Increasing the swap fees of LST/LSD pools that cut off bribery distribution

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Abstract:
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.

Motivation:
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.

Example:
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%.

Specification:

  1. Implement a dynamic mechanism to identify protocols that have stopped bribery distribution.
  2. For protocols falling under the above category, increase the swap commission rate for their pools on Wombat Exchange.
  3. The increased swap commission rate should be calculated in a way that it provides sufficient incentives for liquidity providers without excessively burdening users.

Next Steps:

  • 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.
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Hello everyone
Having reviewed the proposal regarding adjustments for our liquidity providers, I wanted to share some thoughts. First and foremost, I commend the effort and initiative behind this move. It’s this kind of proactive approach that strengthens our community.

However, let’s not forget that Wombat is built on a StableSwap model. Bribes have always been our main lever for attracting liquidity, creating an attractive ecosystem for protocols and offering the best conditions to our users.

If we’re leaning towards increasing the swap fees, I’m concerned we might drift away from Wombat’s core essence. Instead, why not bolster what’s already working well for us? Long-term partnerships or new incentive mechanisms could be relevant solutions.

As an active member of this community, I believe it’s crucial to stay true to our model while still innovating. Let’s keep in mind what our strengths are while aiming to better ourselves.

I eagerly await your feedback and am excited to collaborate for Wombat’s future.

Suplife

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Hi !

First of all, thank you for your contribution and the added value your idea brings.

Even though I salute your initiative, I don’t think it’s the right path for Wombat Ecosystem for many reasons

Please, let’s not forget that we are operating into a bribery market.
That said, setting punitive rules is a not a wise marketing strategy.
In my humble opinion, we have more to bring to the table that can lead to new and more elaborated partnerships based on our current mechanism.

I would be glad to hear your feedback
NoraChocolat

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