Dear Valkyrie community, the Astroport contributors are pleased to present this proposal to redirect VKR-UST VKR rewards to Astroport.
Background and key concepts
Astroport is a next-generation AMM built on Terra expected to launch in December 2021.
Scheduled emissions of the ASTRO governance token will be directed to a limited number of Astroport liquidity pools as determined by Astroport governance. VKR-UST is set to be in the initial batch of pools to receive recurring ASTRO rewards.
As part of the Astroport launch there will be a “lockdrop” where users can move LP tokens from Terraswap to Astroport and “lock” it for a predetermined period of time in exchange for a “drop” or distribution of ASTRO tokens. However, not all Terraswap pairs will qualify for the lockdrop–the purpose of this proposal is to ensure that the VKR-UST Terraswap liquidity pool will be supported.
ASTRO Generators let LPs claim governance tokens from two protocols at the same time (specifically ASTRO + a third-party token such as VKR).
Advantages of moving to Astroport
Astroport rewarding VKR-UST Astroport liquidity with ASTRO on an ongoing basis means Valkyrie users will have to choose between staking in Terraswap and earning VKR rewards, or staking in Astroport and earning ASTRO. However if Valkyrie chooses to shift VKR rewards to Astroport instead of Terraswap then VKR-UST stakers can collect both the ASTRO and VKR rewards thanks to the dual-token distribution mechanism of the Astroport generator.
Continuing VKR rewards for Terraswap liquidity while the same LPs could be earning ASTRO on Astroport will also have the effect of splitting liquidity between the two AMMs. Fragmenting liquidity like this is undesirable as it makes large trades less capital efficient and allows value to be lost to arbitrageurs. Concentrating liquidity in a single pool would avoid these issues.
We expect that Astroport will become the home of deep liquidity for all the main Terra assets due to ASTRO rewards and the flexible pool types such as stableswap invariant pools and concentrated liquidity pools which aren’t available elsewhere. Deep liquidity also for VKR will also allow capital efficient trades to and from VKR from a wide variety of Terra assets, which is beneficial to VKR traders.
For all these reasons, shifting VKR rewards to the VKR-UST pools on Astroport is the best decision for the Valkyrie community.
Why move now rather than later
The Valkyrie community may prefer to wait until after Astroport has launched and matured and then make a decision on moving rewards over.
Astroport would like to include VKR-UST in the initial lockdrop, allowing stakers to earn a significant one-time ASTRO reward for locking their existing Terraswap LP tokens in Astroport for a given amount of time. However, for the reasons above this only makes sense for Astroport if there’s a commitment from the Valkyrie community to migrate rewards. That way, upon Astroport’s launch, VKR-UST stakers will immediately benefit from dual ASTRO/UST rewards (in addition to the lockdrop rewards) rather than needing to sacrifice one to get the other.
The Astroport lockdrop will distribute 7.5% of the ASTRO supply (75,000,000 ASTRO). If this proposal is positively received, VKR-UST will be allocated 3% of the lockdrop (2,250,000 ASTRO).
In addition to the lockdrop there will also be emissions of the ASTRO governance token directed towards the VKR-UST pair, though these have yet to be finalised.
Summary and next steps
We have made this proposal to gauge the interest of the Valkyrie community as to whether a migration to Astroport would make sense now or later.
If the Valkyrie community chooses to move rewards right away and participate in the Astroport lockdrop, VKR-UST stakers will be able to earn significant ASTRO rewards in addition to dual VKR/ASTRO rewards post launch. If the Valkyrie community choses to delay and reconsider later based on Astroport’s launch and success in attracting liquidity, then there will be no ASTRO lockdrop rewards available to VKR-UST LPs and no dual rewards available post-launch.
Following the Astroport launch there will be the first governance poll:
- Move over future VKR-UST LP rewards from Terraswap to Astroport
After some days or weeks once liquidity is sufficient a second poll will be conducted:
- Route buybacks to the Astroport pools; alter the web app to use Astroport pools
We invite open discussion in the comments below.