Proposal for Long Term Incentive Program(LTIP)

Proposals
1

Pilot Program Summary

The subDAO was tasked with executing a pilot incentive program for the CTX/USDC pool on the aerodrome platform. The original pilot program had two goals:

  1. Generate yield using CTX.

  2. Grow the CTX LP position.

This pilot program has been extremely successful in growing the CTX/USDC pool. The CTX/USDC has grown from 278k at the start of the program to ~615k in pool value. Some of this can be attributed to price appreciation of CTX but the vast majority of this TVL growth has been from new LPs to the CTX/USDC.

This exponential growth in CTX/USDC TVL is great for the community but has unfortunately diluted the subDAOs CTX/USDC position. Subsequently reducing the weekly returns the subDAO LP position. Even with the reduction in yield the pilot program has broken even and has been able to accumulate over 10,000 veAERO. This veAERO is now voting on the CTX/USDC pool indefinitely creating a base yield for the CTX/USDC pool.

Based on the above information, the subDAO believes that the program has delivered outsized benefits and should create a long term incentive program.

Sustainable Incentives

Building on this success, The subDAO is requesting ~$715k in funds from the treasury, 30% of this would be in USDC (215k) and 70% would be represented as CTX($500k) to continue the incentive program for one year. The program has two key goals.

  1. Grow liquidity and volume on aerodrome
  2. Create a healthier trading experience on mainnet

Growth

Our goal with this proposal is to compound on the success we have seen during the pilot program. The subDAO will use the funds to increase the LP position by approximately 100k and will use ~520k(20% USDC 80%CTX) to incentivize the CTX/USDC pool for the next 52 weeks. Moreover, by allocating ~520k for incentives it allows the incentives to grow with the TVL; reducing dilution of APR.

To ensure sustainability after the incentives end, the subDAO should lock 100% of the Aerodrome emissions earned and vote to direct emissions to the CTX/USDC pool. By doing this the subDAO is increasing its a base line yield for CTX/USDC LPs (see flywheel here, or Moonwell case study)

A Bit of Math

Based on the pilot program, we can expect an incentive-to-emissions ratio closer to 1.25. This means that for every $1 the subDAO spends on incentives, the CTX/USDC pool will earn ~$1.25 in Aerodrome emissions. With a $520k incentive program, the expected total return is approximately $650,000 in emissions to the CTX/USDC pool. The subDAO would earn a significant share of these emissions due to our Protocol-Owned Liquidity (POL) in the pool. Even in a worst-case scenario like reduction in emissions or dilution of our POL, the subDAO can still expect to break even based on emissions and yield from the veAero.

Healthier Pricing

During the pilot program, another issue has emerged: maintaining consistent pricing for CTX across multiple trading venues. To address this, we propose establishing a Uniswap V3 liquidity pool on the Ethereum mainnet, utilizing Arrakis Pro. Currently, liquidity on Ethereum is significantly lower compared to Base. By leveraging Arrakis Pro, we can create a pool with a 90% CTX and 10% USDC ratio, strategically enhancing the DAO’s protocol-owned liquidity over time.

A Bit More Math

Liquidity Pool Composition: 90% CTX - Transfer ~$90k in CTX from Cryptex DAO’s Treasury to the Cryptex Liquidity Management SubDAO 10% USDC - Transfer 10,000 USDC from Cryptex DAO’s Treasury to the Cryptex Liquidity Management SubDAO Justification: The introduction of this liquidity pool aims to bolster the trading environment for CTX on Ethereum, thereby increasing the token’s accessibility and stability, facilitating arbitrage opportunities between Base and Ethereum pools, and aiding in maintaining the price peg of CTX. Arrakis Pro Information: For further details on Arrakis Pro, please refer to the following article: mirror.xyz/0x929fCf268A62e684221f1e39B8b6ddA2f0dA4AeC/rWKswWUIImfNS6LFxgjdKBFkBdOJE-bcJHuJYuqEFTs

Fee

The subDAO should receive a revenue share of 20% only after the program has broken even based on emissions distributed to LPs.

Final Thoughts

The pilot program has showcased how powerful the aerodrome system can be in growing liquidity pools and providing alternative sources of revenue for protocols. This expansion of the pilot program is a logical next step and allows the subDAO and CTX community to have a clear path to TVL growth, volume growth and eventually product growth. I once again hope the community recognizes the value and potential revenue that this can bring to the Cryptex ecosystem.

3 Likes
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I agree with everything! Make it happen, team.

1 Like
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Hi @Caesar thanks for putting this together and continuing to lead the efforts of the subdao.

A couple of things from my side:

Is there a projected pool value that the CTX/USDC pair will reach, around 25%, 50% and 100% of the way through the program?

I also like what you are proposing for the Uniswap pool.

Looking at the figures, there is 215,000 USDC in the treasury and what you have proposed for Aero and Uniswap is 225,000 USDC. Believe there should be an adjustment to the Aero figures to accommodate the full ask from the treasury.

Other than that, everything looks good!

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I believe increasing liquidity and establishing a base yield are fundamental steps towards creating a robust and sustainable ecosystem for CTX. Higher liquidity improves the trading experience for governance participants by minimizing slippage, and it contributes to market stability, essential for attracting more participation. Additionally, setting a base yield is crucial because it provides an incentive for governance participants to commit their assets over the long term, thereby reducing sell pressure and supporting a sustainable economic model for the token.

Regarding the use of Arrakis Pro, it’s important we approach with caution and do further research. While it promises effective liquidity management, there have been reports from other teams about challenges with their rebalancing systems. This doesn’t reflect poorly on Arrakis but highlights the need for us to ensure that their system can adapt well to the unique dynamics of our CTX/USDC pool. Our due diligence will help confirm if Arrakis Pro is the right fit for our needs, considering its ability to handle CTX’s specific market behaviors and its support framework for any unforeseen issues. By taking these steps, we can ensure that our liquidity strategy enhances our pool in a manner that aligns with our community’s long-term vision and the interests of all governance participants.

5

our initial $25k pilot program, we allocated a fixed bribe of $3,150 (equivalent to $25k/8) over 8 weeks. At the start of the program, this represented approximately 1.25% of the pool’s value, generating APRs in the range of 80-100% for LPs. By the end of the program, however, the same $3,150 bribe accounted for just 0.5% of the pool’s value, with APRs decreasing to 30-40% as additional capital flowed into the CTX/USDC pool.

Now that the groundwork has been laid, our long-term incentive plan aims to utilize approximately $520k, split between 20% USDC and 80% CTX. This allocation allows us to bribe approximately $10,000 per week, representing an initial bribe of 1.5% of the CTX/USDC pool value. Similar to the pilot program, we anticipate that as TVL increases, the percentage bribing will decrease to 0.5%, at which point the total TVL is projected to reach ~$2M.

While the growth trajectory may not be linear, the following projections are based on the observed data:

  • 25% completion:
    • Additional $350k in CTX/USDC liquidity
    • Total pool liquidity: ~$950k
  • 50% completion:
    • Additional $680k in CTX/USDC liquidity
    • Total pool liquidity: ~$1.3M
  • 75% completion:
    • Additional $1M in CTX/USDC liquidity
    • Total pool liquidity: ~$1.6M
  • 100% completion:
    • Additional $1.36M in CTX/USDC liquidity
    • Locked $400-500k in veAERO
    • Total pool liquidity: ~$2M
1 Like
6

Additionally,

My I believe the USDC breakdown is as follows

  • 50k USDC allocated for LPing on Aerodrome

  • 100k USDC allocated for incentives on aerodrome (part of larger 520k ask)

  • 10,000 USDC allocated for Uniswap (this may change to a 50/50 so probably a bit more)

  • Approximately 50k available to be used at the discretion of the subDAO (ie increase LP positions)

totally out to be 215k in USDC. Let me know where our maths differ :slight_smile:

1 Like
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Good idea. Let’s make CTX great again.