Moonwell

Author(s): Fei

Submission Date: 12/01/2022

Forum Post: https://forum.moonwell.fi/t/318

Summary

In preparation for the potential passage of MIP-7, and with it the addition of new USDC.wh, ETH.wh, and WBTC.wh markets on Moonwell Artemis, it’s important that GLMR and WELL rewards are added in order to incentivize liquidity.

If passed and executed, MIP-11 will add GLMR liquidity incentives to new markets on Moonwell Artemis. It will also add WELL incentives to these new markets through the rebalancing of the currently allocated core protocol WELL emissions. The rewards will only be implemented on the supply side, not borrow. This is primarily due to conservative borrow caps being implemented on these new markets.

Following the precedent set by community members not-taco and fechuky, I have also included a one time grant of 100,000 WELL tokens to my own wallet as part of this proposal. This is to encourage other community members like myself to take on this type of work to help maintain Moonwell.

Proposed Changes

Addition/rebalancing of GLMR incentives to account for new USDC.wh, ETH.wh, and WBTC.wh markets on Moonwell Artemis.

• Supply side reward emissions (GLMR/day):
  • GLMR: 4,371 -> 3,795
  • xcDOT: 4,636 -> 3,795
  • FRAX: 4,238 -> 3,946
  • ETH.wh: 0 -> 1,214
  • WBTC.wh: 0 -> 1,214
  • USDC.wh: 0 -> 1,214

Rebalancing of currently allocated WELL liquidity incentives to account for new markets on Moonwell Artemis.

• Supply side reward emissions (WELL/day):
  • GLMR: 50,996 -> 38,633
  • xcDOT: 52,541 -> 38,633
  • FRAX: 50,996 -> 40,179
  • ETH.wh: 0 -> 12,363
  • WBTC.wh: 0 -> 12,363
  • USDC.wh: 0 -> 12,363

Definitions

WELL - Moonwell Artemis governance token

GLMR - Moonbeam governance token

Liquidity Incentives - WELL/GLMR tokens that have been allocated for use as rewards to incentivize liquidity growth.

Core - Moonwell Artemis protocol

GLMR Liquidity Incentives

Through the incredible support of the Moonbeam community and the passage of Moonbeam Referendum #65 “Moonwell Artemis Grant Proposal”, a total of 4,166,400 GLMR have been granted from the Moonbeam Foundation to be utilized as core protocol liquidity incentives.

As shown in the screenshot below from the aforementioned grant proposal, the estimated weekly emissions rate was to begin at 316,800 GLMR, before tapering down to 136,000 GLMR for the final 12 weeks. You will also notice that it was originally estimated that new Wormhole markets would be live on Moonwell by the week of 11/2/2022. As is often the case in crypto, the unexpected happened with the collapse of FTX and subsequent contagion/capital flight.

To adapt to these new market conditions and account for the fact that MIP-7 will launch .wh markets on Moonwell with quite conservative risk parameters (i.e. 10% collateral factors and ~$250K borrow caps), I would propose that we “save powder” and set the initial weekly rate of total GLMR emissions to 92,711.76. It seems wise to conserve the GLMR grant and increase reward emissions as the liquidity supplied in these markets increases over time. I believe it also makes sense to withhold on adding incentives for borrowing while there remains low borrow caps on these markets. Otherwise, only the first users to borrow would reap the rewards.

Please find my proposed GLMR liquidity incentive distribution below:

WELL Liquidity Incentives

750M WELL tokens, or 15% of the token supply, have been allocated as liquidity incentives to actuate TVL growth in the core protocol, Safety Module, and DEX LP. In the recently passed MIP-10 proposal, the weekly rate of total WELL emissions for the core protocol was set at 1,081,730.77.

This proposal will rebalance the same weekly WELL emission rate (1,081,730.77 WELL) set by MIP-10 to include the new markets. You can see the percentage distributed to each of the new markets in the screenshot below:

Conclusion

With the launch of Wormhole on Moonbeam, the passage of Moonbeam Referendum #65, and now the submission on MIP-7 to add new .wh markets, it’s an exciting time for the Moonwell protocol. It’s important that we not only incentivize liquidity growth in these the new markets, but do so in a rational way that accounts for current market conditions and estimated short term liquidity. As the market recovers and liquidity builds, it’s expected that additional proposals will be submitted to update risk parameters (like Gauntlet’s MIP-3) and readjust liquidity incentives.

Thank you for taking the time to read through, and hopefully vote on, my proposal. It’s important for the health and betterment of the protocol that we as a community stay engaged in the governance process.

Finally, I would like to state that though I am an independent member of the Moonwell community, I have consulted with other Moonwell contributors regarding reward distribution data and generating/verifying proposal call data.