Discuss: Changes to Joint Liquidity Mining Framework

We previously created a Joint Liquidity Mining Framework (KIP-10) as a guide for DeFi projects to submit proposals for joint liquidity mining campaigns and boosting liquidity on KyberSwap. This has helped attract liquidity providers, but not necessarily traders, which is a different target audience and requires different types of incentives.

We recommend changes to this framework to include guidelines for trading incentives as well to bring more traders and users to KyberSwap. Let us discuss this updated framework as a community!

Joint Liquidity + Trade Mining Framework

This is a framework for external projects to submit proposals to participate in joint liquidity mining, trading, or strategic user acquisition activities on the KyberSwap DEX aggregator, using KNC from Kyber’s ecosystem fund. This is targeted at popular or promising ecosystem projects/tokens in DeFi and GameFi. Priority will be given to projects that add liquidity to KyberSwap pools exclusively.

Kyber will work with selected projects to provide additional incentives for users to BOTH trade and add liquidity on KyberSwap. This will improve liquidity and volume for the tokens of our partners and in turn educate external communities about the powerful benefits of KyberSwap, especially since KyberSwap now gives the best rates with DEX aggregation.

Motivation

The Kyber Ecosystem Growth Fund aims to incentivize adoption for KyberSwap and our partners’ tokens; primarily via

  1. Liquidity mining to enhance liquidity
  2. Trading rewards to increase volume

By increasing the number and variety of LPs (makers) and traders (takers), we are better able to ensure sustainable growth for Kyber and our partners. This creates a network effect that brings more users, developers, and liquidity providers into the Kyber ecosystem, while greatly benefiting partners at the same time. Through incentives, we aim to:

  • Bootstrap liquidity and improve rates for our partner’s tokens
  • Increase trade volume and users for our partner’s tokens
  • Showcase KyberSwap’s benefits to users
  • Bring more DeFi participants and value into the KyberSwap ecosystem

The tokens of popular projects generate considerable trading volume and this directly benefits KNC holders as 10% of KyberSwap trading fees (through Kyber pools) is given to KNC holders voting on KyberDAO (90% goes to liquidity providers). Higher trading volume will increase the fees earned by the protocol and liquidity providers, as well as the value of KNC. This helps ensure the sustainability of the KyberSwap protocol while benefiting our DeFi partners.

Framework for External Projects: Joint Liquidity + Trade Mining Proposal

Projects can submit proposals to receive bonus KNC rewards for their users to trade and add liquidity for their tokens. All liquidity mining campaigns must be paired with a trading contest for the relevant tokens on that chain.

Although proposal details may differ depending on the needs of each individual project, proposed tokens have to fulfill certain criteria based on this framework in order to be eligible for KNC rewards from the ecosystem growth fund.

Proposals have to be first submitted to Kyber’s governance forum for discussion for 3-5 days, where the Kyber community will discuss and determine the eligibility of a project and its KNC reward allocation. Proposal submission does not guarantee that it gets accepted by the community. It is recommended that proposals follow the template given below.

Template

  1. Project Introduction
  2. Proposal Summary, Motivation and Key Details
  3. Pool liquidity contribution amount ($100K minimum for new projects)
  4. Duration of your project’s liquidity commitment
  5. Exclusive or non-exclusive liquidity provision? Is KyberSwap the only available liquidity pool?
  6. Total KNC Amount Requested (in USD and at what price)
  7. Amount of tokens contributed by your project for liquidity mining + trading contest: Provide the amount of tokens along with the average USD price and the total USD value. For new projects, the IDO price; and for existing projects, it can be the weekly average
  8. Which network? Ethereum, Polygon, BSC, Avalanche, Fantom, Cronos, and/or other supported networks
  9. Token pair option: with ETH, WBTC, USDT, USDC, DAI, KNC or the native token of the network
  10. Farm Reward Vesting: No vesting, 14 days, or 30 days
  11. Campaign start date and duration: State the date and duration (1-5 months)
  12. Marketing support: What kind of marketing support would be provided? E.g. direct link to buy your token on KyberSwap.com on your project website
  13. Project details: Contact information, website url, logo, token contract address, link to CoinGecko/Coinmarketcap markets page etc.

Selection Criteria Guide

Projects/Tokens are chosen to be part of KyberSwap liquidity mining based on a few criteria. Although this is meant as a general guide, proposals that thoroughly consider these criteria stand a higher chance of being approved.

Criteria Description
Demand for the token Recent trade volume of the token pair in the market can be considered as an indicator of token demand. Higher trade volume would mean more fees for the KyberSwap protocol and liquidity providers over time.
Exclusive liquidity on KyberSwap Priority will be given to projects that add token liquidity exclusively on KyberSwap.
Project reputation, quality, and security Since KyberSwap will encourage more liquidity contribution to the project tokens and adopt related products, it is ideal to collaborate with the best and most promising projects in DeFi.
Community size and engagement level Large, active communities can provide bigger network effects and raise awareness of KyberSwap’s key benefits to more users. Community members from the applying project are highly encouraged to voice their support for the proposal in the forum. New projects are also considered if they potentially can create a large community.
Additional value to/Synergy with Kyber Network (marketing, community, product, network effects etc.) Partnerships or collaborations should be mutually beneficial and add value to both parties. E.g. integrations that showcase DeFi composability, joint educational activities.
Projects need to have a minimum of approximately $100,000 worth of tokens locked in a KyberSwap pool. The pool can be for Project token-Network token or Project token-Stablecoin. If the reward token is different from the farming pool token, a pool for reward tokens should also be created with minimum liquidity of $10,000. Sufficient initial liquidity for the token pair is required to achieve good rates for traders and generate meaningful volume. Minimum value locked also depends on the AMP (amplification factor) of the pool. Higher AMP, higher capital efficiency; especially useful for more stable pairs.
Ability to at least match the KNC incentives provided by Kyber Network. Both Kyber and the project should commit a meaningful amount of incentives in order to ensure an attractive APY and amplify the impact of the Rainmaker program. The project should indicate a ballpark range of token incentives they are willing to contribute. KNC reward pool will depend on whether it is a new or established token: Kyber can cover from 30%, 50%, or up to 1:1 of the project’s contribution, depending on how established the token is or other strategic considerations. On top of KNC rewards, Kyber will provide additional market budget and support to promote the campaign.

Once the proposal has been submitted on the forum, the Kyber core team will discuss it with the Kyber community. For proposals requesting less than USD $1M in KNC tokens from the ecosystem fund, a KyberDAO vote is not required. The Kyber core team and community will decide whether to approve the proposal or to make any necessary changes, based on the requirements stipulated in this framework.

If USD $1M or more in KNC is requested, a proposal will be made for voting by the KyberDAO on kyber.org.

The entire process takes approximately 8-12 days from the start of the proposal submission

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As always, let us discuss this as a community and let the Kyber team know your suggestions!

3 Likes

the avalanche tvl looks promising now so yield farming is working but volume is still pretty low. incentivizing traders is a good next step for kyber KyberSwap - Analytics

Yes this is a good idea to use KNC to get more traders on Kyberswap since it’s a DEX after all. Liquidity shouldn’t be the only goal. Is there a way to see the number of traders and transactions on the analytics and not just liquidity?