SWIP-D01: Rebalance swap fee share between Liquidity Providers & Metanode Operators

[swingby-tester]

Proposal Draft for SWIP-D01

You should create a Proposal Draft after getting some community interest in your Discord thread discussions

• Proposal Type: On-chain
• Proposer (Discord): 0xtester#9859
• Proposer (ETH Address): -

Summary

A simple description of what the proposal aims to achieve. This should be succinct and under a few sentences.

With SkyPools’ incoming launch, ensuring that there is sufficient Skybridge BTC liquidity is important to ensure that cross-chain and cross-asset swaps work seamlessly. Today, Skybridge swap fee is split between Metanode Operators and Skybridge liquidity providers with a 66:33 split.

This proposal proposes increasing Skybridge liquidity providers to 50% of all swap fees to achieve greater Skybridge liquidity & SkyPools usability when it launches

Motivation

Why should this proposal be implemented?

• Improve liquidity on Skybridge, so that SkyPools launches with sufficient liquidity to grow
• With a good SkyPools experience, SkyPools (and consequently SkyBridge) swap volume should grow, increasing revenue, visibility and community growth for Swingby as a network

Proposal / Details

How would your proposal solve a problem or achieve a desired end goal?

By increasing Metanode:Skybridge Liquidity Provider shares from 66:33 to a 50:50 split, we increase the incentives and rewards for liquidity providers on Skybridge. This increases incentives for providing BTC liquidity to Skybridge beyond the 15-17% APR today, making Skybridge the leading solutions for earning yield on BTC.

While this rebalancing will reduce Metanode revenue in the short run, we believe that SkyPools’ growth opportunity should draw in attention, TVL and swap volumes in the near future. This should generate much higher revenues for Metanode Operators eventually.

When the vote is approved, the DAO will execute a transaction to set the swap fee share parameters in a Parameters contract. This Parameters change will only go live when SkyPools is launched & will determine the new swap fee shares moving forward.

Poll

For: Increase Skybridge LP’s share of swap fees to 50%, while reducing Metanode’s share to 50%
Against: Remain at status quo (66:33 split between Skybridge LPs & Metanodes)

Next Steps

1. Paste this link in your Discord thread & continue discussion for 48 hours
2. Refine proposal with community feedback and create a Final Proposal (see next comment)

[arnoldinho]

This is my position on the matter:

1. we have enough liquidity at the moment, why are you expecting massive volume grow? what about rebalancing rewards? it wont be deployed?
2. there is no other protocol that offer so high APY for BTC, people are not providing liquidity here because they dont know swingby not because low APR!
   I am pretty sure it wont bring new providers here.
3. it will be more profitable to provide BTC than run a node, moreover liquidity providers dont have to pay $100 server,
   metanodes operators will be incentivized to sell swingby rewards to pay server, some operators can quit the project => price will drop

[creamwhip]

My input here would be that with the key goal of incentives being to incentivize what the network needs, we are currently running with an excess of metanodes (63/50 max) so clearly the incentive balance isn't quite right.

Marketing issues aside, I'm generally in favor of balancing the split closer to 50:50.
Changing the split could also fuel marketing efforts going into the future.

@arnoldinho in response to your concerns about MT operators having to pay for servers, this is what the 30% Swingby APR is intended to cover whereas the 66:33 is more in the area of rewards.

[arnoldinho]

Without the chaos of nodes, we have 30 places, which is less than necessary. How do we know as a community what is the purpose of chaos nodes if you don't say anything?

How changing the split can impact marketing efforts? It is interesting.

If everyone were selling prizes to pay for the server, the price would be even lower. How are we going to pay for the server if the swingby reward drops to 0? What about operators who have to pay for server more than get swingby+bridge rewards?

[creamwhip]

Without the chaos of nodes, we have 30 places, which is less than necessary

Check out the BSC bridge. The community support isn't enough to support the net, even with higher rewards. It's still in the "bootstrapping" kind of stage that WBTC/BTC was in in the early days.

We want to be in a place where (and it is a difficult balance to strike) the networks are able to sustain themselves with the community. Once there are enough nodes to support, then the incentive should be adjusted to bring in more LPs, in my opinion.

Another way to look at this is that LPs sell farmed Swingby tokens immediately as they have no long-term "buy in" compared with metanode owners. By increasing their BTC income in the e.g. 50:50 balance, we may reduce the amount of Swingby tokens that they get and sell to the market.

[raresciobanu]

What I think we should do first is to find a way to spread the tokens between multiple people if we want decentralization. I think this should be the first problem to solve.

We need to grow a strong community. To become a real DAO.

Right now we are 50-100 people interested about the project and the others are - 99% in loss and hope for a recovery.

I don't think that the ratio 50:50 will help too much. We need attention from the others.

[arnoldinho]

@creamwhip
why are you changing the subject?
we are talking about skypools so erc20 is the key
you posted "we are currently running with an excess of metanodes (63/50 max) so clearly the incentive balance isn't quite right" as the reason to lower btc rewards
then you posted "Check out the BSC bridge. The community support isn't enough to support the net, even with higher rewards." - so let cut rewards more, it will works this time!

[arnoldinho]

I see one good argument here - LP providers are constantly selling swingby. Do we know approximate numbers farmed by week by btc providers? I'd agree to cut rewards for metanodes to 50% fees if we cut btc providers farm rewards to 0 -12% APR from fees after increse should be enough to keep them here.

[creamwhip]

Will try to run that analysis, and see where we stand
Meanwhile, @swingby-tester do you have any input so we can proceed to move this to Snapshot?