PART-2 Yield Farming: DMG Lockup

There has been a lot of discussion and concerns from the community on how yield farming will directly impact DMG. Another prominent community member suggested locking proportional amounts of DMG in order to participate in yield farming. While I am in favor of this idea, I think we can modify it slightly to encourage participation while not hampering the program.

What if there was a flat amount of DMG that needed to be locked up in order to farm? For example, each participant would need to lock 2500 or 5000 DMG as a threshold amount needed to participate. Obviously using a flat amount doesn’t scale vertically, but it does scale horizontally as more users participate in farming. How much DMG do you think is a good amount to encourage widespread participation while not making it too restrictive?

Lastly, the DMM: Foundation is looking to add DMG yield farming as well, but we need a price feed from Chainlink for it. We are currently working with them to add this. Would the community like to add support DMG yield farming as well once a Chainlink price feed is made available?

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I don’t have enough knowledge to suggest what’s good for the project. Just showing support. I’m ready to farm and stake when available thanks for giving the community a voice and I would like to congratulate the entire team for their hard work.

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Thank you and the team for hard work and also being dynamic and willing to adapt. I’ll preface this with my opinion could change as we start yield farming and receive more data points (e.g. participation rate, variance, etc). My thoughts right now:

  1. I think yield farming will be beneficial to the project since liquidity helps the project and we need to increase the amount of holders of m tokens. That being said, I generally support DMG required to farm as it shows skin in the game and helps prevent random other projects or farms (or both) from farming and then just selling. The yield farming incentives are quite high, and this would encourage people who hold DMG and support the project to farm (or newcomers would have to become DMG holders as well). However, I’d prefer if it did scale. This way it would not hinder smaller farmers and would also be more impactful to the larger. I have concerns that if implemented and not scaling, another farming system could just pool a bunch of USDC and eth together and farm hundreds of thousands (or millions) until the season is over, then exit. Since it would only be one combined entity, they would only be required to hold 2500 or 5000 DMG tokens. If implemented as a percentage of the total farm liquidity, then this would scale much better. I am thinking 25% is a reasonable number, and this should be based on the liquidity when entering the farm and also the season price for DMG. As an example, this season pegs DMG at $1 for rewards. If someone wanted to farm with 10,000 USDC and 10,000 mUSDC tokens, then that is roughly $20,000 total liquidity. At the $1 peg, they would be required to lock up 5,000 DMG.

I realize the above solution is complex and probably not a quick solution to implement. That being said, I’d support a flat rate of 5,000 to 10,000 tokens required to farm for this initial season (and perhaps consideration of a more complex system that scales in the future).

  1. For yield farming of DMG, would this be in lieu of staking? Or would staking still be added. I guess I’m not sure if we need both but can see benefits to both. For staking, we could perhaps have a lockup of 30-60 days or perhaps even longer to receive rewards. For yield farming with DMG, I do think there could be benefits as well. More liquidity would likely help prevent such price movements from a few sellers. Also it is another way to earn with DMG, which is good. I’m all in favor of encouraging people to hold - and I think the foundation does have a lot of DMG to help incentivize that and I’m glad to see them thinking about uses and ways to do so.

My last thought is more general: I like the addition of yield farming and think the yield farming should last beyond 30 days and hope we can have another vote. As more people participate in these types of events, purchase dmg and m tokens, and yield farm / lock them up, the value of the project should increase. As that happens, it will take less DMG to incentivize (e.g. if $2 token compared to $1, then half the DMG required for same incentive). I think a few months of this should add quite a bit of value and stabilization to the token, and then perhaps future seasons could still be added for the duration of a year (or a long -term target), but the rewards slowly reduced.

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Great read, I enjoyed your thoughts and explanation.

A scalable token lock is the way to go. Having a low flat rate arbitrarily excludes participants from yield-farming while allowing the manipulation you outlined in (1).

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Straight mUSD*-DMG LP farming.

Promotes mToken minting, DMG holding, free marketing via Uniswap token list, and yield farmers are already familiar with this type of farming.

I don’t think a flat amount is going to fix the problems we’re about to face. 2.5k-5k is peanuts for bad actors.

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You would need to also add USDC for liquidity if this is the proposed solution - since m tokens can only be purchased with the underlying asset. So it would make it mUSDC + USDC + DMG

The issue is that listing the mTokens against DMG increases the spread when trying to trade from mToken to token (IE mUSDC to USDC) if we use DMG as the base pair. It is good from an incentive structure for DMG but it is bad for the actual purpose of yield farming, which is to create a liquid market with low barriers for mTokens on the secondary market in case there are constraints on the primary market.

To be clear, you would mint mUSDC with USDC. Take your mUSDC and DMG to uniswap and provide liquidity to the mUSDC-DMG pairing.

Then you would stake the mUSDC-DMG LP tokens.

Why not both? One pairing primarily for farming and the other for the liquid market.

Fragmenting liquidity across all of these pairs also wouldn’t be a good idea, especially in such an early stage when liquidity is initially being bootstrapped.

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What about a flat one that changes per season? Keep in mind that the first season is only 30 days, roughly, in length.

Since this is the first season, it would be good to experiment how DMG should be locked up in order to farm more DMG. I think it would be a good idea to have yield farmers lock a certain amount of DMG in order to participate which would decrease sell pressure, but in what way that should be done needs to be ironed out by the community. There definitely is a risk that token lockups would have the possibility of increasing the barrier of entry too high such that some people will not be able to participate, so it’s a thin line between availability to farmers and decreasing sell pressure. I also think the ability to yield farm with DMG would be great as long as there is a Chainlink price feed securing it.

Maybe the better approach would be to proceed as-is but focus all resources on implementing staking and burning as soon as possible. Rather than forcing newcomers to buy DMG, give them a reason not to dump what is farmed.

This solution increases mTokens liquidity, it’s accessible to all investor levels, relieves DMG sell pressure, further decentralizes governance, and rewards current DMG holders.

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I agree with you. I think we have some interesting levers to pull for season 2 of yield farming.

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I agree with this. Staking is a huge component of farming and should be prioritized. In the meantime, I will farm my dmg with mTokens and hold them.

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if you block an amount of Dmg over 1000 dmg for yield farming you will not attract small investors who are very good for marketing unless the team set up dmg locking pools to participate

The best thing is to return excess profits to dmg holders, so that the whole people can enjoy the dividends brought by project growth and encourage long-term holding of dmg. On the other hand, the dmg tokens were burnt and bought back in proportion.

dmg is a governance token, what votes are locked? It should be allowed to circulate freely. The best way is to give a certain percentage of the excess part of the project to DMG holders, and to buy back and burn tokens. Make the system virtuous circle, encourage people to hold dmg for a long time and participate in ecological governance.

Wondering if it would be possible to implement a bonus to the APR if any amount of DMG is locked up after a minimum amount. Example: minimum lockup 1k DMG, APR bonus from DMG locked up goes from 0% at 1k DMG to a maximum of 3% at 5k DMG locked up. Larger incentives could be given to larger lockups, potentially leading to yield farming pools (controlled by 3rd party contracts) forming to benefit from a higher APR. Example: 5% bonus to APR for 100k DMG, 7% bonus to APR for 1m DMG.

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