Hi Hubble Community, Dual Finance would like to share the following proposal to kick off a healthy discussion around token incentive structures for liquidity mining. We preface this proposal by highlighting that any of the below parameters in bold are configurable and understand the community may want to pilot the changes before finding its end state. A highly recommended walkthrough of the benefits of Staking Options can be found here: Sustainable Token Incentives. Token incentives are the central force… | by Dual Finance | Jun, 2022 | Medium
About us: Dual Finance is designing the next generation of sustainable yield products to be the Base-Layer Incentivization Protocol for Web3. Our breakthrough token incentive mechanism, called Staking Options (SOs) aligns incentives of participants by granting those who provide liquidity or participate in governance, the right, but not the obligation to purchase tokens for a future price. No more token rewards, instead token option rewards.
Dual Finance proposes the Hubble community allocate part of the Liquidity token allocation to be issued in option form using our Staking Options Studio (SOS). The goal of this overhaul of incentives is to revitalize the Hubble token economy and disrupt the negative cycle of inflationary incentives. The initial Liquidity token allocation will be split into SOs for incentivizing Mercurial USDH-3pool LPs and Orca HBB/USDH LPs.
Currently Mercurial USDH-3pool LPs earn ~770 HBB/day which with HBB trading at $0.25 is worth ~$195/day. Additionally, Orca HBB/USDH LPs earn ~357 HBB/per day which is worth ~$90/day. The proposed implementation of both SOs will keep the same effective APY and present value per day to LPs, but grant them additional upside leverage. The SOs will be 150 day expirations of 20% OTM (out-of-the-money) strikes, rolling every 5 days. Users will accrue SOs in 2.4x the proportion to the time and quantity they staked, compared to the fixed emissions scheme.
Effectively LPs will earn per day for Mercurial USDH-3pool 1,848x and for Orca HBB/USDH 857x, a 150 day call option to buy HBB 20% above the current spot price. When pricing the equivalent value of those options using recent realized volatility of 185%, the rewards have the same present value of $195 & $90 per pool and therefore the same effective APY.
Given the reward is equivalent in present value terms at the start, let’s compare the payoff of LPs with Staking Options vs. Fixed Token Emissions at expiration.
LPs with Staking Options gain significantly more upside leverage, in fact at $1.25 its an 82% increase in the profit LP would experience. Critically important here is that Staking Options do not release any HBB supply into the market if the price is below $0.30, whereas Fixed Emissions will release the same supply as price goes to zero.
Users can view and exercise these SOs at anytime by going to DUAL and paying the exercise amount (strike price * quantity) in USDH. All SO exercise proceeds, less a 3.5% fee, go to the Hubble treasury for the community to grow the Hubble ecosystem. For being an early partner and user of Staking Options, Dual Finance will issue a grant to the Hubble treasury of 5M DUAL 1 year SOs with a strike of the greater of $0.25 & 100% OTM.
The benefits of Staking Options are clear to us but the difficulty ahead will be to educate communities and provide the tools and liquidity so any skeptics can liquidate their SOs immediately for cash. Please comment with any questions or concerns. We look forward to addressing your most critical feedback and hope this is the beginning of a long and fruitful partnership.
To learn more about Dual Finance’s mission to re-incentivize crypto and bootstrap token options markets, follow us on Twitter (https://twitter.com/DualFinance), join the Discord (discord.gg/P3uH9AvEp5), and review our medium articles (Dual Finance – Medium). Our Dual Investment Pools (DIPs) to earn sustainable, customized yield are also live for testing at https://beta.dual.finance/ !This text will be hidden