[NKP0023] NKN Geyser for liquidity providers

Background:

  • Decentralized exchanges like Uniswap provide permissionless trading of NKN ERC-20 tokens, enabling everyone in the world to trade freely. However, liquidity providers are exposed to Impermanent Loss (IL) due to the high volatility of tokens. And the trading fees might not be able to cover impermanent loss.

Proposal:

  • Create NKN Geyser with NKN tokens to reward liquidity providers on decentralized exchanges such as uniswap and sushiswap
  • NKN Foundation to provide the NKN reward tokens
  • Liquidity Providers stake their pool specific LP tokens in NKN Geyser.
  • The more liquidity you provide, and for longer, the greater share of the NKN geyser pool you receive.
  • All staking and reward are based on smart contracts

Reasons support Geyser:

  • Additional reward for liquidity providers can incentivize more liquidity for NKN swap pairs on DEX like Uniswap. If we can add 30-50M NKN tokens and equal value ETH/USDT into Uniswap, we will reach 2-3M USD liquidity which is very usable for most traders
  • The more NKN tokens in DEX liquidity pools, the less circulating supply of NKN tokens. 30-50M NKN tokens in Uniswap pool will be about 10% of NKN circulating supply.
  • The token reward is based on the actual contribution of liquidity providers (amount and duration), and is fair and non arbitrary.
  • The additional reward tokens might be encouraged to feed back into the swap pools to earn compounded reward, thus mitigating the risk of selling on secondary markets.

Reasons against Geyser:

  • Increasing theoretical circulation supply
  • Reducing strategic reserve for NKN Foundation, and is not sustainable over the long term.

Details for discussion:

  • Duration of NKN Geyser
    • 1 month
    • 3 months
    • 6 months

Feasibility and implementation costs

  • Development costs in the following:
    • Smart contract development. Can be based on AMPL solidity code and adapt to NKN use.
    • Smart contract auditing. Might be avoided if we do not divert from AMPL code.
    • NKN Geyer website development: both frontend (user portal) and backend (interaction with smart contract)

Advanced considerations for future

  • TBD

References:

I’d love to be able to throw liquidity in without risking my precious NKNs. If Geyser can help cover any losses (or simply guarantee profits) from doing so, I think it’d be a great move. Granted however, I do not have the technical knowledge to full understand the implementation or consequences of a geyser. I’d just like to help the liquidity without costing myself while doing it XD

I don’t think NKN should cater to secondary decentralised markets, I see no merit beyond short term price inflation. Also I think the work required to implement this, would be wasted.

You are basically speculating here with development resources on dex swaps, which future might be dubious.

Very true. Instead of geyser, would it simply be more valuable to list NKN on other Dex etc, and just spread the liquidity over other channels? shrug I am unsure. As I said in first comment. I’d love to add to the pools and know I’m covered, but it is a fairly short-sighted move in the scheme of things, I agree.

NKN is a project in the larger DLT space with tokens being the primary driver of the NKN network. I urge the team and supporters to consider carefully the titanic shift occurring in the space today - namely Defi and NFT’s. Maybe more importantly, how mainstream this is becoming both on a retail and corporate level. This isn’t just a passing trend geared to solely pump speculative asset prices … it may appear that way on the surface, but underlying it is a fundamental paradigm shift that has far reaching consequences on our future.

It should be obvious to us that the success of any project is dependent on a number of factors (including luck), it doesn’t succeed solely on the merit of its technology. I think we can agree that part of that success is almost certainly widespread adoption. If we peer back in history, we will find a graveyard of brilliant technologies that “never made it” because they were unable to captivate the minds of a broader audience. To ignore that reality and not consider the social aspect of this endeavor would be a disservice to the project and the enthusiasts supporting it. Just because we build it, doesn’t mean they’ll come - complacency destroys.

So I ask… why would we be, at all, against incentivizing enthusiasts (liquidity providers, content creators, artists, academics, etc) to draw more eyes to the project and embark on this crusade that is part of a much broader social narrative? How much more excited would people be if they discovered a project and saw a future with tools that free you like Surge that they can use now (what an amazing project!) The accessibility, availability and incentive to on-ramp users is paramount to the success of NKN. Let’s dream of a token value beyond just mundane utility (gas) and numbers.

I arrived at NKN after reading Stephen Wolframs book A New Kind of Science. I was fascinated to see that the NKN team was pursuing an application of those ideas. I know there is a bit of a purist streak in the NKN crowd and I’m certainly not an advocate for the lambo bros or rampant speculators, but I do get deeply discouraged when I see that nMobile has a total review count of eight on the App Store (my guess is Tom is one of them). Why bother doing it at all if that is the entirety of our ambitions? Share that fascinating techology with more people. I suggest we be a bit more unorthodox and not so timid about ushering in the attention of a much broader audience. What I know for certain is no liquidity = no adoption. period. You can’t utilize what you don’t have access to or aren’t aware of (irrelevant) and that is broadly the case with NKN. It is almost comical guiding people on the use of DEX’s with names like Uniswap, Sushiswap and PancakeSwap, but I challenge anyone to go gauge their metrics and the incredible speed of adoption and evolution and see if they are still laughing.

Going back to the geyser proposal - it’s a good start. I don’t think impermanent loss is avoidable and it shouldn’t be, but we should be generous and highly encourage enthusiasts to get involved… especially the ones putting themselves at the highest risk early on. (I was an excited early node operator and eventually stopped because it was just a terrible financial decision). To address impermanent loss I’d take a peek at Thorchain and how they address IL with their RUNE token.

As for adoption, in addition to having a large network of nodes, we should start paying more attention to other metrics like the acquisition of users, useful network transaction volume and [potentially] NanoPay and other financial metrics (e.g. staking, pools, liquidity, swaps, etc). With that I am confident NKN will have a much more formidable position in the market.

Apologies for the long post. Still a big fan and supporter.

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Thanks @Mutsi @Tom and @joseph for the thoughtful discussions. Let me add a few more points why this might help NKN in general:

  • Recently many exchanges starts to restrict NKN trading for US customer, e.g. Binance and Huobi. Other than using VPN, DEX like uniswap might be the only way for US customers. But there is a chicken and egg problem, the less liquidity the DEX has, the less people want to use since a single large order will mess up with the pricing. Therefore, encouraging more liquidity providers to the DEXs will help US customers for sure.

  • I have tried to be a NKN liquidity providers on DEX, and it is not that much a high risk if the price stays stable. If price goes up, LP can actually make good money. But if price go down, there is impermanent loss proportional to the downward swing. Therefore, it is advisable to give additional incentives for the community LPs.

  • DEX and DeFi have its hypes, but also have its proper use cases. In NKN’s context, at least a few things coms into mind. One is to hedge against the token price fluctuation, for services like nConnect where users pay fiat while miners receive NKN. It is similar to traditional foreign exchange rate hedging, and there are plenty of DeFi tools that can achieve similar effects. This saves the NKN team or NKN app developers the hassle of developing their own hedging solution. So we can leverage the innovations in DeFi, while focus on the unique networking features of NKN.

Again thanks for your feedbacks, and let’s keep the discussion open.

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Having presence with enough liquidity in at least 1 DEX is a good idea as some users blocked in certain countries can now buy the token using the DEX.

Let’s focus in Uniswap as it’s currently the most popular DEX.

I vote for this to pass.

Liquidity is something that comes naturally to popular coins. If more effort is taken to promote NKN to people (as opposed to corporations) then it will become more popular and liquidity will improve on its own.

Low liquidity is an indicator that more work needs to be done in bringing awareness of NKN to the general public. This proposal to me feels like you’re trying to solve a symptom of the problem (low liquidity) rather than the problem itself (low popularity).

It would be better if our time and energy was spent on improving NKN’s core technologies that will help NKN over the long term. I think that Geyser helps Defi coins gain popularity more than NKN.

There are more interesting ways for NKN to be a part of the Defi hype train. If there was a way to use NKN as a host for all the transactions for example, making it truly decentralized rather than being dependent on centralized servers, that would build excitement for NKN.