Liquidity reward on SuhiSwap (Non-permanent losses of vega tokens)

Hello everyone!
I decided to come out with a proposal to change the remuneration from vega for the supply of liquidity to SushiSwap.

I propose to revise the rewards to users for providing liquidity to Sushiswap pools in such a way that this reward compensates or more compensates for non-permanent losses caused by the increase in the value of the vega token. At least for the planned 10 weeks.

I discussed this topic in the general telegram chat. Maybe the team saw her.

Description of the problem.
Yesterday I created a liquidity pool on Sushiswap. 50/50 VEGA and USDC. The cost of the vega token was $ 17.
And just I was lucky and the value of the token began to grow , this allowed me to clearly understand what will happen to the pool.
Due to the non-permanent losses inherent in dex, the number of vega tokens in my pool began to decrease, and USD grew accordingly.
If we are talking about the long-term supply of liquidity, then this is extremely profitable. The more the vega token is used, the higher its value will be. Accordingly, in the long term, the supply of liquidity is unprofitable for the user.

But if I understand correctly, liquidity is important to the team both in the short and long term.

Therefore, if it is possible, I propose to compensate for the non-permanent losses associated with the growth of the exchange rate with awards from VEGA.
The current reward offered in this article does not cover the non-permanent losses associated with the growth of the exchange rate.

Perhaps this proposal is too bold, but I think that it is necessary to raise this issue, because it is directly related to the development of the project, especially at the first stage.

4 Likes

To be completely honest, the rewards are fair in my view, and sure if it goes up on price your are selling off at an average rate, but it’s a good thing still, since your overall value increase.

But not sure what you expect to be done by this though, there is a finite number of tokens and in general they should probably be used for other things long-term than be added to the rewa rewards.
That’s my view though.

1 Like

Hi @Alexey3614, welcome to the Vega community and thanks for the feedback!

Ultimately, what you’re asking for is not really in the scope of the liquidity reward scheme. Liquidity provison is a form of trading and that’s inherently risky, and though there are plenty of LPs and market makers who do it profitably, it’s not guaranteed.

These incentives are designed to attract liquidity to dexs and support the DeFi ecosystem as well as to increase awareness of the existence of the Sushi pools. It’s possible that they continue the programme for a short while after the 12 weeks is up, but the rewards were never intended to replace due diligence as an LP and ongoing maintenance of your liquidity provision.

Hopefully being an LP on Sushi works out for you, especially with the fees and rewards :smiley_cat:

Barney

1 Like