Yield Farming & Liquidity Provider Incentivization
$LQ Community Liquidity Bootstrapping Program
Website/Twitter/Discord/GitHub/Whitepaper
For an overview on Liqwid please read our opening intro series post.
Overview
At Liqwid, our chief goal is to create open financial infrastructure that applications and developers can build on, indefinitely. To realize this vision we are facilitating a fair and inclusive distribution of $LQ governance tokens to future protocol users. From Liqwid v1 launch forward, all proposals to update the protocol or access LiqwiDAO treasury funds will originate from $LQ governance token holders — achieving our vision of decentralized from day 1 and establishing an open protocol capable of community-led innovative growth methods.
Liqwid is pleased to announce its upcoming two-phased liquidity mining program. We will be releasing one staking contract and one user distribution contract:
- User Distribution
- Yield Farming
Next we will unpack the parameters of each contract, the differences between the two, and the rationale behind their functional mechanism designs.
User Distribution: Aquifer
The $LQ user distribution program is designed to distribute LQ governance tokens to users based on their usage of the protocol. Concurrent to the first epoch (5 days) of the Yield Farming program protocol users (borrowers/suppliers) will begin earning $LQ each block pro-rata to the borrow interest generated in each market.
The protocol first allocates a specified amount of LQ tokens per block, which are allocated to each market in proportion to the LQ expansion rate. Every Cardano block, 0.5–1 $LQ will be distributed across every market, proportional to the interest accrued in the market. In each market, $LQ is then distributed to all borrowers and suppliers according to their borrow and supply amount. Each market has a “Supply Index” and “Borrow Index” for tracking the accrued LQ token per unit in this market (the unit is a borrowed asset for borrowers and qTokens for suppliers). Within each market half of the $LQ is allocated to suppliers, the other half to borrowers. The user distribution program will automatically distribute $LQ to users once the amount they’ve accrued surpasses a threshold. The Aquifer initiative will be granted 12,600,000 $LQ tokens and every epoch will have 86,301 $LQ tokens to start.
Yield Farming: Hydroponica
The first mechanism delivering initial $LQ token distribution to the community will be the Yield Farming staking contract, dubbed ‘Hydroponica’. This contract will hold 10% of the total supply and will be distributed to community members who stake their qTokens (minted upon initial deposit). Users will be able to stake qTokens for the following assets supported at launch or shortly after: ADA, USDC, AgeUSD, ERG and LQ. We selected these assets because they will serve as the initial set of money markets in the protocol. We thought it was most equitable to design this fair launch opportunity to earn $LQ for these token-holders who will evolve from their modest farmer beginnings to become active protocol users as a part of the distinguished Liqwid legion of hydroponic farmers.
Yield Farming enables our project to bootstrap community through incentives created by distributing $LQ. The key goal is to build the infrastructure of an engaged community whose incentives are aligned with those of the Liqwid protocol, even post Hydroponica (and well beyond).
Participants have the option to redeem their $LQ yield at the end of each epoch. Each epoch will last exactly five days (same as Cardano epochs), and an equal number of $LQ tokens will be distributed during each epoch. The user’s yield will be based on the amount of supported assets qTokens they have staked relative to the total amount staked in the Hydroponica pool. The calculation will be time-weighted to encourage accurate and fair pro-rata $LQ yields. Any user can add to the pool intra-epoch and earn $LQ rewards proportional to the time they are staked, however the funds must remain staked through the end of the epoch to redeem the $LQ.
LQ Distribution & Dividend Model:
https://docs.google.com/spreadsheets/d/1LrSexBmUVpSN6N23psECBPdS0aUjEwlOzZ829E4N974/edit?usp=sharing
Summary
The user distribution and yield farming programs are designed to facilitate the most decentralized community-led protocol that ensures power does not reside in the hands of a few. In addition security audits will be performed on all of the contracts in the liquidity bootstrapping program. Users will have the opportunity to beta test all of these smart contracts on the KEVM devnet before they’re deployed on Cardano mainnet following the final Goguen upgrade.
Any questions around a vesting schedule, please check out our “Fair Vesting” section in the Whitepaper and for more information please also see our post about our LiqwiDAO 1st governance model.
