62% and 8% (give or take),
Currently it’s only 62% rewards overall only on the PRV side.
The rewards are fixed from a pool.
If you don’t know that you want to invest long term, it’s potentially better to stake, as taking out liquidity in the short term gives you a higher chance to suffer from impermanent losses. However overall it’s better for you and the network to provide liquidity as it stabilizes the price of PRV. Unfortunately, the incentive to provide liquidity got reduced which I would say isn’t the best to increase the amount of providers.
Someone once said there are two main driving forces to the market: fear and greed. Yes, there are other forces at play, but by far the most influential are fear and greed. Markets rise and fall based on these two emotions. In this regard, cryptocurrency, and therefore Incognito, is no different than any market.
We don’t have to look far back to see this reality. Coronavirus scares caused the stock market to crater. Even cryptocurrencies lost a ton of value–at least at first. People were scared, and that directly affected the markets.
Even in the microcosm of Incognito, we don’t have to look that far back to see the effects of fear and greed. When Incog first started the staking pool at 57%, we saw a huge influx of staked PRV. And when the original liquidity rewards program first started, liquidity skyrocketed. That’s largely greed. To wit, if Incognito offered 1% APR, no one would play. Now, with the liquidity program changing, we see a lot of retreat. That’s probably fear.
If we really stop to think about it, the whole premise of Incognito is based on fear and greed. The basic mission statement is to bring privacy to all crypto-related activities. But why do we need privacy? It’s because we’re afraid. We don’t want everyone to know our finances. And it’s because we’re greedy. We don’t want someone trying to take a cut of our money, and we want our money to work as hard as it can for us. To call users greedy because they want higher returns–it’s as insulting as it is accurate. But don’t forget that fear also plays a huge role. And when an APR turns into more of an MPR, a monthly percentage rate, because the program doesn’t last a year, the market will surely be affected by fear and greed. To survive, the platform has to adjust to these universal driving forces of human behavior–to incentivize the correct behavior.
So all we are really saying is, liquidity doesn’t have the incentive it deserves, especially compared to some of Incognito’s other offerings. We can debate all day the philosophy behind it, but the fact remains, here is the effect of fear and greed:
So then, in line with the liquidity tiered structure (which provides an incentive), if a person does not provide liquidity for any pairs then staking APY is like 20%.
If your account has $100 in staking, then if you provide $50 in liquidity (so $150 invested overall), then they are automatically tier level 2-you get say 25% APY staking, etc.
What ever was done was enough to start a chain reaction. I wouldn’t say the people pulling out aren’t interested in privacy. Just are financially scared. If they invested in the platform originally, privacy is definitely what brought them here. Money is what made them stay.
It doesn’t help that most people had no warning about this change. It was only posted a day before it was implemented. To an investor that can make things seem a little more sketchy, costing the platform some confidence.
Since the effects of changes like this affect the whole community, there should definitely be some discussion within the community before actions like this are made. I’m not quite sure if there was, but people should be more aware of potential changes regardless.
As for bringing people back into the platform, we need to inspire confidence that Incognito Incentivizes the proper investments to make the network strong. Also being able to hear peoples concerns before new changes go live would promote a stronger community, and put more confidence in investing in Incognito in the future. I honestly think figuring out these problems now is extremely important if we want to continue to expand. I view this as a blessing in disguise.
Hi all, thanks for taking this discussion further.
I want to start off by saying that I LOVE and SUPPORT the ideals behind this project and still have more than 6 figures into the liquidity pool myself and own more than double figures worth of nodes.
I personally did this because I believed in the project’s team and ability to meet a worthy goal (the basic right of privacy) in the most generalizable and usable way possible.
Unfortunately, @Andrey for all your brilliance is getting us this far this statement shows a lack of understanding of risk/reward.
Uniwaps contracts have been around for a lot longer and audited, PRV hasn’t been audited by a third party and anyone holding PRV tokens or shielding them needs to account for this significant risk.
SNX staking rewards are now arguably higher than PRV (depending on which pool and how much capital you have to deploy.) Again, we can all agree given SNX’s current size and following, multiple 3rd party audits and demonstration of how they handle issues, providing liquidity through SNX’s pool is significantly less risky.
This isn’t about greed or capitalism, this is “rational people deploy resources to maximize reward/risk over their desired time horizon.”
The new LP benefits discourage liquidity provision. This will lead to an even further drop in liquidity (as can been seen by the last few days.)
A lack of liquidity discourages people from using the entire Incognito ecosystem BECAUSE they don’t have confidence they can get their money out when needed. EVERY KIND OF USER SUFFERS.
The current levels of liquidity (and recent exodus) empirically demonstrate that this isn’t enough to enough incentivize liquidity to ALLOW Incognito to get the publicity it needs to grow and provide real value to the world.
Incentivize through financial or any other mechanism to encourage exposure/involvement and if the product is good, people will stick around.
This is a great goal in the long term and I agree with it. I shield and hold over 7 tokens.
In the short term, what’s preventing further adoption of PRV is the lack of liquidity, especially stablecoin on and off ramps. It’s the same idea as to why exchanges have been scrambling to get fiat on and off ramps. Those that did, thrived.
To explain it in a different way: Once people are confident they can convert their BTC to pBTC, maybe convert a bit to PRV to stake, then withdraw it all without losing significant value due to a lack of liquidity…PRV adoption can explode. Right now the lack of liquidity basically makes widespread use impossible even if it was the best technology on the planet.
And if it was the best technology on the planet, no one would know because no one is willing to risk trying it if they are scared they can’t get their money out…and the type of big money capital needed to provide liquidity for a robust econo-system won’t even give it a look with the current risk/reward ratio compared to other options.
Please take a step back and really think about how realistic this is in the foreseeable future. This statement is idealistic but not realistic given the current market and level of maturity of Incognito.
In the long-term yes. People helped fund the BTC satellite because they believed in it. Those people would not have been exposed to BTC if it wasn’t for the correct incentives early on.
In summary, I once again want to apologize if I came across as harsh, I am hopeful that this project can provide a generalized convenient form of security to all tokens. This is where my heart is coming from. I’m afraid that if we destroy the fragile liquidity we currently have by hoping “people will do the right thing” (which hasn’t worked so far) instead of correctly incentivizing desired behaviors.
Good post, moos. I like this characterization better. “Greedy” is so disparaging. I glommed onto it because it was the word used, but the desire to make your money work the hardest it can for you isn’t greed. It isn’t selfishness, it’s shrewdness.
Also, I like that you give @andrey due credit. His hard, brilliant work, and the work of the Incognito team in general, has been inspiring.
@andrey, I hope you know we aren’t attacking you, and we wouldn’t take this much time debating if we didn’t care about the project. We’re just looking at the data we have available and are trying to help.
I think we have the potential to really make Incognito the best it can be and provide privacy for everyday people. I want to see the liquidity pools skyrocket We have to make sure we fix the problems at hand to bring confidence back to more investors.
@PRV-team, if there is a DAO type mechanism where these decisions are discussed and voted before implemented please point me to it.
I’m more than willing to contribute by providing my perspective and experience to help move this project forward.
Here’s a new sheet I created to help combine all these principles/ideas and prioritize them, then do some basic calcs. @PRV-team feel free to pm me your gmails so I can give you guys write access to play with it.
From Spreadsheet:
Goals:
Incentivize growing PRV liquidity to support the econosystem Serve & Install confidence in ALL stakeholders:
1. PRV uses looking to protect privacy
2. Financially driven stakeholders looking to accept the high risk of deploying capital on a young project in return for high rewards
3. The PRV dev team who are strongly incentivized in the liqudity and appreciation of PRV
Principles:
Rewards pool is adjustable via a voting DAO mechanism e.g. Synthetix
Reward pools prioritize pools most important to the above goals
Target ROI for Pool Priority 1 should account for risk relative to internal opportunity costs e.g. staking or hosting a node, AND external opportunity costs e.g. Uniswap or Synthetix pools
Concepts:
Liquidity providing (LP) is riskier than staking because of exposure to impermanent losses
Liquidity providing (LP) is riskier than staking because rewards are paid weekly
Liquidity providing (LP) is riskier than staking because a FIXED number of rewards are distributed amongst a DYNAMIC number of LPs making ROI UNCERTAIN
Liquidity providing (LP) is safer than staking because half of capital is held in NOT PRV
Hosting a Node (NH) is riskier than LP because of time to destake
Hosting a Node (NH) is riskier than LP because earning cycles are random
Hosting a Node (NH) is riskier than LP because FIXED rewards are number of nodes is DYNAMIC so ROI IS UNCERTAIN
I‘ve watched this project since Feb., the idea behind pDEX really attracts me (as a fan of privacy-oriented cryptos), the team are impressively responsive, the roadmap and proposals are unfolded in a comprehensive and logical way. These give me confidence on Incog’s longterm development and PRV price, that’s why I became a market maker and then a staker.
I noticed that PRV price and liquidity are going down, but find no reason unitl I read this thread. I agree on team’s longterm view, but I really have very similar thoughts with @moos4444.
If you watch the stats on incscan.io, you would probably find that the ratio between volume and liquidity is signifcantly smaller than average DEXs, no need to say Uniswap. It indicates that most of people come here and provide liquidity, but not for trading. There may be 3 reasons for this: ① people don’t have need to trade at all, they just want higher ROI; ② trade experience in pDEX are far behind from Uniswap, and only few people are willing to accept it for sake of privacy ③ the slippage of some coins are relatively higher. ② is a universally downside for all cryptos projects, e.g. Monero & Zcash vs. Bitcoin on scalability and computational resources. and I have confidence on that YOU the Incognito team would solve it step by step in the future. But with liquidity program v2, many people would pull out their cryptos since ROI are lower, and risk are the same (I’ve asked the team to do Auditing for several times). With more liquidity pulled out, ③ is more severe. And thus it is likely to have a vicious cycle which all of us don’t want to see.
So, please seriouly consider our comments.
Best,
Thanks to you @moos4444 and the team for looking into this.
So, are there two things happening?
-the liquidity program is being tweaked to provide higher returns to lp vs the high risk of the current system?
-We will be moving to a dao with prv used to signal support for major project changes like the liquidity program v2? So there is proper notification and community support ?
I can confirm that we are working on all ideas highlight in this conversation. There were several good suggestions which need to work out. I can’t commit right now what kind of changes will be done. But I can assure you that we read all comments and appreciate such involvement. It becomes a really hot topic
I can also confirm that PRV holders will be able to participate in DAO, but can’t commit right now the date when DAO will be launched on chain level. As I mentioned there were several ideas above which we would like to work out.
If the invest/add liquidity return functions have changed, then why on June 3 did it still show the 62% APY return and 8% for USDC? Also, why then does it show my interest compounding every second under the invest tab?
@andrey is right that the importance of pDEX liquidity is critical.
I don’t have much in the liquidity pools but regardless of how you are invested in this project ( $, sweat, blood, etc) the savvy investor might look at this as the price of PRV going on sale.
Thanks for this conversation everyone. Very good discussion that has helped me learn more about the project.
I am glad that everyone sees that it takes perspective from each aspect of the project, dev, user community, and investors to make a great project like this successful.
I look forward to reading more constructive discussions like this going forward.
LP v2 is not in the right time to implemented. It can be implemented when many coin project already jump into pDex. Atm, the best choise is LP v1. I think, the project team will be reviewed and back to LPv1.
Agree, I actually was actually mentioning to @andrey that this could lead to a “deflationary like” spiral (which is fresh in my mind thanks to the current state of the world economy haha.)
Liquidity dries up, slippage increases, people are less secure holding and transacting in PRV (as is evident from the current Node unstaking and price drop,) more liquidity leaves due to increased slippage and less transaction volume and on and on it goes.
Even worse, this damages the Incognito project and it’s goals in two ways:
people are dis-incentivized from trying the Incognito system (both new and existing user adoption decreases) because the risk of shielding their coin and losing value skyrockets with such low liquidity = high slippage & greater price volatility i.e. risk;
with such a huge price fluctuation, user and capital provider (liquidity providers, node owners etc.) confidence is shaken
Again, this leads to even more liquidity exiting and on and on it goes.
The good news is that the team is more than willing to listen and take feedback, so I’m doing my best to help them balance all stakeholders desires with the goal of create a stable econosystem that people can use for privacy.
Well, this is cool and should help. From Constant:
Get 10% APY on your idle cryptos
You heard that right. We finally offer a crypto investment option so you can earn passive interest on your BTC, ETH, and BNB and withdraw anytime. We call is Crypto Lend.
To pull this off, we’ve partnered with DEXs (Decentralized Exchanges) like the Incognito pDEX to provide extra liquidity for their cryptos. In exchange, you get a healthy cut of the profits from trading fees.
We have to make sure we fix the problems at hand to bring confidence back to more investors.
