Limit matching external incentives

Proposal Discussion Liquidity Incentives
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In the past we voted already on certain guidelines for matching external incentives. One thing we did not discuss is a possible limitation on the time period we want to apply the matching for.

This is triggered (for me) by looking at the proposal for matching the external incentives of PICA (Mintscan). They supply external incentives for a year (Pool #1057) which means that we will also match these incentives for at least a year.

For me it would be good to think about a time limitation for matching external incentives on new pools, since it will allow us to see if a pool gains traction or not. And then we don’t need a new proposal to deactivate incentives if we define pro-actively how we want to deal with this kind of things.

I would think for example in terms like:

  • external incentives are matched for a period of maximum 8 incentive renewals
  • a pool is maintained for external incentive matching if it attracts more than $XX liquidity, $XX volume and generates more than $XX daily fees
  • if a pool fails to match these criteria after 8 renewals, the incentive matching is automatically discontinued
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I agree in spirit, but coming from the other direction.

We should be able to match teams who are practicing optimal incentive patterns by being more agile in their rewarding pattern and renewing frequently by matching a period of time rather than the current batch of incentives that we currently do.

I’d say somewhere around the 3 months mark, which gives the hype cycle time to die down for new listings.
Since we already match based on fees generated, I do not think we need to set criteria here to maintain this.

Actually, changing my mind midway through a post. We should just match externals perpetually for an asset/pair and start phasing out solo incentivizing minor pools. Converting the existing incentive approval to perpetual matching approval. Especially since most of the larger ones will likely be self-sustaining as Supercharged Liquidity reaches those pools.

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So you say we should not vote for specific pools, but for specific assets and incentive all relevant pools from there?

And still have it time-based for newer pools to indeed see if it gains traction?

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Personally, I think the issue here is about governance a

Prop #564 PICA/OSMO External Incentive Match was passed with only 37% of the participating vote in favor of passage. A 63% majority of participating votes did not favor passage; 4% were against and 59% abstained.

Because only a 45% minority participated, Prop #564 was passed by a 17% eligible vote minority.

The analysis conducted by @JohnnyWyles in regards to setting a 40% Yes Quorum finds a very strong correlation between the percent of vote abstaining and percent of vote in contention (correlation coefficient = 0.87).
See: Yes Quorum Parameter - Google Sheets

Additionally, even though Prop #564 is a question about matching external incentives, I would argue, it is really a question about a liquidity swap with another DEX like that of Prop #420 OSMO/WYND Token Swap for Protocol Liquidity.

Both Prop #564 and #420:

  • were passed by a minority of participating votes and eligible votes;
    only 35% of participating votes, or 21% of eligible votes, were favor of passing Prop #420.

  • were passed by basically the same minority votes. Validators basically voted the same way they did on Prop #420 as they did on Prop #564.

  • relate to new small DEX tokens. (For comparison, Wynd DEX currently has $1.4 million TVL, which is a little more than Forge DEX’s $1.2 million TVL. Pablo DEX meanwhile has $0.4 million TVL, which is less than CSwap’s $0.6 million TVL.)

  • Both have one year terms.

** the WYND/OSMO and PICA/OSMO currently have low 7-day trading volume and the same 7-day swap fee APR. (WYND/OSMO = $25 with 1.7% swap fee APR. PICA/OSMO = $2,600 with 1.7% swap fee APR.)

The vote on Prop #564 also closely resembles that of Prop #497 LIKE/OSMO Match External Incentives, which failed.

  • A majority of eligible votes failed to vote on both proposals; both had a 45% participation rate. And essentially the same percent of participating votes abstained; 53% abstained in Prop #497 while 59% abstained in Prop #564.

I also find it interesting that Composable Finance has noted in a blog post that Osmosis has already committed to creating a OSMO/KSM, ATOM/PICA, and OSMO/DOT pool on Osmosis, yet in scanning through the none the one Osmosis blog post and two from the Community Updates blog, nothing about these three pools were mentioned.

(See: Medium)

This isn’t to say that we should strive to make the external matching incentive program more efficient, effective, sustainable, and collaborative. Rather, I think addressing the underlying governance problem by moving forward with a vote considering the adoption of a 40% Yes Quorum would more than likely have prevented the passage of Prop #564 and other ‘contentious’ proposals that passed despite a 3/5th super majority of participating votes being cast against passage or abstaining.

And regarding abstaining, I repeat, principled principals (and principled agents) should always have the right to participate in a vote AND vote abstain due to a conflict of interest.

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I think it is a little bit short to conclude that 63% did not favor passage when 59% abstained. I rather conclude that 59% was both ok with passing as well as being rejected. If they would favored one of the options, then they should have voted “Yes” or “No” ^^

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