Transitioning to a SAUCE-Centric Incentive Structure

Off-Topic
1

Title: Transitioning to a SAUCE-Centric Incentive Structure on SaucerSwap

Author(s): FistBumpJoe (open to community co-sponsors)

Submission Date: October 7, 2024

Summary:

Hey everyone,

I’ve been mulling over some ideas to enhance the value of SAUCE and strengthen our community. I’d like to propose a gradual shift in our incentive structure: over 10 epochs (about 140 days), we transition half of the incentives currently allocated to HBAR-based pools to SAUCE-based pools for the same HTS token pairings (both V1 and V2 incentives). The goal is to make SAUCE the main asset in our incentivized pools.

After these 10 epochs, we can all reassess the situation together. Depending on how things go—with SAUCE’s price, platform usage, and your feedback—we might decide to:

• Continue with another 10 epochs to fully transition to a SAUCE-based economy.

• Reverse course if it’s not working out as hoped.

• Keep a balanced approach with incentives split between HBAR and SAUCE pools.

I’m genuinely excited about the potential here, but I also recognize there are unknowns. That’s why I’m bringing this to you all in the off-topic section first—to get your honest thoughts and feedback. The more voices we have in this discussion, the better our decision will be.

Abstract:

Currently, a significant portion of our incentives goes to HBAR-based liquidity pools. While this has served us well, I believe shifting half of these incentives to SAUCE-based pools could bring substantial benefits to our community.

By making SAUCE the main asset in our incentivized pools, we align with the “fat app” theory, which suggests that individual applications (like SaucerSwap) can accrue value independently of their underlying layer-1 tokens (like HBAR). This shift could enhance value capture for SAUCE holders, promoting price appreciation and strengthening our ecosystem.

I’ve put together a spreadsheet outlining how this 10-epoch transition might look for the V1 portion of rewards. You can check it out here (it might help to zoom out when viewing): V1 Transition Spreadsheet.

I haven’t created a V2 spreadsheet yet, but if we decide to move forward, I’ll prepare one following similar lines for a full proposal and DAO election.

Motivation:

The main idea is to empower SAUCE by making it the central asset in our incentivized pools. Here’s why I think this could be a game-changer:

• Value Capture: By focusing incentives on SAUCE-based pools, we can enhance the intrinsic value of SAUCE. This means more potential for price appreciation, directly benefiting SAUCE holders.

• “Fat App” Alignment: Embracing the “fat app” theory allows us to grow independently of HBAR’s market fluctuations. SAUCE can stand on its own merits, which could attract more interest and investment.

• Community Growth: A SAUCE-centric economy could strengthen our community’s identity and cohesion, making SaucerSwap an even more vibrant platform.

• Flexibility: Starting with a 10-epoch transition gives us room to monitor, learn, and adjust. We don’t have to commit to a full overhaul right away.

Specification & Rationale:

Specification:

• Gradual Transition: Over 10 epochs (~140 days), we’ll shift half of the incentives from HBAR-based pools to SAUCE-based pools for the same token pairings.

• Strengthened Pools: To maintain HBAR liquidity, the HBAR/SAUCE pool incentives will be enhanced, along with the USDC/SAUCE pools.

• Weakened Pools: HBAR/USDC and HBAR/HBARX pool incentives will be reduced to pay for the higher incentives on the SAUCE pools mentioned above.

• Monitoring and Reassessment: After the 10 epochs, we’ll evaluate the impact on SAUCE’s price, liquidity, and overall platform usage.

• Decision Point: Based on our observations and your feedback, we’ll decide whether to:

• Proceed with another 10 epochs to complete the transition.

• Reverse the changes if they’re not yielding the desired results.

• Maintain a 50/50 split if that seems optimal.

Rationale:

• Empowering SAUCE: This shift could lead to better value capture for SAUCE, aligning incentives with our community’s interests.

• Risk Management: A phased approach allows us to mitigate risks. We can adjust or halt the transition if unforeseen issues arise.

• Community Engagement: By involving everyone in the reassessment after 10 epochs, we ensure that the community’s voice guides our path forward.

Benefits (Pros):

  1. Enhanced Value for SAUCE Holders:

• Potential for increased SAUCE price appreciation.

• Greater alignment between platform success and token value.

  1. Alignment with “Fat App” Theory:

• Allows SAUCE to accrue value independently of HBAR.

• Strengthens SaucerSwap’s position as a leading application in the ecosystem.

  1. Flexibility and Control:

• Phased transition provides opportunities to reassess and adapt.

• Community feedback can shape the final outcome.

  1. Strengthened SAUCE Economy:

• Encourages more trading and liquidity in SAUCE-based pools.

• Could attract new users interested in SAUCE’s growth potential.

Downsides (Cons):

  1. Liquidity Adjustments:

• Liquidity providers may need to rebalance their positions, which could be inconvenient.

• Temporary fluctuations in pool liquidity might occur during the transition.

  1. Uncertain Outcomes:

• We can’t predict exactly how this will impact SAUCE’s price or platform usage.

• There’s a possibility that the benefits may not materialize as expected.

  1. Potential Volatility:

• Increasing reliance on SAUCE could introduce new volatility if demand doesn’t meet expectations.

  1. Community Concerns:

• Some members might prefer the existing incentive structure.

• Reducing HBAR’s role could be seen negatively by those heavily invested in HBAR.

Conclusion:

I’m really keen to hear what you all think about this idea. The potential benefits for SAUCE and our community are exciting, but I recognize that there are risks and unknowns. This proposal is just the starting point for a conversation.

Please share your thoughts, questions, and any concerns you might have. Whether you’re for it, against it, or somewhere in between, your input is valuable. Together, we can figure out the best path forward for SaucerSwap and all of us as SAUCE holders.

Looking forward to a lively and productive discussion!

Note: While I’ve only prepared the V1 spreadsheet so far, the V2 transition would follow similar principles. If we decide to move ahead with this proposal, I’ll make sure to complete the V2 spreadsheet and include it in any formal proposals or DAO elections.

3 Likes
2

Hi, veing a large sauce, Xsauce holder myself, i am naturally alligned with anything that goes towards increasing the value of these assets.

I am supportive of this (and other proposals) aimed at increasing the intrinsic value of these assets.

Great work!

3

Awesome - thanks for the feedback!

Quite positive reaction so far in the discord “general” chat also. I’ll give it a little more time for discussion here and then move it out of off-topic.

1 Like
4

yes, let’s just do something, anything, to tidy up the past clutters and make $sauce matters more.

Move the incentives to Pools pairing with $sauce, likely benefits:

  1. Attract more liquidity locked with $sauce, Boost up $sauce focused pools > improve trading efficiency.

  2. boost $sauce market presence, strengthen reputation for future ventures

  3. Align governance more towards native $sauce holders.

Hbars and Stablecoins have their own Enterprises and VC to Back themselves up.:classical_building::office:

Reality is that only $sauce Hbarbarians have only ourselves to back ownselves, we should treat ourselves Better, support $sauce more. :heart_hands:

1 Like
5

i feel like 140 days (5 month duration) seems like a long time for each evaluation

maybe a shorter timeframe such as 2-3 months instead?

6

Yeah I’ve wondered what the right amoung of time is - too long and it’s just wasting time, too short and it could be a shock to the system. Maybe others will have ideas to add also but I’ll lean toward like a 5-7 epoch transition time instead of 10 for this first phase proposal then unless anyone chimes in with other insights around timeframe. Thanks for the feedback!

7

We advise against significantly shifting incentives from HBAR-based pools to SAUCE-based pools. HBAR pools are essential for deep liquidity and efficient trading on SaucerSwap. Reducing their incentives risks decreasing liquidity, harming capital efficiency, and negatively impacting user experience. Maintaining balanced incentives is crucial for the platform’s stability and performance.

1 Like
8

Dear Larry,

Thank you for sharing your concerns. I appreciate your commitment to maintaining deep liquidity and efficient trading on SaucerSwap, as well as your focus on capital efficiency and user experience. With you against the proposal, I imagine it is unlikely to pass a vote, but I also think the conversation is important, so I want to respond with some counterpoints:

While balanced incentives have their merits, the current heavy emphasis on HBAR-based pools may inadvertently contribute to ongoing challenges within our ecosystem. The persistent sell pressure on HBAR, largely due to significant holdings by insiders, has been a barrier to independent growth. By reallocating incentives to SAUCE-based pools, we can foster a more sustainable liquidity model that isn’t as affected by HBAR’s underperformance, ultimately enhancing the platform for all users.

You mentioned concerns about potential harm to capital efficiency and user experience. However, capital efficiency might actually improve by reducing our reliance on an asset currently facing price suppression. The capital tied up in HBAR-based pools is subject to the risks associated with HBAR’s price volatility. Diversifying our liquidity through SAUCE-based pools that benefit from SAUCEs superior tokenomics as a foundational ecosystem store-of-value asset can mitigate these risks, leading to a more stable and predictable trading environment along with value capture for SAUCE.

Furthermore, upcoming cross-chain integrations like Axelar will introduce new trading pairs, reducing our dependence on HBAR for deep liquidity. By proactively shifting some liquidity to SAUCE now, we position SaucerSwap to better accommodate a multi-chain environment. This transition can enhance capital efficiency and user experience as more assets and users join our platform.

It’s also important to consider that the HBAR Foundation’s incentives are currently boosting HBAR-based pools, but these incentives won’t last indefinitely. This presents an opportune moment to test a gradual shift to SAUCE-based pools without causing significant disruptions. By experimenting now, we can gather valuable data on how this adjustment impacts liquidity and capital efficiency, allowing us to fine-tune our approach before external incentives taper off.

Unlike other layer-1 tokens like Ethereum or BNB, HBAR doesn’t currently benefit from strong tokenomics features such as native staking mechanisms that support HBARs price. In the most successful DEXs like Uniswap and PancakeSwap, the native tokens have mechanisms in place that bolster their value and stability. Since HBAR lacks similar features, we need to adapt our strategy to ensure the long-term health of an HTS token economy with the ability to decouple from HBAR.

By shifting incentives to SAUCE-based pools, we’re laying the groundwork for deep liquidity that can accumulate value independently of HBAR’s price dynamics. This approach can reduce the volatility caused by HBAR’s fluctuations and create a more robust and resilient ecosystem. Deep SAUCE liquidity can help solidify its role as a central asset within our platform, much like how deep liquidity has benefited assets like Bitcoin and Ethereum across various exchanges.

Continuing to heavily incentivize HBAR as the primary liquidity asset ties SaucerSwap’s (and the entire HTS ecosystem’s) growth to an asset currently facing market challenges. By diversifying our liquidity pools to include more SAUCE-based pairs, we can mitigate these risks and enhance the platform’s stability and attractiveness to both current and potential users coming in through Axelar integration who may have misgivings about HBARs tokenomics.

In summary, the proposed shift aims to:

  • Enhance Capital Efficiency: Diversifying liquidity reduces exposure to HBAR’s price volatility. Hbar will still be swappable and highly incentivized in the SAUCE/HBAR pool on the platform, allowing existing HBAR liquidity to flow in without allowing its price to dominate the space.
  • Improve User Experience: A more stable trading environment benefits all participants.
  • Prepare for Future Growth: Aligning with upcoming cross-chain integrations positions SAUCE for sustained success.
  • Strengthen SAUCE’s Role: Deepening SAUCE liquidity can help it accumulate value independently, benefiting the entire community.

I understand the importance of maintaining a robust and efficient platform, and this proposal seeks to enhance those qualities by addressing current challenges and preparing for future opportunities. I believe that gradually shifting incentives to SAUCE-based pools is a strategic move that can strengthen SaucerSwap’s position in a rapidly evolving market.

Thank you for considering these points. I look forward to continuing this dialogue and working together to find the best path forward for our platform and community!

1 Like