Liquidity Gauges on WYND DEX: A Decentralized System for Incentive Allocation
What are gauges?
Liquidity Gauges are mechanisms for distributing liquidity incentives to bonded liquidity pools (LP).
How will each LP gauge be decided?
The gauge weight will be voted on by WYND stakers. The staking reward and voting power multipliers increase with the each higher unbonding duration.
This same voting power a user has for their staked WYND will be used as voting power on gauges. A user staking in the 2 year unbonding period has 24 times the voting power per WYND compared to a user in the 1 month unbonding period. All WYND stakers will have a vote in how incentives are allocated to each LP.
Snapshots of the gauges on WYND DEX are taken every Wednesday. The effective gauge weights used for the distribution of incentives will remain the same until the next snapshot. Users can readjust their gauge weights at any time but it will not become active until the next Wednesday snapshot.
How gauges work on WYND DEX?
WYND DEX will have liquidity pool gauges that determine the allocation of incentives for each eligible liquidity pool.
For example, imagine there are 100 WYND to be used as LP incentives. The amount of WYND distributed to each eligible LP is determined by WYND stakers who participate in gauge voting. Users may add vote weight to multiple LP gauges in percentage increments.
In the above example, WYND stakers vote on the allocation of WYND incentives to eligible liquidity pools. The 100 WYND incentives are distributed to liquidity pools according to the total vote weight each LP gauge receives. For example, the vote results might be:
- 40% of the vote weight was to the WYND/JUNO gauge
- 20% of the voting weight was to the WYND/OSMO gauge
- 20% of the voting weight was to the WYND/NETA gauge
- 20% of the voting weight was to other LPs gauge
In this case, the 100 WYND incentives will be distributed to the respective LPs according to the percent allocations determined by all WYND stakers who voted on gauge weights.
Why this gauge system is important?
WYND DAO places a heavy emphasis on decentralization, community participation, and long-term alignment of incentives. We see three benefits to this model:
- A single community member with only 1 WYND staked can have a measurable impact on incentive allocations.
- A group of community members with aligned interests can make an even greater impact.
- Other projects, foundations, and DAOs can rally the WYND stakers in their communities to vote on the gauges in their favor. These entities can also have a more direct impact by staking WYND in their treasuries.
This is the first of many ways that WYND DAO will use gauges to set rewards for future DeFi protocols. The utility of staked WYND increases as DeFi protocols are launched.
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