Today, August 7, 00:00 BST marks the end of our 30-day Liquidity Mining experiment. Based on our learnings of the last couple of weeks we’re announcing a revised structure for this month, ending on September 4, 00:00 BST.
Liquidity Providers (LPs) will share a 400k PLR reward pool funded by the Pillar Foundation on a pro-rata basis.
In order to be eligible for rewards, LP tokens must be staked on the PLR Rewards dashboard.
The initial goals were:
We’re excited that the overall outcome met our goals: The liquidity pool now has over 15 million PLR ($830,000 USD) - compared to 300,000 PLR ($8417 USD) before the program - with over 500,000 PLR being rewarded to LPs. Other highlights included having the highest daily volume of PLR trading ($462,746) in over 2 years.
The original 30-day plan was for the Pillar Foundation to reward up to 250,000 PLR to LPs whose PLR balance decreased due to a net outflow of tokens. Anticipating a rise in the token price and a relatively stable Ethereum price, a decrease in a LP’s PLR balance could result in less value at the end of the period, versus holding the same amount of PLR and ETH outside of the liquidity pool (more commonly known as impermanent loss).
Midway through the first week of the program, token price had increased by about 50%. This meant that the LPs had less PLR in their accounts (although they had more ETH), and if this trend continued throughout the month, some LPs could potentially have less value at the end of the period compared to holding the assets directly.
Pillar decided to reduce any risk uncertainty within the LP group by announcing a one-to-one match of PLR reward tokens to the net token outflow of each LP at the end of the first week. Each LP would end the week with at least the same amount of PLR and likely more ETH. This resulted in a week 1 rewards distribution of approximately 220,000 PLR.
For the second week of the program, rather than continue with the original plan of allocating up to 250,000 PLR rewards at the end of the month, the Pillar Foundation decided to provide another 1:1 match on the net token outflow of LPs.
However, at the end of week 2, no LP had a net token outflow. Instead of not rewarding any tokens, we decided to allocate 100,000 PLR to all LPs based on their share of the liquidity pool. These rewards covered impermanent loss and rewarded LPs who held strong as ETH outperformed PLR. This structure is also more aligned with the majority of LP programs in the space.
Starting in week 3, we transitioned to a fixed allocation of 100,000 PLR per week. We realized that issuing rewards based on the change of PLR price (which causes impermanent loss) only rewards LPs as the token price appreciates. Instead, we wanted to ensure LPs were properly rewarded regardless of token price. This is why we introduced a new structure and migration to an automated LP dashboard. Reward tokens are now automatically calculated at the end of each period, and allocated proportionally to the total LP share tokens staked on the rewards dashboard.
The fixed allocation shared pro-rata to LP’s staking via the rewards dashboard continued through week 4 and will continue to be the primary mechanism through which PLR is allocated for liquidity incentives in the coming weeks.
While this first trial was solely for Uniswap V2, we’re now actively exploring other automated market makers along with different pools and weightings to provide flexibility to LPs of all shapes and sizes. We’re looking for solutions to offer additional incentives for LPs who remain in the pools for a longer period of time.
As we roll out the Liquidity Mining incentive program, we’re also working to integrate this process entirely into the Pillar mobile app to provide a simple, unique, and native experience for our token holders.
At the same time, we’re discussing partnership opportunities with projects that are currently running their Liquidity Mining programs so we can supercharge our efforts. One possible solution we’re exploring is to offer double token rewards (in PLR and our partners’ token) for everyone adding liquidity to their pool using the Pillar wallet.
Lastly, the PLR Liquidity Mining program is one of the major initiatives we’re spearheading to decentralize governance of the Pillar Smart Wallet: We’re currently in the final stages of formulating the governance and tokenomics mechanisms of the Pillar DAO. While the PLR Liquidity Mining program is currently being funded entirely by the Pillar Foundation, we will transition this to the Community DAO once formal, on-chain governance is active. We’re looking forward to collaborating with PLR token holders to make this happen.
If you have any questions or thoughts on our Liquidity Mining program, be sure to check out our Discord - our community is discussing all this and more there!