[Temperature Check] Allocate $BSN to Incentivize kETH/WETH LP Pool via Teahouse Finance’s dApp

Proposal Discussion
1

Proposal Discussion


ABOUT TEAHOUSE FINANCE (Website｜Twitter｜Defillama)

Teahouse Finance is a decentralized financial (DeFi) platform dedicated to secure and flexible asset management. With a focus on enhancing “concentrated liquidity provision,” Teahouse offers a range of innovative strategies that optimize LP ranges for maximum capital efficiency.

Teahouse’s Permissionless Vault offers users several dual asset pairs that run on our optimized liquidity provision strategies for earning yield. It operates completely permissionlessly, enabling users to engage in strategies while maintaining full control over their assets in a self-custodial manner. (More info)

CONTEXT

After a quick chat with @derek from the Blockswap team, it became evident that a kETH/WETH liquidity pool would be an interest to users and a way to increase kETH trading volume and elevate overall project visibility.

PROPOSAL

Teahouse proposes the creation of a kETH/WETH LP Pool via Teahouse Finance’s dApp (deployed on Uniswap), and the DAO allocates $BSN to incentivize this pool.

Currently, users can only mint kETH through the LST Optimizer dApp and sometimes wait up to several days when they’re redeeming kETH back to ETH(or ETH equivalent) using the LST Optimizer dApp due to the dApp’s lockup period.

Considering this, Teahouse proposes the creation of a kETH/WETH paired LP pool on Uniswap to:

  • Elevate Accessibility: Users will be able to acquire kETH directly from the kETH/WETH paired pool without needing to mint kETH with the required LSTs and LSDs, increasing the number of kETH holders.
  • Enhance User Experience: The new LP pool on Uniswap allows users to bypass the long waiting period when depositing/withdrawing kETH, providing a more convenient and appealing trading experience.
  • Boost Trading Volume: Introducing a kETH/WETH LP pool on Uniswap will attract more users to engage in trading activities, resulting in increased trading volume.
  • Improve Liquidity: Providing more convenience to users encourages them to provide more liquidity to the LP pool, enhancing overall liquidity and leading to a more stable and efficient market.

By further incentivizing users to provide more liquidity to the LP pool, Teahouse aims to attract more users to deposit liquidity, thereby increasing pool depth, reducing slippage, and ultimately providing a better user experience.

IMPLEMENTATION

As accurately defining the liquidity Teahouse could contribute to the new pool and determining the adequate amount of $BSN incentive required may present challenges, we propose the following:

  • Teahouse creates and launches a kETH/WETH LP Pool deployed on Uniswap V3 via Teahouse Finance’s dApp.
  • Teahouse monitors the Uniswap V3 trading volume and monthly APR of the pool after launch to evaluate its competitiveness.
  • One month after launch, Teahouse can evaluate the performance of the pool in comparison to ETH pools on DefiLlama. Using this information, we can determine the amount of BSN required to remain competitive in the ETH LSD market.

Example

One month after launch, the back-test of the pool’s APR stands at 2%, whereas the wstETH/WETH pool on Uniswap V3 reports an APR of 4%. Teahouse will calculate the necessary amount of rewards that is required to elevate the kETH/WETH pair’s APR to 4%, thereby enabling it to compete effectively with the wstETH/WETH pool.

  • Teahouse Finance then requests the calculated amount of $BSN from the DAO to fund the incentive program for the kETH/WETH LP pool. The grant will be utilized as an incentive to users who contribute liquidity to the kETH/WETH onTeahouse LP Pool on Uniswap, encouraging participation and driving growth. $BSN tokens as rewards to LP providers based on their contributions.


This approach adopts a relatively objective perspective for assessing the amount of $BSN incentive while also considering the trading volume of the kETH/WETH pair on Uniswap V3.
A crucial aspect of Teahouse’s approach is to assess rewards in a way that enhances kETH’s competitiveness among other ETH LSD/LSDT pools.

Any feedback is welcome, and we would be happy to discuss more.

2

Thank you for the proposal. Are you able to estimate how much we would need to incentivize the pool with BSN to get enough liquidity per month?

1 Like
3

Hi @tokenswolf. Thanks for the replied.

It depends on the trading volume of the kETH/WETH pools on Uniswap. After a month or two of launching, we can back-test the pool to determine the APR of the pools using the Teahouse strategy.

Let’s assume it’s 2%, while the rETH/WETH pools are yielding 4%. In order to increase the APR of the kETH/WETH pools to 4%, we will conduct a number of $BSN token transactions at market price to boost the pool’s APR.

This approach adopts a relatively objective perspective for assessing the amount of $BSN incentive while also considering the trading volume of the kETH/WETH pair on Uniswap V3.
A crucial aspect of Teahouse’s approach is to assess rewards in a way that enhances kETH’s competitiveness among other ETH LSD/LSDT pools.

Feel free to let me know if you have any quetsions.