Wombex: proposals & future roadmap.
The team’s opinion.
Let’s review the current state of Wombex and its future plans
Dear Wombex Warriors!
The community was very active lately, creating proposals and asking multiple questions regarding the Wombex roadmap and next actions for its development.
We decided to communicate with the community in one place and not fragment this communication across multiple topics on the forum.
The current state of things: discussion and insights
Wombex’s strategy from day one was to build on top of Wombat and contribute to the ecosystem making Wombat stronger. And we continuously had been fulfilling this goal — accumulated $WOM and became #1 in WOM Wars, attracted $108m TVL to Wombat (ATH level) and maintained >50% of Wombat’s TVL over 8 months peaking at 60+%. We built a strong community and made one of the biggest AMAs and community events ever on the BNB Chain. Even now, Wombex has a bigger TVL than anyone else in the Wombat ecosystem.
However, let’s discuss why we are where we are now. During this journey several particular problems happened:
The overnight pool led to the ecosystem draining up.
Overnight, positioning itself as a ‘market-neutral yield’ de-facto just mints stablecoins pegged to USDC, deposits stablecoins to projects providing native token rewards and dumps these tokens right away using part of these proceeds for paying bribes to boost pool rewards in the future periods. No rocket science, complex strategies or anything like that. Just farm & dump. So after the launch, Overnight deposited liquidity in Wombex/Wombat main pools, farmed WMX and WOM, and dumped them all the time. You can see all the stats here:
When we found out that WMX (and also WOM) were being dumped all the time, we made an on-chain analysis, found out that it was Overnight, and reported to Wombat all our findings. WMX dropped down because it was hugely sold on the market by Overnight and at the same time since the Wombat cap had been decreasing, the Wombex had logically became less and less valuable. So, our possible solution was only to add a claiming penalty on $WMX (since it’s evident that in web3 you cannot ‘blacklist’ any address or contract of using the protocol, it is far away from our values and tech possibilities). However, this solution (1) wouldn’t save the WOM price and attractiveness (and we need to highlight that it significantly affects Wombex) (2) would cut off not only Overnight, but a lot of other LPs and possibly doom the TVL in main pools (3) looks like it should have been done by a governance process (4) was planned to be solved by Wombat using their own approach (turn off the bribes etc).
Due to the combination of factors mentioned above, a penalty wasn’t added. Overnight dumped $WMX from $0.13 to $0.045. If anyone says “if you provide rewards, you should make your token attractive enough to be owned after farming and not dumped”. Overnight dumped tokens algorithmically, it wasn’t connected with token value or bribes income or anything else. Any project on the bear market couldn’t be able to maintain token price at a good level if somebody continuously sells a significant share of daily rewards.
The significant decline of bribes volumes (not only in Wombat, but in general on the market)
Projects like Wombat (DEXes) and aggregators like Wombex significantly depend on the volume of bribes since it is a pure ‘monetary value’ or simply money paid to active token holders who participate in governance.
If you can receive a lot of $$ per 1 vote, the token is valuable and has a good price.
If you receive a small amount of $$ or it is close to zero, holding the token may be unattractive and its valuation is quite small as a consequence.
We created a special dashboard for tracking the overall bribes market on Wombat:
Now, there is around $10k of bribes for Wombat at the BNB chain and almost zero on Arbitrum. The low bribes volume is connected to two main reasons:
(1) low bribing efficiency — since WOM price is low, the USD-denominated amount of rewards that pools receive as a result of bribing is also quite small
(2) projects don’t allocate bribes due to the bear market (they don’t see any significant impact of bribes and want to optimize their budgets)
Other Convex-like projects that can be used as a reference, for example Aura Finance also demonstrate some decline in bribes (and, as a result, $AURA token valuation):
Note, that this substantial amount of bribes allocated (around $350k) is based on the competition for rewards distribution in the Balancer ecosystem, a leading DEX with $170 m.cap of BAL tokens and $900m TVL. For reference, Wombat now has $4.7m m.cap and $32m TVL. When comparing the bribes/TVL ratio, we can find out that Wombat is almost the same as Balancer:
The numbers of 0.041% and 0.031% are comparable, which means that if Wombat had $900m TVL, the total bribes theoretically should be $281k.
Convex token also declined in its valuation:
The bribes volume per 1vlCVX is currently on an ATL with $0.029 per vote. In march it was 0.065 and in april it was 0.051 on average. So, it decreased 2x.
The overall situation in bribes across different protocols is much worse now than several months ago and it doesn’t depend directly on Wombat or Wombex performance. It is also reflected in the token price of AURA and CVX. Also it’s important to note that these two tokens have much bigger m.caps, liquidity, brand value and community size, and also underlying projects have much bigger TVL and impact on the market.
Wombex actions and upcoming Ethereum launch
As we mentioned before, Wombex has been committed to building on top of Wombat and developing the Wombat ecosystem.
We rejected all suggestions to bribe vlWMX token holders independently from the general Wombat bribe market (which was quite easy to implement from a technical point of view). It could provide greater bribe efficiency for projects that were interested in it, and also provide additional exclusive value and reward streams for vlWMX holders. However, as team players in the Wombat ecosystem, we decided not to violate the rules created by Wombat and not to do anything like that.
Now, we are waiting for the Wombat full Ethereum launch (now it is launched only partially, without veWOM which is a critical part of the infrastructure needed by Wombex for its operation).
Due to its incredibly gas-efficiency (which in turn is a consequence of the AMM algorithm that doesn’t require complex calculations on-chain), Wombat has a real chance to compete for users swaps with tier-1 players such as Curve/Balancer on the Ethereum StableSwap DEX market.
Since we depend on Wombat in this launch, we cannot launch anything faster than them.
Wombex will launch the Ethereum Bootstrap event soon
Stay tuned for the announcement on our Twitter!
Key takeaways from this part:
Wombex issues are a results of the following:
- The Overnight issue that resulted in a huge WMX and WOM dump
- Decline in bribes volumes which is not specific for Wombat only (although, depending on low WOM price and low TVL), but also affecting the entire market including Curve, Balancer, Convex, and Aura.
- Delay in new TVL and users’ acquisition due to delay in Wombat Ethereum full launch. It results in the overall stagnation of Wombex metrics
The Wombex community was very active and proposed various ideas on how to support the WMX and wmxWOM pegs. In the following section we explore them and provide our team’s opinion.
Reviewing Wombex governance proposals
So, the Wombex Governance Forum has been up and running for three weeks now. During this time you have presented us with 4 proposals on enhancing Wombex and your experience as users on this platform.
In this section, the Wombex team will share opinions and comments about all of them.
Let’s look at them in chronological order:
Wombex proposal #1
To counteract the falling price of the WMX token, the Wombex team has proposed to introduce a 50% withdrawal penalty for claiming WMX rewards from the main pool without vote-locking them. The specifications and detailed motivation for this proposal follow this link.
In short, Wombex believes that introducing a penalty for withdrawing WMX will help stabilize its price and encourage long-term WMX token holders. As for the penalized tokens, they can be distributed to vlWMX holders in a way that will benefit Wombex’s most devoted users and facilitate long-term engagement.
Team opinion
In our opinion, the overall idea to decrease new emissions entering the market is good and should support WMX. However, it is a two-edged sword and the other side of things is that actual APRs (the income that could be instantly derived from LPing) will drastically drop and Wombex can lose a significant amount of TVL in main pools.
We have decided to let our community submit proposals on how these bonus rewards should be distributed. Currently, this mechanism is already implemented in the Booster.sol contract for all pools, without the ability to set different penalties for individual pools. All penalties are automatically distributed among vlWMX holders. To add the ability to set different penalties for each pool or different distribution, we should make some changes to the Booster and migrate it.
Enhanced APY Display for Liquid Staking Pools
@Suplife proposed to make adjustments to APY calculations in the Wombex UI. He proposes to include the “native yield” of the LST in addition to $WOM and $WMX rewards into the formula. The goal is to display a more attractive ARY and attract more LPs into Wombex LST pools.
Additionally, he proposes tracking and sharing TVL statistics in the affected pools before and after implementation of this proposal (if passed) over a three-month period to be able to see its efficiency.
Team opinion
We think that the overall idea is good. However, we doubt that it will significantly change the TVL acquisition process. Users who deposit LSTs already know their APRs and note this. It definitely can be implemented but will require some technical work and we need to decide together should this particular work be prioritized or not since there are other proposals requiring significant input on the development side.
Wombex improvement discussion — Lock boosters (counterproposal)
@NoraChocolat & @Suplife have come up with a scheme of distributing penalized tokens from Wombex Proposal 1 (if passed). This proposal has 2 parts that are both related to increasing rewards for holding vlWMX. It aims to reward long-term WMX holders and motivate new users to lock WMX at the same time. Here is what is proposed:
- Implement 2 lock options (for example, 16 and 24 weeks) with the longer option receiving an additional yield booster.
- Create a “floating” boost to vlWMX yields based on the accumulation rate of WMX. It is proposed to do a monthly snapshot check and boost the yields of users, whose WMX balance has increased in this period. (for example : If you have more WMX on snapshot 2 in comparison with snapshot 1, you get an additional boost)
Team opinion
The idea to motivate users locking WMX for a longer time period and being rewarded for that looks attractive. However, there is an issue — on the BNB chain the contract cannot be updated, so even theoretically it can be implemented only on Arbitrum and other new chains like Ethereum. Also, it requires substantial changes to the staking logic. The question is — would these changes affect the project performance in a positive way? Would vlWMX receive more demand and holders due to these changes?
Are there any assumptions or models behind it that could provide insights on what will change in the project if this logic will be implemented?
How much WMX will be accumulated by users, and what amount of rewards should be allocated to achieve these results?
We ask these questions since the proposal isn’t detailed and doesn’t provide any particular data — the amount of rewards that should be allocated and estimated outcome (amount of newly vlWMX locked vs the previous lock-up ratio vs protocol expenses for that).
Re-vote on WIP#2 because of confusion regarding listing on Wombex
@Cloud9g proposes to consider re-voting on WIP#2. The motivation is that some users misunderstood the vote’s implications and thought that it was about listing exclusively on Wombat and not Wombex as well.
Team opinion
Unfortunately, this is probably not possible, as the vote already concluded.
Creating penalty
@ruben opposes implementing a WMX withdrawal penalty as proposed in Wombex Proposal 1. His fear is that it will lead to a massive exodus of LPs from Wombex main pools.
He instead proposes to create an “instant redeem” option to the WMX locker with a penalty calculated proportionally to the remaining lock period.
His second suggestion is to create a wmxWOM locker offering higher APRs to lockers, also with a penalized “instant redeem” option.
Team opinion
We think that as in the case of previous ideas of changing vlWMX mechanics we need some assumptions of what will happen if this mechanics will be implemented — the amount of possible penalties charged for early unlocks, how it will affect the vlWMX locking results, etc. Please, provide more details and rationale backing your idea and let’s discuss it together.
For the wmxWOM lock-up — details are missing as well. We need to think together regarding the lock-up periods, APR/amount of the rewards paid for locking wmxWOM, and the impact of this whole update on wmxWOM peg in the future. What amount of rewards should be allocated to motivate users to lock wmxWOM for some specified time period? How would it affect other sources of wmxWOM yield — wmxWOM staking for protocol fees and wmxWOM/WOM pair staking?
Closing team thoughts
We found all the proposals to be important and creative. However, for a productive discussion (not with the team, but with the rest of the community) we suggest providing details, models, and assumptions to understand which proposals are worth implementing and which are not.
Also, we think that the main point that should improve Wombex’s performance is the upcoming Ethereum launch and a successful bootstrap event aimed at becoming #1 on Ethereum (possibly the most important chain for the future of Wombat, since the low gas consumption for swaps could provide a real competition with other StableSwap DEXes and drive significant trading volumes and bribes afterwards). So, there are two main topics the community should think about and devote creativity to:
- How to acquire as much WOM as possible in the current market conditions.
- The TVL acquisition strategy for Ethereum — how to attract TVL, maybe we have some whales/DAOs etc that can participate? On what terms?
The performance and success of Wombex is primarily based on TVL and the amount of veWOM locked, and we should primarily work together on this.
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