A much better liquidity mining incentive design is to distribute reward tokens based on the AMM trading fees earned by liquidity positions. - cc: double2winwin uniswap yamfinance defi amm
’s vampire attack to bootstrap an AMM’s liquidity. But overall, most projects were simple copycats or straight forks. Sadly, there are also many scams riding the market narrative.
From tokenomics incentive design perspective, the liquidity mining approach pioneered by Synthetix distributes reward tokens based on theof liquidity positions and let’s define this approach as Liquidity Mining 1.0 . Based on the results, such an incentive program worked for Synthetix to achieve its goal to attract more users to mint more sETH.
Second, in many cases, multiple pools need to be incentivized. The existing approach is to allocate a certain amount of reward tokens to each pool without considering the contribution of each pool, e.g. how many trades and how much trading volume are executed in each pool. The reward allocation decisions are either made by governance vote like in Curve, Balancer or by the team like in Sushiswap, which are sometimes political or arbitrary.
Second, there is no need to allocate reward tokens to multiple pools manually either through governance token votes or team decisions. These manual approaches create wrong incentives to LPs and treat liquidity in different pools unfairly.
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