In May 2023, QuickSwap launched a governance discussion and formal vote to expand the scope of funds reserved for DAO liquidity mining rewards that are currently being used to incentivise LPs to contribute liquidity to the DEX. The community requested that the contributors provide more specific use cases and granularity.
Per the community’s request, QuickSwap is re-introducing a revised proposal that dives deeper into more detailed use cases and case studies for the expansion of the scope of funds reserved for DAO liquidity mining rewards. Additionally, this proposal has been co-written with community members and potential partner ApeSwap. Please see the section ‘Liquidity Mining Incentives - Bonds’ for the ApeSwap contribution.
QuickSwap wants to be as open and transparent as possible - dragons take care of their own and QuickSwap is making sure the community’s voices are heard!
Given that the state of DeFi is rapidly growing and evolving, regular LP reward programs no longer provide the full or most effective firepower needed to help protocols remain competitive across the landscape. Projects are exploring other new and exciting ways to boost protocol activity, drive engagement, and build communities in DeFi as a major value-add - while protocols still continue to use vanilla liquidity mining reward programs to incentivise users, they’re becoming more of a base layer and bootstrapping method than an optimised additional layer for new growth and user acquisition. As a reminder from the previous proposal, QuickSwap has big plans for 2023 and beyond to deploy new and exciting products, with QuickPerps being the hallmark of what the DEX has launched so far this year - the QuickSwap team sees this as an amazing opportunity to ignite growth for these new products, especially amidst the rising interest in the DeFi sector. Additionally, these new strategies can be more efficient than vanilla liquidity mining campaigns, which would allow the community to lower overall emissions for the same or better results.
The purpose of this governance discussion is to ask the QuickSwap community if 1. The scope of funds reserved for liquidity mining should be expanded to include other strategies such as trading/volume incentives & competitions, bonds, quests, and other user acquisition campaigns, initiated either exclusively by QuickSwap or in collaboration with other platforms, and 2. Emissions should be lowered and used more efficiently.
- QuickSwap currently issues liquidity mining rewards to incentivise LPs to contribute liquidity to the QuickSwap DEX and QuickPerps protocol
- QuickSwap is asking the community if the scope of funds reserved for liquidity mining incentives should be broadened to include more efficient growth-focused trading/volume incentives like volume mining, competitions, bonds, quests, marketing & other user acquisition campaigns
- Examples of how QuickSwap intends to utilise the funds are outlined in detail below, along with several case studies of successful campaigns run with prominent Quest platforms
- To start, the governance discussion on the official QuickSwap Discord & Reddit will run until Thursday, July 20 at 12:30 PM UTC
- Once the Discord & Reddit discussions conclude, a formal Snapshot vote will begin and run from Thursday, July 20 at 12:30 PM UTC until Monday, July 24 at 12:30 PM UTC
- Once you’ve read this entire blog post, make sure to visit the official QuickSwap Discord server & Reddit discussion forum to share your perspective with your fellow community members
Plan & Use Case Overview
3 Main Categories:
*Liquidity Mining Incentives (Old & New)
*User Acquisition and Marketing
With QuickSwap’s plans to add more products and utility to the DragonFi ecosystem, deploying new strategic tactics will help acquire more users (while also engaging the existing community, stay competitive across the DeFi market, and spark greater adoption overall. Quests and campaigns will be tailored towards a wide variety of on-chain DeFi and social tasks, including swapping, providing liquidity, farming perpetual swap contracts, and more across Polygon PoS, Polygon zkEVM, and Dogechain.
This will ultimately result in greater volume, more trading fees (equaling greater revenue for QuickSwap LPs), and ultimately higher liquidity. Not only will this increase interest and adoption for the QuickSwap DEX but also the 3 blockchain ecosystems it’s built on. Also, arguably the most important point is that QuickSwap will have a greater opportunity to attract new, loyal users that will be retained for the long term, driving sustainable growth and adoption.
To better understand how QuickSwap is proposing to adjust and distribute rewards, let’s dive deeper into the emissions model (please note that all numbers noted throughout this proposal below are denominated in New QUICK).
Currently, QuickSwap has enough QUICK in the DAO treasury assigned to liquidity mining to incentivise up to around 1,100,000 QUICK per day in rewards (as per the original tokenomics, with a 4-year emissions schedule). Below are the approximate averages of liquidity mining incentives given over the last 6 months. As you can see, the protocol has actually been giving much less than the maximum cap, which is why QuickSwap has enough rewards that if current emissions continued, QuickSwap could sustain rewards for another 3.5 years. The community had originally budgeted rewards for 4 years, and QuickSwap is almost 3 years through the original 4 years. If QuickSwap were to continue at the current rate, rewards would last a total of almost 6.5 years instead of the original 4 years. In simpler terms, QuickSwap is giving, and suggests that there should be less inflation than originally planned. The current proposal is to lower the official emissions cap from the current approximately 1,100,000 QUICK per day to a maximum of 450,000 QUICK per day. Additionally, with more precise and flexible reward strategies, QuickSwap may be able to lower emissions further and/or get better results with the same amount of rewards.
Below is a breakdown of the incentives QuickSwap has been distributing:
- 300,000 QUICK/day January
- 300,000 QUICK/day February
- 320,000 QUICK/day March
- 350,000 QUICK/day April (ZKEVM V3 Launch)
- 375,000 QUICK/day May (ZKEVM QuickPerps Launch)
- 340,000 QUICK/day June
Furthermore, since all current rewards are being used for liquidity mining, this new structure would allow QuickSwap to move a small amount of these rewards for the areas mentioned above which will be explained in detail below.
In addition, reducing the emissions from approximately 1,100,100 to 450,000 QUICK per month would allow QuickSwap to extend rewards distribution over a longer period of time - the current emissions model is enough for rewards to be distributed for another 1-2 years, whereas the newly proposed emissions of 450,000 QUICK per month would extend rewards for 3-4 years.
If QUICK is outperforming the market, QuickSwap will continue to lower emissions wherever possible.
New Proposed Hard Caps (Maximum): This would be the maximum amount usable in times of need, such as when launching a new product to bootstrap initial liquidity, or if another protocol is doing a vampire attack. This is how we were able to defend against the Sushi vampire attack 2 years ago, and how we’ve been able to defend against Uniswap’s launch on Polygon as well. Many new players will be coming to zkEVM soon, and QuickSwap needs to be able to act quickly if they launch vampire campaigns either targeted directly at the QuickSwap DEX, or generally (SushiSwap, for example, put a button with a “Migrate liquidity from QuickSwap” right on their website). We increased rewards to all of the pairs they were attacking, and we won that battle in the long term, even though they did surpass us in liquidity for a brief period of time. Now they have a small fraction of our liquidity on Polygon PoS and we have over 1000x their liquidity on zkEVM, but they haven’t launched any rewards yet. As you can see above, we typically raise rewards for launches like Algebra, Gamma, QuickPerps, V3 on ZKEVM, etc. to bootstrap initial liquidity, then steadily lower them after the launch.
New Suggested (Guideline): This is what we’d be using currently, and in normal non-launch, non-defensive times.
New Proposed Hard Caps (Maximum):
- Total: 450,000 QUICK/day
- Liquidity Mining Incentives: 360,000 QUICK/day
- Volume Mining Incentives & Trading Competitions: 70,000 QUICK/day
- User Acquisition Strategies & Marketing: 20,000 QUICK/day
New Suggested (Guideline):
- Total: 320,000 QUICK/day
- Liquidity Mining Incentives: 265,000 QUICK/day
- Volume Mining Incentives & Trading Competitions: 43,000 QUICK/day
- User Acquisition Strategies & Marketing: 12,000 QUICK/day
The next 3 sections dive into more detail regarding the above-proposed emissions caps and how QuickSwap intends to use the rewards.
Liquidity Mining Incentives
Vanilla Liquidity Mining
QuickSwap has already been offering vanilla liquidity mining rewards on an ongoing basis that the community is already familiar with, and will continue to do so. These are the normal LP mining rewards you all know about.
Syrup pools have been used on QuickSwap to allow users to earn rewards in project tokens in return for staking QUICK - this proposal also factors in the potential use of allocated rewards for incentivising syrup pools. We have backed off on these for the most part since they haven’t been as efficient in the bear market, but we will leave these in as an option if they make more sense during better market conditions.
This part of the proposal was co-written by ApeSwap and outlines the allocation of a percentage of monthly rewards to foster the launch of a new product: QuickSwap Bonds. The bonds function to provide QuickSwap with protocol-owned liquidity, letting users exchange their Liquidity Pool (LP) tokens for single-asset tokens at a discount. These discounted tokens are packaged into a QuickSwap Bond NFT.
Owners of a bond NFT can claim these discounted tokens according to the vesting schedule specific to each bond. Essentially, QuickSwap exchanges users' LP tokens for discounted tokens, bolstering the treasury to construct lasting, sustainable liquidity as an alternative to the conventional short-term rented liquidity from a farming protocol.
In summary, users obtain tokens at a discount, and QuickSwap enhances its liquidity in a sustainable manner, thereby boosting Total Value Locked (TVL) through these emissions.
Furthermore, the bond feature extends beyond offering $QUICK tokens, enabling other projects to leverage these features to establish their own long-term liquidity on QuickSwap. This opens avenues for us to reduce liquidity mining emissions to projects that would otherwise have participated in Dragon’s Syrup. Projects can use their tokens in bonds, fostering additional liquidity on QuickSwap without relying on the $QUICK token.
To ensure the success of our new bonds, we are partnering with ApeSwap, the pioneers of this product, which was introduced in April 2022 as a response to a bear market. ApeSwap identified that several strong protocols were facing challenges due to ineffective liquidity management and sourcing methods.
Traditional yield farming (or liquidity mining), popularised during DeFi Summer, has had a detrimental impact on the industry. The surge of hyper-inflationary liquidity incentive mechanics flooded the market with excessively diluted tokens lacking substantial backing.
One critical concern has been the influx of mercenary capital deployed in high-yield LP farms, exploiting the rewards, devaluing the reward token, withdrawing their liquidity, and moving to the next yield farm.
Bonds address this issue by enabling protocols and the DEXes built on them to acquire their liquidity through purchases rather than endless renting via farms.
An exemplary case is DappRadar, one of ApeSwap's earliest and most significant bond partners, which carried out multiple bond sales using their native $RADAR token. Over ten months, they deployed $595,054 of $RADAR tokens into bond sales, achieving an average Return-On-Emissions (ROE) of 84.01%, amounting to $499,924. In a conventional liquidity mining setup, this would equate to a near-zero ROE, as liquidity tends to dry up once rewards cease.
However, with bonds, DappRadar was able to spend the same budget to secure permanent liquidity of $499,924, owned entirely by themselves. This strategy has proven successful for numerous ApeSwap partners since the bond product's inception a year ago.
We are thrilled to collaborate with ApeSwap and bring these progressive DeFi 2.0 liquidity mining strategies to QuickSwap.
Volume Mining Incentives
This is one of the most important parts of this governance proposal. To help further boost volume and on-chain activity across the QuickSwap platform as a whole, the team believes that volume mining and trading competitions will be essential given the incentives they can offer and successful applications from other platforms.
For example, volume mining initiatives would provide users with rewards (QUICK emissions) that are based on volume and fees generated instead of just simple liquidity mining. This will increase APY to liquidity miners while simultaneously positively affecting volume and revenue as well as statistics/analytics across the board.
dYdX, a popular decentralised perpetual exchange platform, distributes rewards to traders every 28 days (around 1,582,192 DYDX tokens) where users earn rewards proportional to their fees paid divided by the total fees paid by all traders during a particular epoch. This has worked extremely well for them, and they actually give about 4x the amount to volume mining than liquidity mining as it’s been so efficient for their growth of both volume AND liquidity.
Level Finance also offers trading incentives to its users, where a total cap of 30,000 LVL tokens is given out per day across multiple chains. This is broken out in two ways - a Ladder program (helps scale LVL incentives by encouraging more trading volume and fees on their platform, where rewards are distributed to the top 20 traders on the leaderboard each week) and a Loyalty Program (users paying any type of platform trading fee receive lyLVL tokens, and 5,000 LVL tokens are allocated per day is distributed to the most loyal traders, depending on the various amounts of lyLVL they receive/earn).
Trading competitions are another way to encourage higher volume across the QuickSwap DEX and product ecosystem, highly incentivising users to not only trade more but also compete against one another. To add another example, dYdX also offers ongoing trading competitions called Trading Leagues where users compete with one another on a weekly basis, all with different entry requirements and prizes.
QuickSwap would use a portion of the liquidity mining rewards (as proposed above) to offer similar types of volume mining incentives and trading competitions to remain more competitive in the market and attract (plus retain) more users, as the above trading incentive programs by dYdX and Level Finance have proven to be strong examples of successful initiatives.
The key point here is that volume incentives provide both volume AND liquidity because volume = revenue = fees = APY. Normal liquidity mining ONLY provides APY, but not the volume side. This proposal would ensure the Dragons kill two birds with one fire breath.
User Acquisition Strategies & Marketing
Over the past few months, QuickSwap has worked with leading Web3 campaign/quest platforms to help boost on-chain activity and broaden our horizons to target new and existing users. The goal is to continue running new campaigns for on-chain activities such as swapping, LPing, farming, decentralised perpetual swaps (leverage trading), QLP liquidity, and more, in addition to inviting other ecosystem partners into the mix to both participate and contribute as needed. Initial tests of these quests have been providing great results. The goal is to get users to try the platform, as we believe once a user tries QuickSwap & Polygon, they stick around as long-term users.
To illustrate some of the results and progress QuickSwap has made so far, here are a few case studies of quests/campaigns that have been run:
- QuickSwap Polygon DeGens (Galxe): Starting in February 2023, QuickSwap participated in a large Galxe campaign alongside other Polygon ecosystem projects to help increase TVL for Gamma V3 liquidity pools and farms from the new integration. For this campaign, users needed to deposit a minimum of $250 in liquidity, farm their LP tokens, and hold for 3 weeks - by the end of the campaign, $250K+ in liquidity was provided
- QuickSwap on zkEVM (Layer3): Layer3 ran a quest where users were required to execute a swap of any amount on the QuickSwap DEX on Polygon zkEVM - the quest is still ongoing and has 12K+ participants to date
- QuickPerps Perpetual Trading (Layer3): In an effort to onboard users to QuickPerps and Polygon zkEVM, QuickSwap ran another quest with Layer3 that required users to make a perpetual trade (using leverage) on QuickPerps - 2.6K+ users participated and new activity on our decentralised Perpetual Exchange spiked
- QuickPerps Liquidity Providing with QLP (Layer3): This quest is currently in progress where users need to provide any amount of liquidity to the $QLP pool on QuickPerps in order to qualify - so far, 3K+ people have joined the quest and the numbers continue to increase
Layer3 also has a dedicated Dune analytics dashboard that’s specific to QuickSwap quests that have been previously run. From the charts and numbers, it’s clear that there were increases in user activity for on-chain tasks on QuickSwap on Polygon - there has also been a high retention of these users over time, contributing to new product adoption (i.e. Gamma V3, QuickPerps) and overall sustained growth.
In addition, QuickSwap is proposing to use the newly structured emissions/rewards to increase marketing efforts and help expand QuickSwap’s presence across the DeFi landscape. This is included, but not limited to, PR (public relations e.g. article distribution), KOL (Key Opinion Leader) initiatives, paid advertisements, and SEO (Search Engine Optimisation) efforts, in addition to marketing efforts surrounding regular liquidity mining, syrup pools, bonds, volume mining, trading competitions, and quests/campaigns.
Join the Discussion
As always, QuickSwap community members are encouraged to participate in and contribute to QuickSwap governance discussions and proposals across all of QuickSwap’s online forums, especially on Discord & Reddit. As a Dragon, you are a valued community member and your opinion matters – but you have to participate in community voting procedures to make it count.
As always, critical decisions guiding QuickSwap’s strategic development will always be determined by way of decentralised governance. QuickSwap’s future is in your hands, so make your voice heard!