have sufficient liquidity. Perhaps 10M in HOP (or $810K USD) incentives would be better suited to starting this program now. Happy to get your thoughts on this matter as well.

Piping in again on this, a few things:

  • Dedicating all incentives towards a single pool, at least for an initial program, makes sense to us. We’d support the 0.3% pool
  • I’d be curious to hear more from the community what level of liquidity should be desired/targeted. There are several ways we can approach it and I think we’d support starting smaller and then potentially scaling up in a subsequent period. That said, as @BP333 mentioned, we’d want to devote a sufficient amount of incentives. Given the broader market and lower token price, it could make sense to increase reward token amount

Can someone clarify what “incentivizing the ETH/HOP 0.3% pool” means? Are we giving LPs in that pool extra HOP tokens as rewards? If so how are they given out over time? Presumably we are not just air dropping 4.5M HOP to LPs.

1 Like