Incentivization of aqua token and possible synergy with element.fi

firstly, I would like to applaud blockzero for developing a new strategy to reimagine yield optimization. Would be interesting to see more math behind the model from the dev team so as to allow citizens to speculate on TVL : LP owned by protocol ratios that would be profitable for aqua. As much as I like the sound of partial or full collateralization of aqua by fees from the protocol it would be nice to see some form of deflationary measures incentivizing token holders as well.

However, in the medium I saw a missed opportunity and that is the possession of liquidity mining rewards from AMM’s. the protocol intends to keep fees generated from trading but what does it plan to do with the earned uni or sushi?

also an important question: how does aquafi plan to handle liquidation events on uniswap v3 pools?

finally, I would strongly suggest that some sort of incentive is needed for aqua token holders. there needs to be an incentive to buy and hold the native token from the launch date. I would suggest especially in the current crab market where market participants are likely to consolidate positions into large caps, and recoup losses incurred from trading/holding alts. I would also suggest that the large unlock from xio lp providers will create some sell pressure unless there is an immediate incentive to hold the token to offset this early actor risk. This could look like an incentivized aqua/eth or aqua/xio lp pools, it could look like bonus yield for aqua holders, it could look like a single stake aqua pool. but there needs to be some sort of reward vector that offsets the massive risk of holding/buying a newly launched yield token

secondly element.fi is a derivatives platform that allows users to deposit yield bearing positions from yearn into a fixed term and mints for the user a yield and principle token, the yield token represents the yield that the position will acquire over the time of the term and is redeemable for this value at the end and the principle token is redeemable for the initial deposit.

It would seem to me that a synergy between these two protocols could allow for further capital efficiency for users, which could drive TVL

3 Likes

As it stands at the moment we have no plans for the earned UNI or Sushi. This is something that could be introduced as an update in the future if we wanted this functionality. I see no harm in adding this in but it would be up to the community via governance vote.

As it stands at the moment, the AquaFi protocol would collect the fees from NFT positions as ERC20 tokens. This means when the user un-stakes their NFT position, the protocol would collect the fees and receive two ERC20 tokens that made up the NFT position’s fees. These fees will be dropped into the AquaFi index fund where they can be redeemed by using Aqua tokens (initially).

The goal with AquaFi is to have permanently locked liquidity within the protocol. I’d like to see an upgrade to the protocol/index fund whereby we automatically add back liquidity to earn fees perpetually. The funds in this index fund will be either:

  1. Redeemable by burning Aqua
  2. Removed by the Blockzero council via Timelock for upgrades

Now that I have this explanation out of the way I will get to your question.

I assume when you liquidation event, you mean when the NFT position falls outside the tick values and therefore there is only one ERC20 token left in the position?

If so, this does not make much of a difference to AquaFi due to the explanation above. If you meant from a user unstaking POV, the fees generated will still be collected.

The premium rate for the Aqua/Weth pool will be very high to incentivise. If you have other suggestions please feel free to drop them here.

3 Likes