@Revolve Maybe this LPRV2 is to keep going. However, to make user willingly opening order. So, it is better to list PRV at another top exchanger. Than, no need headache to think about incentive formula. But project will same to spend a budget to list withing top exchanger.
[Finished] Liquidity rewards program v2
Fantastic! I want to stop everyone for a moment and point out a very clear fact that most are missing. Tell me one other investment vehicle that does not require a massive investment, that can return anywhere near 60% APY? Exactly, they do not exist! So if you ask me, the current reward rate should should apply to those who have at least 2,500.00 and require a lock period. So I fully support the suggestion from @Jerry_Watson!
4 Likes
As many of you will already know, I am a strong advocate for the importance of providing liquidity for Incognito’s long term health.
If this is true, you are either misestimating or do not understand the entire concept of opportunity cost.
Opportunity cost is the gain someone gives up to do something else.
You are asking people to provide liquidity when they can get a better reward by either:
- Converting to PRV and staking (but this is not possible or safe with no liquidity and massive slippage) (internal opportunity cost) OR
- Taking their coins else and staking them for a reward (external opportunity cost.)
This is irrational and is not consistent with "I am a strong advocate for the importance of providing liquidity for Incognito’s long term health. "
I have explained it multiple times but I will do so again because I want this project to succeed, but for that to happen you are going to have to provide valid counterpoints to take correct action.
The opportunity cost for providing liquidity is higher than staking.
Yet the APR for staking is 37%, and for providing liquidity is 16.5% (in your calculation which ignores the June 900k target)
So you are getting less reward for more risk.
I’ve laid out clearer logic in previous posts above:
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
You go on to say:
However do note:
If you own another token in addition to PRV, your overall rewards are higher. For example, contributing 10,000 PRV & 6,700 USDT in liquidity will net you a larger return than putting 10,000 PRV in the staking pool and leaving 6,700 USDT in your wallet, and is of course, far better for Incognito.
This is not relevant because the market has already clearly demonstrated that most of the liquidity is coming from finances and not users of the platform. The only reason the dump is occurring so “slowly” is because the network is super slow right now.
Users are typically NOT financers.
How many users are sitting with 100k of pUSDT doing nothing? I’d guess about 0? For this user, the opportunity cost is NOT: sit in pUSDT and get nothing vs convert some to PRV and get something, its either:
- Convert all to PRV and get the better staking reward or:
- Go to Celcius or Crypto.com and get a non-zero reward for your USDT.
There are at least 3 distinct stakeholders as I mentioned above:
- Users
- Financers
- Devs
You are punishing your financers and they are reacting by exiting which destroys value for all 3 stakeholders.
For those worried about impermanent loss, we are working on a few solutions to mitigate risks.
One such solution is allowing liquidity to be provided from one side only. This is in development and will launch within the next month or so. We will share details as soon as it takes shape.
This will be a great solution, but it is not ready.
An easy solution would have been to revert to the old liquidity pool rewards or drop the staking rewards so they are lower than the new liquidity provider rewards which I have communicated to you in person.
I have tried to explain this in private and wanted to avoid publicly calling you out in this way, however, at this point since you seem to either not understand opportunity costs or have other motives.
I sincerely hope you try to understand the inconsistency in the incentivization mechanism and how it’s resulting in the destruction of the value you have created OR provide valid counter-points that explains the markets reaction.
10 Likes
I like these suggestions. This would absolutely re-incentive liquidity providers.
I wonder if they can’t do this though because there is not an allocation amount set aside for it in the DAO, and that’s why they are trying to think with smaller returns, but for a longer amount of time.
Because the previous rewards paid out to users were not sustainable?
1 Like
I wonder if they can’t do this though because there is not an allocation amount set aside for it in the DAO, and that’s why they are trying to think with smaller returns, but for a longer amount of time.
There a handful of solutions for this e.g. lower the staking rewards to bring relative risk/reward ratios into line. This could however not be enough to incentivize liquidity vs external options like snx/crypto.com etc.
However, that’s not what @andrey is communicating. His last message shows that he believes that somehow the everyday user leaves his pUSDT on Incog and so some reward is better than nothing.
But economic logic dictates, and the market has proven, that this is obviously false. Users with that amount of pUSDT would either convert to PRV and stake or remove their pUSDT and stake elsewhere given how the rewards are structured. This has been proven true by the current price movement and number of nodes unstaking.
I’m hoping if we can fix that logical error that “something is better than nothing for providing liquidity” we can re-align incentives for all stakeholders and value providers.
5 Likes
To play devil’s advocate… There’s still A LOT of liquidity, despite the recent selloff and change in liquidity terms. Arguably, enough to proceed with the next phase of expansion into Kyber and Uniswap.
I do still think it would be good to gear liquidity incentives so that the primary motivation someone has, without needing to just be altruistic and charitable (SURVEY: Incognito = A Charity), is to put their money into liquidity.
3 Likes
Hah, @Mike_Despo! I am also writing a devil’s advocate argument. That’s funny.
So, playing devil’s advocate, is providing liquidity such a bad deal? And should it be seen as less than staking, or more as a symbiosis?
First, Incognito’s rates for providing liquidity are competitive with, and sometimes beat, the competition. Assuming the APR in Andrey’s calculator holds true, the return for liquidity providers ranges from 16.5% to 24% APR. On the low end, this competes with Crypto.com (CdC) rates, the highest of which are 12% on USDC and 18% on CRO. And that is just on the low end of liquidity rewards. On the high end, 24%, the liquidity returns beat CdC’s highest rate of 18%. In this regard, Incognito is very competitive.
Second, saying our non-PRV coins are just sitting in liquidity doing nothing is untrue. The whole pair is effectively earning the 16.5-24% return. An investment of 50k PRV and 50k USDT at 19.5% or higher is still better than the equivalent value of CRO held at 18% on CdC. The argument that the non-PRV half of the pair is just sitting there is inherently false.
Third, thinking of staking as a stand-alone and more lucrative investment than providing liquidity is flawed logic. The two are very much interlinked, and we can see this with the current liquidity dump and devaluation of the currency. It is true we can stake at a higher percentage, but if the liquidity and PRV price falls, then our stake is doing nothing more than earning a ton of a devaluing asset that we can’t trade. Our stake is worthless if there is no liquidity. Thinking one type of Incognito investment is better than the other misses the point that they are interdependent.
Fourth, we absolutely need to think of the value of PRV in our investment decisions. When I first started, PRV was worth between 30 and 50 cents. Over the course of a couple months, it skyrocketed to 85 cents. Just in price alone, my investment had basically doubled. This price is especially important when we compare assets at other competitors, such as CdC. CRO has gone up dramatically in the past month, shooting from around 5 cents to now 10 cents a token. PRV needs to continue to perform similarly in order to stay competitive; it has proven that it can, and we should engage in behaviors that ensure our own growth.
Finally, in our calculations, we shouldn’t forget that we can reinvest liquidity rewards in 37% staking. We can take advantage of both types of investment. In a way, this means we can compound our rewards at a 37% APY–which we can’t do at CdC (or anywhere else I know of). Sure, you can reinvest in more Earn vehicles at CdC to effectively compound your earnings, but not at 37% continuous APY. This reinvestment strategy in staking will surely help make up for the lower liquidity rewards and should be incorporated in to our calculators.
Now this isn’t to say the new liquidity program doesn’t have problems. Impermanent loss and the current selloff make the new program more risky. And I still believe the incentives need adjustment for long-term health. I just think that, despite the decrease in liquidity rewards, the program is still very competitive and still worthwhile-- especially when viewed as part of a bigger ecosystem.
So, as devil’s advocate, I think we need to recontextualize this new liquidity program. We shouldn’t see it as a stand-alone investment, but as part of the overall Incognito portfolio. It’s not charity. It’s part of securing our entire investment. Remember, if liquidity drains, price plummets, and the market floods with PRV, our stake is worth nothing. Splitting our funds between liquidity and staking may seem like a sacrifice to the stability of the system, but in reality, it may be a bolster to our overall returns.
As such, I think we should all put at least some amount into the liquidity pool–not just with the health of the system in mind, but also the health of our own investments. We should do this now to stop the hemorrhaging.
11 Likes
Yup, I recall advocating for this a while back, but yea incentives until expansion
1 Like
I’d like to say that is the reason why people are selling out is the fact that they are dependent on each other. Since incentives dropped on providing liquidity less people are likely to invest in it, bottom line.
Sure It’s better if you do invest in liquidity, helps everyone’s assets out. But obviously the people pulling out don’t see that happening. If they did, they would keep their money in. Yes staking is better, untill PRV gets devalued enough, which is why you want to provide liquidity.
But people are leaving because staking is better, they aren’t trying to stake. They are leaving because the incentive currently is to decrease liquidity. If there is no incentive for growth but the threat of the platform failing, investors honestly care more about their money then a brand new privacy platform, and I don’t blame them.
Your seeing it as an investment into the platform itself, and that’s much harder to sell to people. If the incentives were arranged correctly, everything would work flawlessly. It wouldn’t matter what type of investor your attracting. That should be the goal. You want the economics to fuel your platform, otherwise it’s going to progress very slow and potentially fall apart. If your targeting very niche specific investors, good luck with progression.
The platform is risky, putting your money in is risky. The people with money aren’t going to put their money in, when they have to rely on other members to “do the right thing”. That’s just bad business.
People chose this platform because they obviously think privacy is important. The fact they are investing into it has unfortunately more to do with economics then the sentiment about the project. If investors invested in things based on sentiment alone they would be broke. If the economics don’t look good, as far as they are concerned it’s a sinking ship.
It would be a better model to fix the incentives, then sell the platform to people. If done correctly, any privacy conscious individual would invest. Currently risk of the platform outweighs that. Lot’s more liquidity is going to get dumped if it’s not fixed. Simple as that.
8 Likes
@Revolve, I definitely don’t disagree with your argument, and I think you’re right: there needs to be a change. And I hear what @moos4444 is saying, too, that the reward, while still higher than other options, isn’t enough to justify the risk. I definitely agree with both of these stances.
The reason I started considering the devil’s side, though, is this: many of us still have funds staked in the system, and in nodes that could take time to unstake if things go severely south. Waiting for the Incognito team to implement a change might take too long; they’re fast, this isn’t a statement against them, I’m just saying we’re leaking now. All of us who still have funds in the system are leaking. If there is something we can do now to stopper it, I think we should take this action. Otherwise, it’s like waiting to patch a leak now because the patches we have aren’t as good as the patches that might be coming later. If we continue with that type of thinking, what’s going to happen is we all sink. This is partly the impetus behind my call to action.
The other drive behind my argument is more long term than short term. We can’t continue to rely on big investors to provide liquidity. In a way, that basically creates a centralized liquidity pool. No matter what the incentives are going forward, a pool of funds largely controlled by a small handful of individuals will not be healthy for anyone in the long term, as all it takes is one or two whales to capsize the whole boat. I warned about this earlier, and now the boat’s a’rockin.
3 Likes
I hate that I have to say this but…
I think it’s all this bickering driving the PRV price down further. Last time I checked, incognito wasn’t a run by one run by all project. I agree with most of what you are all saying but if incognito states their reward program, we all go and do our calculations and make decisions. Challenging the program so openly is not good for business. I mean there’s a poll about donating to incognito floating around somewhere.
Someone talked about fear and greed, what do you think people are feeling right now.
Getting @andrey to keep changing up the program so quickly to satisfy people makes the whole project look weak.
Let’s nip this in the bud please. If the new rewards don’t suit your investment needs instead of doing this and dragging down to price in the process, move your investment somewhere else. Probably the project will figure out another way to incentivise LPs if V2 rewardsproram isn’t working but for now let’s just try it out and see.
Ps. Not meaning to be rude it’s just sometimes I say what I see.
12 Likes
Challenging the program so openly is not good for business.
Who’s business? If we are talking about the business of building a sustainable ecosystem, then I respectfully disagree.
Someone talked about fear and greed, what do you think people are feeling right now.
No, we are trying to prevent a flight of liquidity due to a fault incentive program. A flight of liquidity is bad for everyone including the survival of the project.
Getting @andrey to keep changing up the program so quickly to satisfy people makes the whole project look weak.
Two things, if such a silly error of incentive logic destroys the project would you prefer that over looking weak? Secondly, the point of community contribution is to have all stakeholders who contribute value contribute their opinion on major changes.
If the new rewards don’t suit your investment needs instead of doing this and dragging down to price in the process, move your investment somewhere else.
That’s exactly what’s happening, and it’s destroying the project. So you have your wish.
6 Likes
You totally get me wrong. I agree with you,Lps for new projects are open to more risk and should be rewarded accordingly.I myself withdrew some liquidity yesterday and also sold some of my prv. What I meant is we can’t really argue these things on open forums. Today we are not satisfied with LP rewards so spend all day arguing it, tomorrow maybe it’s something else.
There has to be a system where things like this can be dealt with by a dao. Today’s chats have discouraged me even more from moving more funds into the ecosystem. That’s not we want right?
I agree with you on that statement very strongly…I invest in this project cause I believe in it and its mission but I primarily invest in it for economic reasons and I believe most others do as well. This project has to show the positive financial and economic reasons for investing in it…whether it’s in the liquidity or staking side of it for it is the driving impetus of most investors…and indeed the liquidity side needs to be adjusted and corrected in a way that safeguards said liquidity pool or else further hemorraging of the pool will take place. An individual always searches for two items mainly…ROI and Stability…in their investments. Everyone who has posted in this topic line have made very good points on their own personal opinions. I wish to thank you all and well lets see if it can fixed or enhanced as well all wish… 
2 Likes
Hey Gold … very good point there… Incognito does not need whales in it for indeed if whales come to control the coin well then PRV coin will suffer the manipulation issue that granddaddy coin of all coins…(BTC)…is alleged to have…and moos4444 hit it right on the head…but Joe Bloggs raises a very valid point as to how a potential new investor might perceive the discussion taking place at this time as a reason to not invest or even worse pull their investment. I am not sure what the community as a whole will think is the best fix for now is but indeed the sooner this topic is addressed the better for the community and all of us indeed.
As much as I would be a fan of having the liquidity in the network be decentralized and largely owned by individuals, I think that significantly hinders the pace of the project.
Most people, at least in the US, live paycheck to paycheck. It’s hard to scrounge around the kind of money your looking for from these particular individuals. Don’t get me wrong, It’s possible, just slow. Bringing in large investors is definitely important because it brings more confidence to the network. More confidence, equals more investments, not just from more large investors, but from smaller ones too.
I don’t think you should completely cut out large investors from the picture, they help significantly in gaining notoriety, which is an important aspect of the platform. In the future, you want wealthy people using the platform. If there is risk, even if the benefits of privacy are good, they are less likely to use it. I rather snuff out the potential risks preventing future investors now.
All this being said, if you believe in the network, the price of PRV is down, like I said before, it is a good opportunity to double down and buy. A rally after this downturn would be extremely beneficial. If it’s possible that the discussion about the rewards program was what significantly decreased the price, and not the rewards program itself, then I think it’s good we are seeing this now. If conversation like this is that detrimental to the stability of the platform, that’s something we need to fix if we are trying to expand as much as we are. It’s good to know your weaknesses before a bad actor tries to exploit them. (It probably was a mixture though)
Overall, I think we have some very good people and ideas in the community. I’m sure the developers are reading our comments with an open mind. I don’t think the platform will fail, if anything I want to help push it to the finish line. If I had more money to invest I would. (Probably why I don’t have much money 
)
Privacy is important to people, so there is always going to be a “grassroots” movement to try to capture those ideals. More money just inspires more confidence and makes things move faster.
I think things will work out, and I think we all have learned something new from this discussion.
10 Likes
@Revolve, I totally agree, we need large investors. My point is that we shouldn’t rely on them as much as we currently do. Instead, we should all work toward building a stable pool of liquidity. We don’t have to put everything in it to do this, and I think some of our incentive and tiered ideas would go a long way toward achieving this goal.
Cheers!
2 Likes
Ok guys and gals…let’s get it done…nuff said!!!..
1 Like
Had to chime in, perhaps this opinion will also be taken under consideration.
Lack of interest on the other half of PRV pair is what killed my incentive to keep the funds in the liquidity pool, I cashed out and went elsewhere.
The biggest problem is the broken promise of an APR, when I invested I understood that the rates would stay the same at least until the end of this year, this applies both to staking and liquidity.
To me personally this feels like bait and switch. I’m hurt, disappointed and no longer trust the project, if this can go any way the devs decide to, then perhaps they’re the only ones who should use the product.
The tech is ok and the idea is sound, but the lack of understanding of the economic part is sinking it.
My suggestion is to restore the promised APR and the conditions of LPv1, apologize profusely to the users and work on gaining back the trust of the community.
Kudos to gents who managed to put everything so eloquently, earlier in this thread, I decided to add a bit of personal “butt-hurt” and imho a lot of people feel the same way, as clearly evidenced by the amount of liquidity evaporating and the price action that follows.
11 Likes
why can’t we have emission curve written in code at the first place? why does that have to be extended by a year? Why can the reward to LPs be adjusted manually? Isn’t this the most important thing, the ethos of decentralized blockchain: Bitcoin go directly to miners and no one can stop that, because they are written in code.
1 Like