SPS DAO LPs: An exploratory post
The SPS DAO has been paying out a substantial amount of inflation to LPs for about 2 years now and we've yet to do any proper cost-benefit analysis on these pools. To make sure everyone is up to speed, here's the last adjustment proposal that passed to remove DEC inflation and reward only SPS for all LPs and here is another proposal that allowed the DAO to start taking a share of the SPS inflation for the SPS:BNB and SPS:ETH pools. Let's dive into examining each pool's usage and cost below.
DEC:DAI on Uniswap
First up we'll take a look at the DEC:DAI pool on UniSwap. We can see that historically usage is extremely inconsistent. The pool usually peaks out around $30k-$40k on days of high utilization and most days volume averages between zero and few hundred dollars.
The volume for the last 30 days in this pool was roughly $271k and the total liquidity being provided in the pool at this time is $377k. The DAO is paying 200,000 SPS a month in inflation to this pool.
DEC:Swap.Hive on Tribaldex
Historical data on TribalDex is a bit limited, but it's possible to see daily, weekly, and monthly volume to gauge a pool's usage consistency without trying to parse all of the on-chain data, so we'll be using these stats for each of the TribalDex pools going forward.
In the last 30 days the Swap.Hive:DEC pool has done nearly $2 million in volume and has approximately $220k in liquidity. The DAO is paying 200,000 SPS a month in inflation to this LP.
DEC:SPS on Tribaldex
In the last 30 days the DEC:SPS pool has done nearly $1 million in volume and has approximately $720k in liquidity. The DAO is paying 825,000 SPS a month in inflation to this LP.
Swap.Hive:SPS on Tribaldex
In the last 30 days the Swap.Hive:SPS pool has done over $1.8 million in volume and has over $800k in liquidity. The DAO is paying 1,300,000 SPS a month in inflation to this LP.
Swap.Hive:Voucher on Tribaldex
In the last 30 days the Swap.Hive:Voucher pool has done over $200k in volume and has around $150k in liquidity. The DAO is paying 300,000 SPS a month in inflation to this LP. It's worth noting that this volume is likely unusually high due to the Rebellion presale.
DEC:BUSD on Pancakeswap
More useful charts from CMC
PancakeSwap's historical data leaves a lot to be desired so I'll be using the CMC charts to illustrate relevant data for our pools. With the recent Rebellion presale, we've seen a massive uptick in volume in this pool. Before the Rebellion presale was announced most days volume was under $1,000.
Volume has varied widely from less than $1k per day to over $100k on a single day. The average is closer to a few thousand dollars a day. The volume for the last 30 days in this pool has been roughly $774k with current liquidity sitting at $313k. The DAO is paying 200,000 SPS a month in inflation to this pool.
SPS:BNB on Pancakeswap
More useful charts from CMC
This pool's volume is all over the place with some days as low as $3k and one closer to $100k. Most days average around $5k. Over the last 30 days volume has been roughly $528k with current liquidity of $914k. The DAO is paying 1,300,000 SPS per month in inflation to this pool.
SPS:WETH on Sushiswap
Sushiswap analytics won't load at all, so I'm using CMC for analytics. Over the last 30 days volume has been inconsistent with lows under $1,000 and a couple of high days between $50k-$60k. Total monthly volume is approximately $238k with over $800k in liquidity. The DAO is paying 1,300,000 per month in inflation to this pool.
Personal Thoughts and Observations
There's a lot of info to digest in this post. It's clear that we have underperforming pools that are getting the same amount of inflation as higher performing pools and some that we could consider dropping all together due to low utilization.
We also have to ask ourselves if paying SPS inflation to any pool without an SPS trading pair is in the best interest of the DAO. The DAO should be encouraging people to use its DEC minting feature by burning SPS, not paying LPs to circumvent the main SPS utility, which is minting DEC.
Arbitrage is also an important aspect of the flywheel, so removing all DEC LPs could be problematic. I'd suggest we at least keep the SPS:DEC pool on TribalDex for arbitrage purposes as it has no fees to move in and out of the in-game wallets.
Another important thing to consider is that Land LPs are coming soon and that they will provide new pools for DEC liquidity providers to move into that could benefit SPS flywheel progress by removing pools that circumvent the SPS burn while also providing much needed liquidity for Land pools.
It's quite glaring to see pools like DEC:DAI doing $271k in volume compared to a pool like DEC:Swap.HIVE that's doing closer to $2 million in volume with much less liquidity and they're both receiving the same amount of inflation from the DAO.
We could also consider sunsetting some of these pools and rerouting inflation to new pools. By establishing pools on new chains or different types of pools, like perpetual pools for leverage trading, we could open ourselves up to new markets and traders finding the SPS token.
These are just my thoughts and observations. I hope you'll share your own in the comments below. Now that we have more data readily available to us, hopefully we can all have better discussions on the topic and ultimately make moves that will add more value to SPS. Thanks for your time and consideration.
Update:
Thanks to @bravetofu for suggesting I make a chart out of the data. I'm attaching my findings below for a TLDR version of all of this data. I've highlighted green for healthy, yellow for okay, and red for no good. These are my opinions, not a hard and fast rule. Generally you want higher volume than liquidity and the amount of SPS we're paying for volume and liquidity to be lower than higher. It's all relative:
Thanks Clay, this is useful. Not to give you additional work on this particular post, but in the future I think something like this would be more easily visualized in a table (so we could more easily compare the performance/rewards of each pool without having to scroll up and down). I agree there's some optimization we should do here, and in particular I think we should plan on sunsetting some of the pools that are considerably less active (e.g. DEC:DAI) and also DEC/BUSD given that BUSD is getting retired.
For sure, I was thinking about it afterwards. I'll probably throw it in a table and update the post in a bit. Trying to juggle a few things at the moment.
Definitely sounds like the SPS:BNB and SPS:WETH pair should be deprecated, that is 2.6 Million in incentives that we can route to something like a Cosmos LP (I suggest Kujira) with 2 Million and save the other 600K.
Just a random suggestion!