# Deploy ETH/BTC Liquidity and Reduce incentives on ETH **URL:** \ **Category:** Proposal Discussion\ **Tags:** passed\ **Created:** [January 3, 2025, 9:50am UTC](https://forum.osmosis.zone/t/deploy-eth-btc-liquidity-and-reduce-incentives-on-eth/3391 "2025-01-03T09:50:28Z")\ **Posts on this page:** 3\ **Page:** 1
**Author:** ![JohnnyWyles](https://sea2.discourse-cdn.com/flex020/user_avatar/forum.osmosis.zone/johnnywyles/32/3114_2.png) [@JohnnyWyles](https://forum.osmosis.zone/u/JohnnyWyles)\ **Post date:** [January 3, 2025, 9:50am UTC](https://forum.osmosis.zone/t/deploy-eth-btc-liquidity-and-reduce-incentives-on-eth/3391/1 "2025-01-03T09:50:28Z")
# Deploy ETH/BTC Liquidity This proposal would deploy ETH and BTC from the community pool into a Margined liquidity strategy. ## Current Liquidity ETH Liquidity on Osmosis is currently limited. The main [ETH/USDC pool](https://app.osmosis.zone/pool/1948) has $320k in liquidity, while[ETH/BTC](https://app.osmosis.zone/pool/1982) has only $18k. Both are incentivized but are failing to attract additional liquidity. The current emissions to the Volume Splitting Group (VSG) of ETH/BTC and ETH/USDC are 1,956 OSMO per day, a 200%+ subsidy to the swap fees. This is currently the only volatile VSG to which Osmosis emits incentives to at a greater rate than the protocol revenue generated by the grouping. The lack of ETH liquidity on Osmosis has a subsequent impact on liquidity only connected to ETH, such as the protocol-owned ERC-20 token liquidity, established in [Proposal 802,](https://daodao.zone/dao/osmosis/proposals/802) and wstETH liquidity, a premium collateral asset which is currently at cap on Mars. ## Requested Deployment This proposal asks for: - 16.47 ETH, in the form of - 13.75 ETH - 2.72 ETH.axl - 0.47 BTC Both sets of assets have been accumulated through Osmosis taker fees. This liquidity, valued at approximately $99,000, will substantially increase the ETH/BTC liquidity available on Osmosis. This will allow the ETH market to develop further while generating yield for the community pool. This liquidity would be deployed into a newly created Locust Vault for ETH/BTC via the [Osmosis Liquidity subDAO](https://daodao.zone/dao/osmo1rvq5cq2j35k7sqqz49e5e8zezl45fcywcawazh46qnc0g96d0d6sasqsgc/home) **Locust Vault Parameters** - Target Pool 1982 (ETH/BTC, 0.01%) - Spread -2.5%/-2.5% - Reposition trigger 0.5% - Performance Fee of 15% The receipt token for the vault deposits and any excess BTC or ETH will be transferred back to the Osmosis Community Pool. ### **Risk Analysis** - Community pool exposure to Bitcoin and ETH - Initial exposure remains the same as this proposal has no new purchases. - Risk: Value ratios could increase or decrease significantly from current levels, leading to a loss of up to 16.47 ETH or 0.47 BTC previously accumulated by the Osmosis community pool. - Mitigation: The Locust vault repositions liquidity to retain inventory, so a large ratio movement would be required to lose the all inventory of one side. - Community pool exposure to Alloyed Ethereum - Risk: There is an increased risk to the 2.72 ETH.axl due to increased exposure to multiple sources of Ethereum. - Mitigation: Inter-chain and intra-alloy rate limits. In the event of a security issue involving the ETH Alloy the Community Pool should include this position’s ETH holding in any resolution proposal to make users whole. - Mitigation: Adding ETH.axl to the alloy supports Alloyed BTC liquidity, allowing more varied liquidity to enter and exit the alloy more easily. - Community Pool asset exposure to smart contracts - Mitigation: Margined smart contracts have recently completed audit. - Mitigation: Locust uses the same mechanism for repositioning liquidity in volatile deployments for the previous LST support deployments, the difference being that there is no target price for the pairing. - Community Pool asset exposure within liquidity pools - Mitigation: While adding liquidity to pools adds a layer of risk compared to native asset deployment, the Osmosis Concentrated Liquidity pools have been live with no security events for over a year. - Use of Multisig for execution - Mitigation: This 4/6 multisig has previously been used to deploy liquidity in other proposals, acting as an intermediary to perform multi-stage or time-dependant transactions, such as adding liquidity to a pool with a ratio of assets that will vary before a five-day Osmosis governance proposal is completed. **Success Metrics** - Volume facilitated through position - Fees earned (LP + taker) - Slippage reduction during volatile periods - Market share of Ethereum trading volume **Target Onchain Date** : 8th January 2025 * * * # Reduce incentives on ETH This proposal would reduce the incentive emissions allocated to ETH. ## Current Liquidity ETH Liquidity on Osmosis is currently limited. The main [ETH/USDC pool](https://app.osmosis.zone/pool/1948) has $320k in liquidity, while[ETH/BTC](https://app.osmosis.zone/pool/1982) has only $18k. Both are incentivized but are failing to attract additional liquidity. The current emissions to the Volume Splitting Group (VSG) of ETH/BTC and ETH/USDC are 1,956 OSMO per day, a 200%+ subsidy to the swap fees. This is currently the only volatile VSG to which Osmosis emits incentives to at a greater rate than the protocol revenue generated by the grouping. The lack of ETH liquidity on Osmosis has a subsequent impact on liquidity only connected to ETH, such as the protocol-owned ERC-20 token liquidity, established in [Proposal 802,](https://daodao.zone/dao/osmosis/proposals/802) and wstETH liquidity, a premium collateral asset which is currently at cap on Mars. ## Requested Incentive Adjustment Incentives will remain on ETH pairings at a reduced rate of 500/day, an LP fee subsidy level similar to BTC/STABLE of 50%. This will make this Volume Splitting Group break even regarding Protocol Fees generated compared to emissions. **Target Onchain Date** : 8th January 2025 ---
**Author:** ![Govmos](https://sea2.discourse-cdn.com/flex020/user_avatar/forum.osmosis.zone/govmos/32/123_2.png) [@Govmos](https://forum.osmosis.zone/u/Govmos)\ **Post date:** [January 9, 2025, 2:19pm UTC](https://forum.osmosis.zone/t/deploy-eth-btc-liquidity-and-reduce-incentives-on-eth/3391/2 "2025-01-09T14:19:52Z")
This proposal presents a well-reasoned strategy to leverage untapped liquidity while delivering meaningful protocol improvements. We fully support this initiative and will cast a _Yes_ vote on behalf of the PRO Delegators’ validator. We believe this deployment aligns with the community’s best interests and represents a valuable step forward for the ecosystem. Thank you, Govmos. [![pro-delegators-sign](https://us1.discourse-cdn.com/flex020/uploads/osmosis1/original/2X/4/46ce5c796764011e4e3c3b9f0bcfb8f1a80e6202.png)](https://wallet.keplr.app/chains/cosmos-hub?modal=validator&chain=cosmoshub-4&validator_address=cosmosvaloper18sqvyf4ss84qree7gndph5chmm82fglsqfylwn) ---
**Author:** ![LeonoorsCryptoman](https://sea2.discourse-cdn.com/flex020/user_avatar/forum.osmosis.zone/leonoorscryptoman/32/208_2.png) [@LeonoorsCryptoman](https://forum.osmosis.zone/u/LeonoorsCryptoman)\ **Post date:** [January 9, 2025, 7:07pm UTC](https://forum.osmosis.zone/t/deploy-eth-btc-liquidity-and-reduce-incentives-on-eth/3391/3 "2025-01-09T19:07:57Z")
I am ok with deploying for now, but I think it also would be good to set some kind of metrics to see if the liquidity actually attracts volume and / or more liquidity. If unsuccessful, we might need to reconsider to have it deployed at other more needed locations.