Discussion: Staking v2

Discussion
#35

Hi all

Very similar views to a lot of the posts already made on this topic but thoughts as follows:

  • Would you like to see a single-sided MC staking pool next to the LP pool?
    Yes happy to keep a single sided MC staking pool but the weights should be similar to the current 20/80 split with the LP pair.

  • What asset would you prefer as an LP pairing asset next to MC; ETH, WBTC, USDC or something else?
    I do understand the original reasoning for chosing ETH over USDC but I think the last 6 months have shown that we end up trading as a higher Beta ETH, which clearly has not been a good thing with the market conditions since November. The reverse of this is that if we do go through another positive price movement with ETH then we should also perform well. However, I would prefer to see USDC as the LP pair, it will be interesting to see the performance of MC when we are not tied to ETH.

I appreciate that inflation is high at the moment and this will reduce the value of USDC but we can always move back to ETH again in the future. Also, I don’t think you can compare ETH as a store of value, it is quite clearly a high beta asset.

  • What weights should the LP pool have?
    As above, 80/20

  • What is the preferred platform for LP tokens? (currently uniswap v2 50/50 LP tokens)
    Current platform works well.

  • How long would you want the locking periods to be?
    12 months

  • What % of DAO revenue should go to staking rewards? (currently everything used to build treasury, re-invest and buy back and burn $MC)
    Does a percentage of the revenue need to be used for staking rewards? Not something that can be answered without further information being provided.

  • Should the DAO, outside of locked MC, also distribute ETH, WTBC or USDC from revenue to stakers with longer locks?
    I would prefer the DAO retain revenue and use it to continue to grow the treasury. Maybe in future this could be an option but I still think it is too early for the DAO to go down this route at the moment.

  • How long should staking rewards be locked for?
    12 months - like the current system

I think it is important to ensure that current LP stakers who are locked for 12 months are not disadvantaged if we move from ETH to USDC.

Thank you to the core contributors for raising this topic and I look forward to a few of the points going to a vote.

1 Like
#36

I have some thoughts on the other points of discussion but specifically want to comment on the MC counterpair question.

I strongly prefer ETH and think choosing USDC or any another USD stablecoin as the LP counterpair would be a significant mistake.

There’s 2 key, somewhat interrelated points here:

  1. By LPing you’re forced to take a position in the MC counterpair and I think it’s pretty hard to argue for a position in USD vs ETH longterm, especially while simultaneously being bullish MC. @tommyq has already addressed the first part of this and I agree with his comments.

  2. IL comes from directional movement of 1 asset against the other in an LP pair. Broadly speaking it is advantageous to provide liquidiity for correlated assets and MC will almost certainly be more correlated with ETH than a stablecoin. Although pairing with ETH will lead to higher volatility, even assuming we can’t know taking a position in ETH has an overall higher EV than USDC we can still say having it as a counter-pair is advantageous due to higher correlation.

To elaborate a bit further:

As I mentioned @tommyq has already made a strong case against USD broadly. USD is not actually “stable”, it is a moderately -EV position that has become more -EV with the recent increase in inflation.

I suppose you could prefer USDC if you’re bearish on ETH long term but this seems a pretty bizarre stance given the nature of MC. We’re a crypto-gaming DAO. While not impossible, it’s a somewhat strange position to be bullish on crypto gaming and bearish on one of the biggest underlying platforms for those games.

I think the objections of “risk” are short-term thinking driven by a mostly bearish last few months. If Merit Circle had launched 6 months earlier and instead we were having this conversation last November I doubt we’d be hearing too many objections to an ETH counter pair. While I understand the sentiment and know these last 5 months or so have been very trying at times, this is all still very results oriented thinking and shouldn’t guide our long-term decision making.

We can illustrate the second point, that it’s advantageous to LP with correlated assets with some simple math.

MC is currently trading near $2. For whatever staking period we’re considering let’s say there’s a 50% chance MC increases or decreases by $1. In this case the EV of holding MC by itself is 0, however the EV of LPing varies depending on MC’s correlation with it’s counterpair.

First let’s consider LPing with a stablecoin counterpair. In this case when MC goes up to $3 the value of a $1000 LP position increases to $1224.74 and when MC goes to $1 the value of the position declines to $707.11. The overall EV of this position is -$34.07. This is due to the relatively high rate of impermanent loss due to 0 correlation between MC and USDC.

Now let’s consider an ETH counterpair position and assume a 0.5 correlation between MC and ETH with a starting ETH price of $3000. In this case when MC increases to $3 ETH increases to $3750 and the value of the LP position increases to $1369.31. When MC decreases to $1 we assume ETH declines to $2250 and the value of the LP position declines to $612.37. The overall EV of this position is -$9.16, significantly better than the -$34.07 EV of the stablecoin LP position strictly due to the the higher correlation between the paired assets and thus less IL.

6 Likes
#37

I’d just like to reiterate that for me not having a MC-USDC LP is full on a break point, and that includes exclusion of another MC-ETH LP.

#38

the prizes deriving from staking must absolutely be released immediately, otherwise someone could think of a scam, and we do not attract new investors, and the price always falls, wake up and take action immediately, put to the vote immediately.

#39

Spot on, very good points. For long-term holding ETH and MC is clearly a superior investment.

It´s beyond ironic to have some many people in crypto favoring a centralized stablecoin pegged to fiat money.

2 Likes
#40

Hello,

A great man once said I must stop thinking like dev, so I read this thread twice: once reading as dev, once reading as cat. I think there were some interesting points raised, but both cat and dev me agree that we need an USDC LP. I think impermanent loss is a meme with staking rewards implemented. Profit made from MC rewards will far outperform any impermanent loss made or fees earned.

Long term, Tommy might be right about the inflation risk of USDC, but right now we’re in uncertain times and being tied to a highly volatile assets seems very risky. I think the ETH-MC LP decision was made with the expectation that ETH would keep on climbing against the USD, but that didn’t happen, so it might be justified to call that a mistake.

The opinions seem very divided about this topic and waiting till November is silly. Even if Tommy is right long-term, we can still profit from USD non-volatility short-term. I say we put it to a vote to add a USDC-MC LP Pool to the staking contract and adjust the weights of the current pools. Currently, the single-sided staking is 20% and ETH-LP is at 80%. Perhaps for the rest of the staking period we can adjust the weight to:

  • Single-side: 15%
  • USDC-LP: 40%
  • ETH-LP: 45%

If the ETH-LP lockoooors feel rugged because of the decrease in weight, perhaps it might be an idea to provide additional MC to the rewards pool? I am too clueless about current available MC balance for this, so it might be a low IQ suggestion.

Anywho, counter my suggestions and let’s make a proposal for a real solution. USDC LP can not be ignored.

Kusjes,

Electric Dick Dev

2 Likes
#41

My 5 cents: I don’t think single side MC staking makes any sense - just paying people for not selling (here I agree with Cobie’s article).
LP pools are useful (provide liquidity) and should be with max priority to ETH - just because whatever the liquidity is the pair MC/ETH would be much more popular on Uniswap than any other with MC. So - we can do something like 70%(ETH)/10%(WBTC)/20%(USDC) or just leave ETH alone.

1 Like
#42

What do you think the weight for MC should be within the LP position? 70%? And 30% the other pairing asset(s)? Or you mean something else? 50/50… 80/20… 75/25?

#43

Also in a 80/20, 75/25 or 70/30 LP pool scenario?

The pairing asset would matter less in such a scenario, I think this would also greatly improve the average liquidity depth. Since a lot of single staking will be comfortable with such ratios.

The liquidity efficiency of the pool will be lower, but the total pool will have a much larger size. Moreover, the people in the LP pool will suffer much less IL and can maintain more relative $MC exposure per $ in the pool.

#44

A poll is now live to gauge which LP pairing asset is preffered by the DAO community. This is the first Official Merit Poll (MP-1).

Read here:

Vote here:
https://vote.meritcircle.io/#/proposal/0xbd4b35e7ef4fa6aa3d354084a6c6cde2db9f4f029554169357faf3690c3bdef4

2 Likes
#45

Uniswap allows only 50/50 - am I wrong? Or do you consider switching to another platform? 50/50 seems to be most natural, although I’m not a great theorist in this domain.

#46

Uniswap v2 only allows 50/50

Uniswap v3 allows custom ratios. Like 75/25 (random example). Other platforms like Balancer also allow for this.

1 Like
#47

Not sure if its been discussed yet but what happens with the current pools?
Will they be migrated or will they stay in place?

#48

They will be phased out.

Locked v1 stakers do not have to worry. Rewards will not stop until the very last staker is unlocked. Every v1 staker will get their proportional share of rewards, regardless if you lock tomorrow for 1 day before v2 for another 12 months.

Once v2 is live, people can no longer add stake to v1 staking. They will only be able to withdraw their LP and rewards, while rewards will continue for another 12 months.

#49

Henlo,

So we’ll be stuck with ETH LP for the rest of the year? How is this a solution? Then we’re still tied to ETH for a long while. We need a migration.

Honey

#51

If the main pool becomes USDC, you’ll have both pools for the rest of the year. In that scenario ETH relative share will decline, until there is only USDC left. That is not necessarily a problem, most trades are routed anyway.

It is not possible to migrate a pool with a different pairing or ratio.

1 Like
#52

Hiya Tommy,

When do you expect this new staking process to be implemented? I am asking mainly to decide on if I should stake in V1 now or hold off for V2. Thanks!

#53

Hey there Cadet.

As soon as possible! No hard timeline, sorry.

Either way, you should not worry. We will implement a system where it should not matter much wether your in v1 or v2.

#54

First poll concluded the LP pool should be paired with USDC. A significant majority voted for this option.

A new poll [MP-2] is now online to decide how long people will be able to lock there stake for:

Vote here:
https://vote.meritcircle.io/#/proposal/0x64a669acccf77471e8aee82ecbfdda431d4b487ca01e66b2cc4c1764b5ef97d0

#55

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