This proposal aims to address the issue of liquidity providers facing reduced earnings when protocols cease bribery distribution on Wombat Exchange. Currently, some protocols attract votes by offering bribes, resulting in token emissions to their pools. This attracts investments to the pools and rewards users based on the liquidity they provide. However, when protocols stop offering bribes, users stop voting, leading to a halt in token emissions for the pools. As a result, liquidity providers only earn minimal rewards from swap transactions within these pools.
The motivation behind this proposal is to sustain incentives for liquidity providers even after protocols discontinue bribery. By increasing the swap commission rate for protocols that have ceased bribery, we can ensure that liquidity providers continue to earn rewards for providing liquidity, thereby maintaining a healthy ecosystem for these pools.
Furthermore, this update can make the bribe distribution plans of the relevant protocols more stable.
Currently, the swap fee rates for Lido Finance’s asset are as follows:
Wombat Exchange: wstETH > ETH (Arbitrum) Swap fee: 0.01%.
Camelot Exchange: wstETH > ETH (Arbitrum) Swap fee: 0.04%.
- Implement a dynamic mechanism to identify protocols that have stopped bribery distribution.
- For protocols falling under the above category, increase the swap commission rate for their pools on Wombat Exchange.
- The increased swap commission rate should be calculated in a way that it provides sufficient incentives for liquidity providers without excessively burdening users.
- Discuss and gather feedback from the LST/LSD partners and our community.
- Collaborate with relevant stakeholders to finalize the implementation details.
- Test the changes in a controlled environment to ensure seamless integration.
- Deploy the updated mechanism to Wombat Exchange once approved.