We propose to redistribute SWOP farming rewards among pool liquidity providers depending on their votes for the pool weight and the lock-up of share tokens in farming, as well as to simplify SWOP governance rules.
The total farming reward is divided between farm pools in proportion to their weight. Liquidity providers can vote for the weight of their pool and thus increase its profitability. However, the additional profit is dispersed between all providers in proportion to their share in farming, whether they voted or not. Small investors, who do not have significant influence on the pool weight, prefer not to invest SWOP in voting, but to sell their SWOP rewards. To additionally reward liquidity providers who promote their pool is a fairer solution.
The following improvements to farming and staking mechanics will bring additional value to SWOP stakers.
- Boosting for voting. A portion of the farming rewards will depend on the liquidity provider’s share in the total number of votes for the pool weight. Of two investors with the same liquidity in farming, one may receive up to 1.5 times more SWOP than the other thanks to boosting. Liquidity providers will benefit from staking SWOP and voting for their pool.
- Boosting for lock-up. Liquidity providers will be able to lock up share tokens in farming and earn higher rewards. The longer the lock-up period, the higher the multiplier is. Thus, the protocol will remunerate LPs for planning long-term investments.
- Direct staking of rewards. For direct staking of accrued SWOP rewards from farming and staking (bypassing the wallet), double the amount of gSWOP is credited, which bring governance rewards and give the right to vote. The premium for direct staking of rewards will provide a greater benefit to liquidity providers who stake their rewards.
Boosting for voting
With the launch of boosting, the farming reward in each farm pool will be divided into the base part and the boosting part in a 2:1 ratio (in the future, the ratio may change).
The base part of the farming reward is distributed among liquidity providers according to the former rule — in proportion to their share in farming:
base_reward_lp = base_reward_total × farm_lp / farm_total,
where:
base_reward_lp is the base part of the LP’s reward,
base_reward_total is the base part of the farming reward in the pool,
farm_lp is the amount of the pool share tokens staked by the LP (taking into account the multiplier for lock-up),
farm_total is the total number of the pool share tokens in farming (taking into account the multipliers for lock-up).
The boosting part is distributed only among the LPs voting for the pool weight, and depends not only on their share in farming, but also on their share in voting:
boost_reward_lp = boost_reward_total × min(vote_lp / vote_total, farm_lp / farm_total),
where:
boost_reward_lp is the boosting part of the LP’s reward,
boost_reward_total is the boosting part of the farming reward in the pool,
vote_lp is the amount of SWOP by which the LP votes for the pool weight at the current blockchain height.
vote_total is the total amount of SWOP voting for the pool weight.
Example.
Let’s say the farming reward in the pool is 0.9 SWOP each block. The base part is 0.6 SWOP, the boosting part is 0.3 SWOP.
Three liquidity providers each own 10% of the pool liquidity. Then the base part of the reward for each LP is 0.06 SWOP each block.
LP A votes for the pool weight, and their voting SWOPs are 10% or more of the total SWOPs voting for the pool’s weight. The provider earns the maximum possible boosting part: 0.5 × 0.6 SWOP × 0.1 = 0.03 SWOP each block.
LP B votes for pool’s weight, and their vote is 7% of the total. The provider receives only 0.5 × 0.6 SWOP × 0.07 = 0.021 SWOP in addition to the base reward.
LP C does not vote for the pool weight, so they only receive the base portion of the farming reward.
Normally, the boosting part of the farming reward is not fully distributed among liquidity providers: this is only possible if the shares of all providers in farming are equal to their shares in voting. In fact, the total rewards to LPs will decrease, and the undistributed portion will go into the treasury. The treasury funds can be spent for various purposes or even burned according to community suggestions.
Boosting for lock-up
Investors who plan to provide liquidity for a long time can increase their farming rewards by choosing the lock-up period for their share tokens:
- 3 months: +10%
- 6 months: +15%
- 12 months: +20%
When an LP stakes tokens to farming, the lock-up period is extended.
For each liquidity provider, the amount of share tokens in farming is counted with the multiplier. The total farming reward in the pool does not change, but is redistributed between LPs.
Liquidity providers who wish to reserve the right to withdraw liquidity at any time will have that option. However, they will earn less than they could have.
Direct staking of rewards
In case of staking SWOP rewards directly from farming and governance smart contracts, stakers will receive double the amount of gSWOP. gSWOPs are the implementation of governance power: they bring staking rewards and are used in votings. However, any unstake operation will reset the bonus to zero.
For example, an investor has 90 SWOP in a staking and 90 gSWOP corresponding to them.
The investor staked farming rewards of 10 SWOP and got 20 gSWOP. Now they have 100 SWOP staked, but already 110 gSWOP: their vote and staking income is 10% more than if they simply staked all the 100 SWOP from the wallet.
After that, the investor unstakes 1 SWOP, and now they have 99 SWOP in staking and corresponding 99 gSWOP. The zeroed gSWOPs can not be restored.
Governance changes
Voting rules will be simplified. Reducing the power of newly received votes during the voting period, as well as freezing SWOP tokens counted in the last voting, will be canceled.
Instead, SWOP tokens will be locked up in staking for 4 weeks. When an investor stakes SWOP (by any means), the entire staked amount is locked up. It will be possible to unstake SWOP
4 weeks after the last staking operation.
Bonus for those who read to this line
The next SWIP will be even more impressive: benefit-providing NFTs will appear on Swop.fi 🦀
As usual, community feedback is welcome in our Telegram group.
