[DRAFT] Penalty System For LPs

Proposal Structure

Body Paragraphs:

  • 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.

1 Like

I’m not sure if we should use 100% penalty for 30 days.
It would be better:
48 hours - - 100% penalty
7 days - - 50% penalty
14 days - - 25% penalty
30 days - - 0% penalty.

1 Like

First, We are not looking for Short term LPs like AMMs and We are not a Farming Project. We are Capital Efficient and MM needs them for offer better quotes.so I think 4 month is a proper period, however in order to implement this in a more efficient way we need a the status of deposit/ withdrawals of the last 12 months, maybe @gxmxni can help us here.

beside they if subjected to penalty they still receive Market making Profit from Market Makers.

I’ve said this on discord but I believe a better approach to this is tiered APYs based on lockups.
Reward distribution instead of penalty. Think it gives more flexibility.

48 hours - 30 days is a fine time frame

Yes it will clear the LP of quick hands and temporary contributors, I’m all for

30days is quiet low considering our designed structures but tiered apy is also a good idea.

thank you for the support

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