KIP-10: Joint Liquidity Mining Proposal Framework
Note: This is an informational KIP and starting framework that is meant to be a general guide for potential project partners. Contents may change over time based on community feedback. View KIP-10 on Github.
Summary
We propose a new framework for other projects to submit proposals to be part of the ‘Rainmaker’ program for joint liquidity mining with Kyber, using KNC from Kyber’s ecosystem fund. This is mainly targeted at popular or promising ecosystem projects/tokens in DeFi.
Kyber will work with selected projects to provide token holders with additional incentives to hold their tokens and add liquidity on the highly capital efficient KyberDMM (Dynamic Market Maker).
This will in turn educate external communities about the benefits of KyberDMM and start a network effect that brings more users, developers, and liquidity providers into the Kyber ecosystem.
Motivation
Liquidity providers seek to make the most of their capital by using platforms that earn them the most fees and yield. Rainmaker liquidity mining incentives on KyberDMM, on top of its high capital efficiency and dynamic fees, will reduce the impact of potential impermanent loss and make KyberDMM a more attractive venue for liquidity providers to park their capital compared to incumbents in the market.
Working with top ecosystem projects further amplifies the fundamental impact of Rainmaker liquidity mining:
- Bootstrap TVL (total value locked), liquidity and volume for the most popular tokens
- Showcase KyberDMM’s benefits e.g. amplified liquidity for high capital efficiency, dynamic fees; retain long-term liquidity provision
- Bring more DeFi participants and value into the Kyber ecosystem
Top DeFi projects have large and vibrant communities with many being seasoned DeFi power users. By receiving KNC rewards as liquidity providers, they gain the ability to stake KNC on KyberDAO and participate in Kyber’s governance.
Through this yield farming process and the marketing activities involved, it is also more likely that power users will make the effort to understand Kyber Network and the benefits of its various protocols such as KyberDMM.
In addition, the tokens of popular projects often generate considerable trading volume compared to others and this directly benefits KNC holders as 10% of KyberDMM volume is given to KNC holders who vote on KyberDAO (the other 90% goes to liquidity providers). Higher trading volume will increase the fees earned by the protocol and liquidity providers (%APY), as well as the value of KNC. This helps ensure the sustainability of the KyberDMM protocol.
Framework: Joint Liquidity Mining Proposal
Projects can submit proposals to get their tokens voted into KyberDMM’s Rainmaker program to receive liquidity mining rewards on top of protocol fees. KNC rewards received during liquidity mining can be restaked into the KNC/ETH pool for even more rewards.
Although proposal details may differ depending on the needs of each individual project, all tokens have to fulfil certain criteria based on this liquidity mining framework in order to be eligible for a KyberDAO vote and Rainmaker liquidity mining.
Proposals have to be first submitted to Kyber’s governance forum for discussion for 5-7 days, where the Kyber community will discuss and determine the eligibility of a project and its KNC reward allocation.
Projects have to submit their proposal on this Github form as well as the Kyber governance forum under the section ‘Collaborations, Partnerships, Integrations’. It is recommended that proposals follow the template given below.
Template
- Project Introduction
- Proposal Summary, Motivation and Key Details (refer to the selection criteria guide)
- KNC amount requested
- Amount of tokens project is contributing
- Network: Ethereum or Polygon or others
- Token pair option: ETH, WBTC, USDT, USDC, DAI or KNC
- Vesting: No vesting or 14 days vesting
- Campaign start date and duration: 1-3 months
- Project details: Contact information, website url, logo, token contract address, link to CoinGecko/Coinmarketcap markets page etc.
Example
1. Project Introduction
XYZ Finance is a DeFi project that…
2. Proposal Summary, Motivation and Key Details
XYZ Finance is proposing a joint liquidity mining program with Kyber to help improve liquidity for the XYZ token on the KyberDMM protocol. During the campaign period, liquidity providers who add liquidity (deposit tokens) on the eligible XYZ-ETH pool will receive LP tokens that can be staked on the Yield page for additional XYZ and KNC token rewards. Other token pairing options for the pool (besides ETH): WBTC, USDT, USDC, DAI and KNC. As part of the campaign launch, there will also be joint marketing efforts with Kyber Network.
Additional Idea: Top 500 XYZ product users can claim a fixed KNC reward on KyberDMM immediately after they provide liquidity.
XYZ is an ideal candidate for Rainmaker Liquidity Mining on KyberDMM. Key reasons:
- There has been high volume for the XYZ token for the past 30 days as seen on CoinGecko.
- XYZ as a DeFi project has been gaining a lot of traction. The XYZ product has been widely used by hundreds of users and has been audited by Quantstamp.
- There are over 100,000 members in the XYZ community and many are liquidity providers.
- XYZ has integrated KyberDMM hence many XYZ users are also indirect KyberDMM users.
- XYZ will provide the minimum requirement of $200,000 worth of liquidity on a new amplified XYZ-ETH (AMP=1.3) pool on KyberDMM.
- Together with requested KNC rewards, total incentives exceed the minimum requirement of $200,000.
3. KNC amount requested
77,000 KNC ($100,000)
4. Amount of tokens project is contributing
1,000 XYZ ($200,000)
5. Network
Ethereum
6.Token Pair Option
ETH
7. Vesting
14 days vesting
8. Campaign start date and duration
Starts 30th August, lasts for 1 month
9. Project Details
Website, Twitter, Logo, Token Contract, CMC, CoinGecko etc.
Selection Criteria Guide
Projects/Tokens are chosen to be part of Rainmaker 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 for a KyberDAO vote.
| 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 KyberDMM protocol and liquidity providers over time. |
| Project reputation, quality, and security | Since Rainmaker will encourage more users to add liquidity for 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 KyberDMM’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. |
| 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. |
| Project tokens need to have a minimum of approximately $200,000 worth of liquidity in an KyberDMM amplified pool. The pool can be Token-ETH or Token-WBTC/USDT/USDC/DAI/KNC. | Sufficient initial liquidity for the token pair is required to achieve good rates for traders/takers and achieve meaningful volume. Minimum TVL also depends on the AMP. Less TVL required with higher AMP (more stable pairs). AMP=1.15 to 1.3 recommended for most non-stable pairs. |
| Ability to at least match the KNC incentives provided by Kyber Network for established tokens. Minimum of $200,000 worth of incentives in total from both parties. | 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 rewards 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. On top of KNC rewards, Kyber will provide additional market budget and support to promote the event. |
Once the proposal has been submitted on Github and the forum under the section ‘Collaborations, Partnerships, Integrations ’, the Kyber core team will discuss it with the community. If the community determines that the project has met the requirements stipulated in the liquidity mining framework, an on-chain proposal will be made for voting by the KyberDAO on kyber.org. Entire process takes approximately 14 days from the start of the proposal submission.
Voting Process
Visit the KyberDAO interface kyber.org and cast your vote on the relevant campaign with a binary YES/NO vote.
Each voting campaign ends after approximately 4 days and if KyberDAO approves the token, it will be added to Rainmaker liquidity mining program after another 3 days.
The entire process takes approximately 14 days, starting from the proposal submission on the forum.