Idle

The following is an extract of the proposal posted on the Idle governance forum.

Author

Treasury League

Summary

A proposal to discuss the next steps of the $IDLE incentivization, aka the Liquidity Mining program, on Best Yield strategies ending in April 2023.

Rationale

The Liquidity Mining program is live since November 2020 with different rates of IDLE distribution. During this period, the IDLE incentives were also routed to Yield Tranches through the Gauges system. A summary follows:

• Distribution 1 - 3205 IDLE/Day distributed between Best Yield (70%) and Yield Tranches (30%)
• Distribution 2 - 1990 IDLE/Day distributed between Best Yield (50%) and Yield Tranches (50%)
• Distribution 3 - 500 IDLE/Day distributed on Best Yield

Financial analysis

To understand the financial performance of the incentives program, it can be useful to understand the dollar cost, aka the acquisition cost, of the fees generated by the Idle strategies for every $IDLE incentive distributed.

How many fees were generated by the Idle strategies vs the $ amount of IDLE distributed?

We have already analysed two different distribution periods:

• Distribution 1 from 01/01/2021 until 08/06/2022 with 3,205 IDLE/day
• Distribution 2 from 08/07/2022 until 12/31/2022 with 1,990 IDLE/day

Today we will add a third part

• Distribution 3 from 01/30/2023 until 13/03/2023 with 500 IDLE/day

Distribution 3 The Best Yield strategy received around 21k $IDLE incentives, i.e. 47% of the funds, (for an average dollar value of $9k with IDLE price equal to $0.42) and generated around $22k in fees for the DAO.

• For every $1 spent in $IDLE incentives, the BY strategies generated $2.49 in fees

These results seem to suggest that the incentivization program for Best Yield is strategic and helped retain the TVL. We should anyway weigh this analysis taking into consideration its short length. Due to the Euler exploit that happened on March 13th, multiple strategies were paused. Hence the analysis lasts only ~40 days.

Proposals

We will list three ideas as the next steps for the Liquidity Mining program:

1. Continue the Liquidity Mining program for 3 months

The Best Yield strategy has been incentivised through the Liquidity Mining program with different distribution rates (3205 → 2215 → 1000 → 500 IDLE/Day). One option is to extend for another 3 month the program at the same distribution rate.

• 500 IDLE/day for the next 3 months

The IDLE needed to fund this extension can be taken from the Ecosystem fund.

Extending the incentivization length of the LM program can be strategically smart to retain the current liquidity (mainly sitting in the DAI, USDC and USDT BY markets). Even more, now that the Best Yield and the Yield Tranches strategies can work synergetically.

This emission rate would not affect the rewards return for the BY strategy (+0.2% at current prices).

2. Continue the Liquidity Mining program for 3 months and update the distribution rate

Another option is to extend for another 3 months program but adjust its distribution rate.

• From 500 to 250 IDLE/day for the next 3 months

The IDLE needed to fund this extension can be taken from the Ecosystem fund.

This emission rate would affect minimally the rewards return for the BY strategy (+0.1% at current prices).

3. Pause the Liquidity Mining distribution

One last option is to pause the Liquidity Mining program.

• From 500 to 0 IDLE/day

From a DAO treasury perspective, this option would stop the emission of IDLE and reduce significantly the selling pressure on the DAO governance token. The emission rate would affect the rewards return for the BY strategy and stakers.

It is important to remember that the Liquidity Mining program started in November 2020 with different rates of distributions and strategies affected.

The DAO may also think to update the Integration Partners program and create an ad-hoc solution for integrators that count on the additional return given by IDLE on the Idle strategies.