- Title: [DRAFT] . Implementing a Penalty System For LPs.
- Author(s): < @Mehdi
- Related Discussions: <https://gov.hashflow.com/t/scale-down-lp-rewards/338/32\>
- Submission Date: < December 2 2022>
Simple Summary: Implementing a Penalty System For Short term Liquidity Providers.
Abstract: Implementing a Penalty System For Short term Liquidity Providers to disincentives them to Use Weekly withdraw Limit of Each Pool which is currently 30% which Makes LP rewards more sustainable for Long/Medium LPs.
Specification & Rationale: one of the downside and poor User experience of Providing Liquidity on Hashflow pools is the weekly withdraw limit. A user Fund may Stuck on the pools for Weeks especially During High Volatility when everyone needs their Liquidity. on the other hand a user may wants to switch His/Her LPs on the pools to gain better APYs. in order to Disincentives such Explained Activities, I suggest to Implement a Penalty System and give back the Collected Fees to Medium/Long Term LPs Based on the following Mechanism.
100% Penalty on HFT Rewards for withdrawing LPs before 30 days
75% Penalty on HFT Rewards for withdrawing LPs before 60 days
50% Penalty on HFT Rewards for withdrawing LPs before 90 days
25% Penalty on HFT Rewards for withdrawing LPs before 120 days
and by the end of 4th month 0% penalty on HFT rewards eg, Full rewards
1-Rewards that are given By Market Makers are not subject to the System. It is only For HFT Rewards.
2-after 6 month I will write another Proposal and Direct the collected fees to the DAO treasury.
Benefits (Pros): Less Use of Withdraw Functionality and Using 30% of Max Capacity on Each Pool
More sustainable Rewards for Medium/Long term LPs.
Better User Experience
lower Waiting time to exit from pools.
Downside (Cons): Not in favor of Short term LPs.
Voting: Yes Vote means Implementing the penalty System and No votes Means Keep LPs penalty Free.