This proposal would allocate 3,200 OSMO over 30 days to match the initial ASTRO emissions to the TIA/OSMO Astroport PCL pool on Osmosis.
Background
Astroport is proposing to begin emissions of ASTRO to the Passive Concentrated Liquidity (PCL) pools recently deployed on Osmosis.
The initial set of pools created are:
- NTRN/USDC
- INJ/USDC
- LUNA/USDC
- SEI/USDC
- DYDX/USDC
- ASTRO/OSMO
- TIA/OSMO
These pools link to the existing Astroport deployments on Neutron, Injective, Terra, and Sei and target other high-volume pools with established liquidity gaps on Osmosis.
Of these pools, Osmosis currently incentivizes only TIA/OSMO pools through a Volume Splitting Group (VSG) mechanism. Unfortunately, CosmWasm pools cannot currently be added to VSGs, so any incentives must be added individually.
This proposal asks that Astroport’s spending on the TIA/OSMO pool be directly matched by Osmosis for the initial month.
The full details of the Astroport emissions proposal can be found here.
About Astroport
Astroport’s PCL pools use an advanced repegging algorithm to give Liquidity Providers the benefits of concentrated liquidity pools without requiring active management.
This algorithm looks at ongoing trades and rebalances liquidity and fees around the exponential moving average of those trades. The moving average determines a specific price range around which to amplify trades. If prices move outside the range, the repegging algorithm automatically sets a new price range.
While the currently incentivized Osmosis Supercharged Liquidity and PCL pools may look like competitors, PCL pools are better viewed as an evolution of passive Classic pools. They should perform 2-3x better than Classic pools while requiring no active management. On the other hand, Supercharged liquidity pools can and often will outperform PCL pools when used by a highly skilled and active liquidity provider.
Justification for Spend
TIA liquidity is one of the few currently incentivized liquidity groupings below the target liquidity set by the Incentives Optimization Algorithm to facilitate trading with minimal slippage.
The impact of additional TIA liquidity within an Astroport pool should indirectly lower these target liquidity levels by causing swaps to have an additional liquidity location to route through.
TIA liquidity is estimated to increase incentive allocation by 229 OSMO per day in April. If Astroport liquidity reduces the target liquidity required in Supercharged pools to the Current liquidity level, this may not be necessary, resulting in a net overall saving on TIA liquidity cost.
Additional incentive spending on TIA pairings in an alternative location such as Astroport may attract current liquidity providers in TIA Supercharged pairings to migrate to Astroport pools; however, these are likely the more passive participants in the pool, resulting in increased capital efficiency overall and so lowered target liquidity still.
Astroport is proposing to spend 774.95 ASTRO per day on the TIA/OSMO pool which is currently worth approximately 106 OSMO per day.
Deployment Mechanism
This proposal requests 3,250 OSMO to be transferred to the Astroport Builder Multisig.
50 OSMO will then be used for gauge creation, which returns to the Osmosis community pool.
The remaining 3200 OSMO will be automatically distributed to the Astroport TIA/OSMO pool over 30 days.
Target On-Chain Date: 18th March 2024 or Concurrent with Astroport Emissions Proposal