As many of you know, our current Uniswap LP promotion is coming to an end on December 31st, 2020. We want to thank everyone who has participated and provided liquidity to the DEC-ETH pool on Uniswap so far, and we hope you get some legendary land plots and great prizes in the raffle!
Having a large liquidity pool available for players to trade in and out of DEC as well as tying DEC to ETH instead of HIVE has been extremely helpful towards maintaining a stable and rewarding game economy. Therefore it is very important that players continue to provide liquidity to the DEC-ETH Uniswap pool going forward in 2021 after the initial promotion has ended.
In order to help ensure that happens, a new incentive program for liquidity providers will be launching starting on Jan 1, 2021 - immediately after the current promotion ends - which will work as described below.
Uniswap DEC Reward Pool
A new source of DEC inflation will be added to the game that will specifically be paid out to liquidity providers in the DEC-ETH Uniswap pool. The new inflation source will produce a total of 100M new DEC tokens over the course of one year, which is roughly 274,000 DEC per day.
This may sound like a lot at first, but in the scheme of things it's actually relatively small, while still providing some very enticing returns for liquidity providers. Please see the DEC Economy section below for more details on that.
Starting on January 1st, 2021, approximately 274,000 DEC will be awarded every day to accounts that provide liquidity to the DEC-ETH Uniswap pool in proportion to the amount of liquidity they have provided as compared to the total in the pool. As always, the liquidity provided by Splinterlands (roughly $65k / 40M DEC) will not be eligible for the promotion and will not be counted in the liquidity totals.
At the time of writing there is around 80M DEC in the pool (after taking out Splinterlands' portion), which means that liquidity providers will earn over 62% returns in DEC tokens per year!
As more liquidity is contributed to the pool, that number will come down a bit, but considering that there's not a whole lot of DEC left in circulation at this point we expect the returns to remain very high - which is the goal in order to incentivize participation.
Reward Bonus Multiplier
We also want to encourage people to provide liquidity consistently and for longer periods of time, and reward those who do. As a result, a bonus multiplier will be added to each participant's percentage of the liquidity pool based on the amount of time they have kept their liquidity in the pool.
Participants will earn a 1% bonus multiplier to the amount of liquidity they have provided for each day they remain in the pool, up to a maximum of a 100% (or 2X) bonus mutiplier which can be reached after remaining in the pool for 100 days. If at any time an account removes any amount of liquidity from the pool, their bonus multiplier will be reset to 0.
Hopefully the following simplified example will help make this more clear. Let's assume that Alice contributes 1M DEC (plus the equivalent dollar amount of ETH) to the liquidity pool on day one, and she is the only participant in the pool. Then, after 100 days, Bob contributes another 1M DEC (and ETH) to the pool, so the pool now has a total of 2M DEC.
Alice has earned a 100% (or 2X) bonus multiplier for having remained in the pool for 100+ days, so that means she will be considered to have 2M DEC in the pool, while Bob who just joined and has a bonus multiplier of 0 will be considered to have 1M DEC in the pool. This means that Alice will earn two thirds of the total rewards for that day and Bob will earn one third. Even though they have both contributed the same amount of liquidity, Alice will earn double the reward that Bob does since she has been in the pool for 100+ days while Bob has just joined.
As each day goes by, Bob's bonus multiplier will grow (assuming he does not withdraw any liquidity from the pool) and he will receive a larger portion of the total rewards until 100 days goes by and then both Alice and Bob will have a 2X multiplier and each receive half of the rewards.
Please note that all players will start with a bonus multiplier of 0 on January 1st, 2021, even if they have been contributing to the liquidity pool before then.
We hope that this mechanic will encourage players to provide liquidity to the pool early on and for longer periods of time, while also not discouraging new players from participating since new participants can still achieve the same bonus multiplier as older participants over time.
The new Uniswap LP rewards will be able to be claimed from the Splinterlands game website in the same way as the rewards from the currently running promotion. Players can click on the "Claim Uniswap Rewards" option in the settings menu and enter their Ethereum wallet address to see what rewards they have available to claim. Then they will have the option to claim them which will pop up Metamask or other web3 wallet to sign a message proving ownership of the wallet.
Please note that signing a message does not require making a transaction on the Ethereum blockchain and therefore is instant and has no fees.
The DEC rewards available to claim for each participant will be updated daily and will remain available and accrue under the associated Ethereum wallet address until they are claimed. This means that players have the option to claim their rewards as often or as rarely as they want. Rewards will simply accrue in each player's account every day until they decide to claim them.
DEC rewards will be credited to the Splinterlands account with which the player is logged in when the rewards are claimed. This means that DEC rewards for Uniswap LPs will be credited in the game and not to an Ethereum wallet. This allows us to avoid the high fees and other issues that come with Ethereum transactions.
DEC Economy Details
Finally, we wanted to add some information about the overall DEC economy to help show the relative size of the new DEC inflation pool and allay any potential fears about over-inflating the token.
There are currently three sources of DEC inflation:
- Ranked Battle Rewards (~850k / day)
- Quest and Season Rewards (~400k / day)
- Burning Cards (This varies greatly, but has averaged about 900k / day over the past three months)
This gives us a rough estimate of about 2.15M DEC that are created each day, which means that the new source of DEC for the Uniswap LP reward pool will increase that to ~2.424M / day, which represents about a 12.7% increase to the total DEC inflation rate.
There are a number of significant new features planned over the next year that will involve large amounts of DEC tokens being burned, which we expect will far outweigh the effects of this new source of inflation, and will likely require the amount of DEC rewards given out in other areas to be increased as well. The first such feature is the Guild Brawls system, which is planned to be released in Q1 of 2021.
How to Participate & Risks
For more details and instructions on how to participate in the Uniswap liquidity provider promotion, please see our announcement post for launching the DEC-ETH pool on Uniswap.
We also wanted to be clear about the risks involved with providing liquidity to the Uniswap pool. When you provide liquidity initially, you are required to add an equal dollar amount of both DEC and ETH tokens based on the current pricing of the Uniswap pair. Then, as people swap DEC for ETH and vice versa, the amount of each token in the pool will change.
This means that the amount of DEC and ETH you will receive when you withdraw your liquidity from the pool may change significantly from the amount you put in. You will either receive more DEC and less ETH or less DEC and more ETH, depending upon the amount of each token in the total pool at the time you withdraw. Additionally, the prices in USD of both tokens may vary significantly between the time you commit your funds to the pool and the time you remove them. Finally, there are also risks of a hack occurring on either the Uniswap platform smart contracts or the DEC token smart contract.
As we mentioned in the original announcement post, Splinterlands does not assume any responsibility, nor can we issue any refunds for loss of funds or any other issues relating to the use of Uniswap or transactions on the Ethereum network. Please make sure you know what you are doing, and if you are unsure, please ask for help in the Splinterlands Discord server.
Still Time to Earn Land Plots & Raffle Tickets!
If you want to provide liquidity to the pool and start earning rewards, you don't need to wait until the new promotion starts on Jan. 1st. If you contribute to the pool now there are still a few days left to earn land plot claims and raffle tickets from the first Uniswap LP promotion!
The current promotion ends on December 31st, and 1000 land plot claims will be divided among all participants based on their percentage of the pool from 12/2 through 12/31. Additionally, 100,000 raffle tickets (for the drawing planned to take place in late January) will be divided among all participants based on their percentage of the pool from 10/3 through 12/31.
If you contribute liquidity to the pool now, you can potentially earn some land plots and raffle tickets and then you'll already be entered as soon as the new promotion starts and start earning DEC rewards and increasing your reward bonus multiplier!
Stay tuned for more updates from the Splinterlands!
NOTE: All rewards from this post will be burned.