Proposal to create an incentive program

Proposals
1

Dear Community Members,

I wanted to share a proposal to create a sustainable liquidity program for CTX. The program aims to create deeper liquidity and help the subDAO earn a yield with its POL on Aerodrome.

Background
In June 2024, the subDAO provided approximately $300k in liquidity on Aerodrome. An initial incentive campaign distributed 5,600 CTX over an 8-week period, successfully attracting ~115k in additional liquidity and 120k+ in volume. Additionally, liquidity providers (LPs) received an average of 70% APR in Aerodrome emissions for participating, making this campaign a HUGE success!!

Sustainable Incentives
Building on this success, I propose that the subDAO launch another incentive program over the course of a year. The subDAO should allocate $150k from the treasury, split evenly between CTX and USDC, to incentivize the CTX/USDC pool for 52 weeks (1 year). The incentives would be distributed weekly, with a cap of 3% of the pool’s total TVL at any time. To ensure sustainability after the incentives end, the subDAO should lock approximately 40-50% of the Aerodrome emissions earned and vote to direct emissions to the CTX/USDC pool. This approach creates a baseline yield for LPs (see flywheel here).
The subDAO should receive a revenue share of X% only after the program has broken even based on emissions distributed to LPs (~$150,000 in Aerodrome token emissions).

A Bit of Math
Based on the test campaign, the expected incentive-to-emissions ratio is 1.5. This means that for every $1 the subDAO spends on incentives, the CTX/USDC pool will earn ~$1.5 in Aerodrome emissions. With a $150k incentive program, the expected total return is approximately $225,000 in emissions to the CTX/USDC pool. The subDAO would earn the lion’s share of these emissions due to the large percentage of Protocol-Owned Liquidity (POL) in the pool. Even in a worst-case scenario, with a 50% reduction in emissions, the subDAO can still expect to break even based on emissions and yield from the veAero.
Calculations here

Final Thoughts
The subDAO is an extension of the greater Cryptex community, with a mission to grow liquidity and earn a yield for the Cryptex DAO. This proposal is a natural progression toward that goal. Moreover, we have the opportunity to make growing liquidity a revenue-generating event rather than a cost sink. Hopefully, the community recognizes the value and potential revenue that this can bring to the Cryptex ecosystem.

look forward to hearing everyones thoughts.

2 Likes
2

Proposal Updates

  • The subDAO will run a pilot campaign for 8 weeks with a budget of ~$25k.

  • The goal for this campaign is to generate income using DAO assets and secondary goals being to increase TVL for CTX/USDC pool.

  • The subDAO will receive a revenue share of 10%. The revenue share is only distributed if a positive return is generated during the campaign.

  • At the end of the 8 week campaign the subDAO will share outcomes and results with the greater Cryptex Community.

  • Upon a successful campaign the subDAO and community will vote one more time to extend the incentive program for the full 52 week duration.

1 Like
3

Dear @Caesar,

Thank you for putting together this detailed proposal for a sustainable liquidity program for CTX. I appreciate the effort to enhance our liquidity while also aiming to generate revenue. Here are my thoughts:

  • Support for the Proposal: I fully support the initiative to increase our protocol-owned liquidity (POL) and generate yield through Aerodrome.

  • Pilot Campaign: The decision to start with an 8-week pilot campaign with a budget of ~$25k is prudent. It allows us to test the waters without fully committing to a year-long program from the outset. This approach mitigates risk and provides an opportunity to adjust strategies based on real-time data.

  • Community Engagement: The commitment to share outcomes and results with the Cryptex community after the pilot is crucial. Transparency will help build trust and encourage further participation and support from the community.

  • Long-term Commitment: The plan to reassess and vote again before extending the program for a full year is smart. It ensures that the community remains engaged and that the strategy can be adjusted based on performance and changing market conditions.

Overall, I believe this proposal is a step in the right direction for enhancing our ecosystem’s liquidity. I look forward to seeing the outcomes of the pilot campaign and participating in the subsequent discussions.