A Possible Development for our Fee Sharing Mechanism!
Following the poll we tweeted yesterday, a deep and stimulating discussion has been started on our Discord about the way we actually might distribute the fees for our protocol!
Unfortunately though, we realized that most users did not have a clear picture of the topic (as no explanation for Limone is yet public)! We therefore decided to write this brief medium article as a way to better explain the whole situation.
Let's lift any confusions that we had.
As a prerequisite, have a read at the poll we were referring to above, regarding whether users would like to earn USDT in addition to ICE as nICE holders.
Since then, there has been a lot of discussions in our Discord, which has been great. We love seeing the energy being back in our channels and we love engaging actively with our beloved Isvikingers to improve our products!
We wanted to clear up some things so that more productive discussions can occur considering not everyone had the same information yesterday.
Sorbetto Limone, is our multichain LP strategy, which will LP on BSC, FTM, and Ethereum on V2 alike DEXs. The main reason why BSC and FTM are actually very profitable is that with very little capital we will be the majority percentage of the TVL. Furthermore, a lot of projects are providing farming opportunities on these chains. For example, users can stake Spookyswap LP tokens to farm BOO tokens, gaining the trading fees from the LP tokens as well as BOOs on top of it!
This ultimately means that we will capture a majority of the LP fees as well as earning a ton of farming rewards with the Popsicle LP (PLP).
The LP fees will of course be distributed to LPers in the same fashion as is right now, meaning with the two assets you are LPing. We as a team then discussed what happens with the farmed tokens.
We were thinking about many things: Impermanent Loss, Value Accrue to nICE, auto compounding, attracting new users, and more. Out of this, we were thinking about the fact that other projects are always delivering returns in their token only, meaning that you NEED to be a true believer in the project or else you will likely dump your rewards.
But the farmed tokens being dumped and used to buy ICE will create a buy pressure?
Yes, that is correct, however, remember that volumes and liquidity change on a daily basis. A token bought or a token sold does not necessarily equal the same amount of pressure. In the same way how buy pressure will be high at one point (volatility going insane a lot of fees being printed), buy pressure will be low if volatility is low. Meaning that all the ICE that have then been earned from fees will give a decent sell pressure. If we add on top of these large LPers and also add having farmed rewards being distributed in ICE there is a long-term risk that we run.
So how do we create a situation where we can get “non-believers” to LP into Popsicle, while at the same time adding value accrue to ICE?
Making stablecoins as a return is always great since you can do whatever you want with these stablecoins. You arent going to be missing out on returns if the market dumps, you can use it to buy any sort of crypto asset, meaning you will likely use it to buy the asset that you like. This means that from a narrative perspective it is much easier to get people to try out Popsicle Finance, if there is a component of fees being earned via stablecoins.
So the model we were thinking about is the following:
Users LPs with Popsicle, earn the trading fees as normal in the assets they are LPing with. The farmed tokens are dumped and sold for USDT. Meaning the users are earning Asset A, Asset B and USDT. He could of course also auto-compound the USDT into the LP (we could build an extra function for this or any auto-compounding project could help us here) if they wanted to or they could use the USDT for something else like buying more ICE to stake as nICE, or buying NFTs whatever he/she wants.
On the other hand, nICE holders have their ICE staked, they earn ICE from the LP fees, in addition to that they also earn USDT from the farmed token rewards as they are gaining a percentage of the rewards produced by the protocol (hence gaining ICE tokens bought with two assets and USDT). This again means that the nICE holders are not only exposed to ICE, but also to stablecoins. If the market decreases, they do not have to cover themselves by selling ICE since they are also earning USDT.
So what are the benefits of this?
- New users can more easily be convinced to take part in Popsicle LPing as they are earning stables not just a token they don’t know of.
- Users are somewhat offsetting IL by earning stables!
- There is a larger incentive to stake your ICE and less reason to worry about market dynamics as you are not only earning more ICE but also earning stables.
- There is less “bad buy pressure” and more “good buy pressure”- meaning the people that actually want to hold ICE will buy with USDT, people that don’t want ICE won’t have such a strong sell pressure
I am sure I have missed some things, but in short, well I guess not that short I hope this explains the whole situation!
