Ideas to Bootstrap MILK liquidity pool

muesliswap_team · September 13, 2022, 9:18am

With MuesliSwap v2 launching soon we need to start thinking about bootstrapping liquidity in the MuesliSwap pools and especially in the MILK pool. Sufficient liquidity in the MILK/ADA pool is important to guarantee price stability, high trading volumes and increased interest in the MILK token. Next to yield farming there exist additional approaches that can help to bootstrap the initial liquidity. We would like to particularly discuss one model with the MuesliSwap community. This model is called the Collective Zap-In pioneered by MinSwap (Collective Zap-in: an in depth look | by Minswap Labs | Sep, 2022 | Medium).

To summarise, the idea behind the Collective Zap-In is that the project provides their native token while users provide ADA. The ADA and the token are then paired and added to the liquidity pool. The campaign usually takes around 10 days. At the end of this campaign, the collected liquidity tokens are distributed among the users and the project. In this case, 50% of the lp tokens are distributed to the users while the remaining ~50% are becoming Project Owned Liquidity (POL). Users are free to withdraw their liquidity at any point, to recover their initial investment (disregarding impermanent loss) in the form of the native token and ADA. In our case, this would mean that the MuesliSwap team provides MILK while the participants in the Collective Zap-In provide ADA to essentially bootstrap the MILK/ADA liquidity pool. All participants in the Collective Zap-In campaign will be awarded a participant NFT. The NFT can be staked in a special Zap-In farm that will have higher yield returns for four weeks. This is a new idea to further promote the MILK token and create POL that benefits the entire MuesliSwap community. We are looking for additional feedback from the community for this. The preliminary plan of the event would be as following

Collective Zap-In
Start Date: 27th September (around the expected launch of Muesli V2)
End Date: 6th October
Maximum MILK available for the campaign: 500,000 MILK

Note that this is a maximum amount and we only provide as much MILK as ADA has been added to the campaign. Moreover, ~50% of the MILK provided in the campaign becomes part of the Project Owned Liquidity (POL).

This is only a first-stage idea and we are looking for feedback from the community. Depending on the community feedback we will decide whether the event will be performed and what the maximum quantity of MILK provided for the collective Zap-In will be. Moreover, we are also looking into feedback for the additional reward given to Collective-Zap In participants.

Selim · September 14, 2022, 7:16am

Hi team,

That’s a great idea, but I don’t see a lot of participation, most likely because the concept is a little bit complex, so I will ask some questions to clarify some ideas and ensure the community understands everything well.

Q1: What will be the price of Milk used for this special liquidity pool? Will that be the Milk trading price at a specific date and time or a preestablished price that will be announced before Sep 27?

Q2: let’s presume that Milk’s price is 3.5 ADA for this liquidity pool. What happens if we receive more than 1,75M ADA in this pool? Will you be returning the ADA exceeding the value of 500K Milk, or will you close the pool for new participants as soon as the value of 500K Milk is reached?

Q3: Will the team withdraw the liquidity used for the campaign in the future? or will the other half of LP tokens be locked in the pool indefinitely

Q4: what happens after four weeks? Will the zap-in farm merge with the regular one, or will the zap-in farm become the regular one where everyone has the same yield?

Q5: Could Hungry Cows NFT be used in the zap-in farm to boost the yield even more?

Q6: How the participant NFT will work? Do they limit the participant to a specific number of LP tokens, or could someone use a participant NFT and add more liquidity using ADA and Milk to benefit from the higher yield?

I will let you answer these questions first and will have more follow-up questions later

Thank you,

muesliswap_team · September 14, 2022, 9:26am

Hi, to emphasize in the beginning is that if we move forward with the motion we will try to make it more accessible and easier to understand for all participants.

Answer 1: The idea is that as soon as ADA is provided the liquidity together with MILK is added to the existing liquidity pool (market price). Throughout a maximum of 10 days, the liquidity is added and the liquidity tokens are collected. At the end of the period, the liquidity tokens are then distributed to all participants. What that means is that even though I provide liquidity at a certain moment in time I am Dollar Cost Averaging throughout the entire campaign as first at the end the liquidity tokens are distributed

Answer 2: In this case, we would close the campaign after the maximum amount has been received and end the campaign early. (Potentially we could still perform an Dollar cost averaging across the 10 days)

Answer 3: We are planning on keeping a very large fraction of the liquidity in the pool. If we upgrade to newer pool contracts (e.g. concentrated liquidity pools, newer versions of the AMM contracts) we will of course also migrate the MILK liquidity bootstrapped.

Answer 4: The farms will be merged and everyone will have the same Yield

Answer 5: We have not thought about this aspect. But I would assume we will also enable Hungry Cow boosting for this campaign. Are there any thoughts on this?

Answer 6: The participant NFT is just one idea to track the initial liquidity boost option. We might use a different paradigm to track eligible liquidity providers. Any liquidity removed from the farm will not be able to be readded to the Zap-In farm but only the regular one.

Lourde · September 14, 2022, 12:29pm

Love this LBE approach MINSWAP did a great job with spearheading this for the Cardano Community… now the meat and potatoes… I love Idea answer #5…

Cows are a hot topic for some… including them is great even if they will be limited for this event. The vision I see for this particular experiment is to put the cows at the front and center of the offered Bootstrap so as to give them more time in the public eye . It’s a main stay NFT for MUESLI SWAP as of now , and we can let ppl know they exist … thinking publicity…

Selim · September 17, 2022, 7:04pm

Thanks for the reply Chris. Very well explained.
I agree with @Lourde regarding the importance of HungryCows NFTs. Very few projects have useful NFTs and this brought a lot of excitement when they were released and it was a great publicity for MuesliSwap, but unfortunately the timing was not so great because of the delay of Vasil hardfork, so this excitement died off but the NFT can be used to put back some excitement on this project and encourage NFT holders (more than 2000 owners according to the Blockchain) to put liquidity in the bootstrap liquidity as this gives them an advantage over the non-holders. Also, this will increase the activity of these NFT trading, which helps increase the treasury of MuesliSwap and also helps bring back more attention and excitement about this project. So I think the NFTs should be used in all liquidity pools, including the bootstrap one.

Plan_A · September 21, 2022, 5:51pm

Hi Chris! Nice idea

Since it appears that HungryCows are a hot topic for many, I would like to make a proposal that adds up to what I articulated here.

The proposal is to use HungryCows to boost the yield of an entire liquidity pool, rather than that of a single user.

Let us assume that I have two that offer 40% boosting and, rather than letting them sit in my wallet and eating grass, I want to milk them

I am interested in providing liquidity only to the ADA/XYZ pool, so I send the first alongside with my funds, for which I get my very nice 40% bonus yield

The other now is alone and sad in my wallet, and this makes me sad as well

So the idea: I can send the second it to the pool as well, but without funds. The will boost everyone’s yield, and I will have a small commission in exchange.

How? Let’s see some number

Let us assume that there are 100 different wallets contributing to the pool.
20 of these wallets are already powered up by cows. Among these wallets, there is mine.
So there are 80 cowless wallets.
The total liquidity provided by these 80 cowless wallets corresponds to 8,000 ADA (distributed between ADA and XYZ).
One can boost only one wallet, so with my second I can boost 1/80-th of those 8,000 ADA: namely, 100 ADA.
For sake of simplicity, let us assume that the APY of the liquidity pool is of the order of 36.5%, which corresponds to 0.1% profit / day.
In this scenario, those 8,000 ADA of liquidity generate a yield of 8 ADA per day, or 0.1 ADA per wallet per day.
Since my boosts 100 ADA, it will lead to a +40% yield on those ADA, which corresponds to 0.04 ADA/day.
50% of the yield generated through the goes to the cowless wallets, the other 50% goes to me, cowboy
in conclusion, 80 people can benefit from my (not by that much, of course, but it is still better than 0), and I can benefit from their liquidity, just like I had provided an additional 50 ADA of liquidity, without doing it.

Basically, like borrowing coins from a lending protocol and using them to provide liquidity, but:

without needing any collateral;
without any risk of being liquidated.

So, yes, it is a much cooler idea, in my opinion

Two variations are possible to make it even cooler.

Variation number 1

In this case the gets all the rewards.

Hence, the 80 cowless wallets do not receive any extra reward for having the cow staked inside the pool.

The , however, gets extra rewards, like he/she had provided 1/80-th of that liquidity.

This idea would be great to increase the attractivity of the s.

Variation number 2

In this case, when the is staked into the pool, it can boost more than the equivalent of one wallet. Let us say 10.

This would make the contribution of each much more noticeable because 10,000 of them could boost the equivalent of 100,000 different wallets.

Of course, in this scenario the maybe should earn a smaller reward, which could be 1/10-th of the total yield due to the

This idea would be a great to increase the attractivity of the s and to incentivize the delegation of people’s liquidity to MuesliSwap pools.

And this is all for today.

As always, I’m eager to know what you think about my ideas.

Cheers

Lourde · September 24, 2022, 10:00pm

Example 2 is exactly what I was looking for… Now this is a probable bonus for the entirety of the pool… now the question is how can we keep one pool from hogging all of the providers? … Can we limit the Liquidity amount of each pool to spread more of the boost around… and decentralization will be a factor to showcase for pools… like each pool can have a boost and max of 100providers or 1 mn ADA … if that made sense

Kudos my friend on a magnificent idea!!!