The Second Incentive cycle on Theta Mainnet started on January 7, 2021. It will end on February 5, 2022.
As the second cycle comes to an end, we will review the performance of the incentivized pairs and determine the reallocation of volt for the third cycle from February 6, 2022 to March 7, 2022.
Evaluation of Incentivized Liquidity Pairs:
We could define a few of the critical parameters that will help us evaluate the performance of the liquidity pairs on Voltswap;
- Transaction Volume
- This is by far the most important parameter for evaluation since the goal of the product is to generate free cash flows from the operations and be self-sustainable
- Transaction volume is also largely dependent on market conditions and token specific events, to smoothen the effect of these variations, we have considered both Median as well as Average volume
- Total Value Locked (TVL)
- This is a critical parameter to gauge the adoption of the DEX. Higher TVL is typically correlated with higher adoption and enables bigger buys on the DEX without too high a price impact
- Turnover of the pair
- It can be defined as the ratio of Volume by TVL
- Higher volume for a specific TVL means that the pair has a higher utilization of assets and the LPs are generating higher revenues due to the turnover.
- The overall role of a pair is a factor of both the TVL it adds to the Voltswap as well as the transaction volume of the pair.
- However, the intent of TVL is to primarily aid transactions and lower slippages, we will try to weigh transaction volume at 65% and TVL at 35% to gauge an overall role of a pair in the growth of the ecosystem
- We will also try to look at the turnover (average Volume by TVL) to determine the capital efficiency of the pairs
Based on the above parameter, lets us look at the statistics on Theta Mainnet
- Current Volt allocation to the Incentivized Pairs
- Daily transaction volume of Incentivized Pairs
- Liquidity for Incentivized Pairs
- Transaction Volumes for Incentivized Pairs - Since transaction volumes do depend on market conditions and token specific events, a smoothening effect is applied to add higher weights to immediate past
Column 10,11,12 are average volumes
Column 13,14,15 are median volumes
Column 18 is the overall average volume of each pair since the second cycle smoothened for periods (7-day, 30-day, Total Vol) and method (average volume and median volume). Pure Average volume would have the bias of outlier days where there is very high transaction volume or very low transaction volume
- Evaluation of Pairs based on overall role in DEX Growth (65% weight to transaction volume and 35% weight to TVL)
- TFUEL-BUSD.bsc has had substantial liquidity added to the pool with an increase in the transaction volume, making it the best performing pair in this cycle.
- TFUEL-VOLT pair has similar token quantities but lower value than in December. The pool is still performing well in terms of transaction volume.
- TFUEL-BNB.bsc has much higher liquidity than the previous cycle. However, the same effect has not been observed on the transaction volume which is still muted.
- BUSD.bsc-USDC.eth and TFUEL-WETH.eth have a small share of the overall volume at ~5% each
- BUSD.bsc-VOLT liquidity is hovering around 150K to 200K range for the second consecutive cycle even as it had one of the highest daily volt allocation
- Turnover (Volume by TVL) for Incentivized Pairs
The turnover data presents another perspective on the insights presented earlier. TFUEL-VOLT has lower turnover even though it has high transaction volume due to the higher liquidity
- Volt Earnings per 1000 USD of Liquidity provided
- BUSD.bsc-VOLT, TFUEL-MTRG, and TFUEL-USDC.eth provide the most earning potential per $1000 USD of liquidity provided through a combination of transaction fees and Volt rewards
- In both BUSD.bsc-VOLT and TFUEL-MTRG, higher earning potential across 2 last cycles has not resulted in increase in liquidity provided
Based on the above insights, the volt allocation proposed for the third cycle on Theta Mainnet are as below;
The Volt Earnings per 1000 USD of Liquidity provided based on new Volt allocation is as below;
- Assessing that BUSD.bsc-VOLT has not received traction after the first 2 cycles, the volt emission is reduced. Even so, the pair still remains the highest Volt earnings per 1000 USD of liquidity provided. We expected users to provide more liquidity and deepen the pool further
- BUSD.bsc-USDC.eth has the lowest volt earnings. This is due to 2 reasons – Lower transaction volumes and no impermanent loss. The emission is considerably reduced in line with overall market APYs for stablecoin pairs.
- TFUEL-WETH.eth and TFUEL-MTRG allocations are reduced due to much lower transaction volumes. The volt earnings are still equivalent to average earnings.
- TFUEL-BNB.bsc emission is increased slightly due to the substantial increase in liquidity added to the pool. We can evaluate in this cycle if the liquidity translates to transaction volume like TFUEL-BUSD.bsc
- TFUEL-TDROP and TDROP-VOLT have been allocated substantial emissions at 10000 Volt/day and 7000 Volt/day respectively.
- TFUEL-TDROP pair has an additional allocation of 1.5 million TDROP over the next 3 months
- The estimated earnings are at Volt price of $0.17 USD and Voltswap valuation of $2.7 million USD. The earning potential significantly increases with increased Volt price.
Higher liquidity provision for Volt pools is the key reinforcement driver that will enable increased volt price as well as lower price impacts for users.