[DRAFT] Penalty System For LPs

Governance
1

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

Note:
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
2

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
3

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.

4

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

5

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

6

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

7

thank you for the support

8

The comment period for this thread is now closed - thanks for all the comments!