Is it time for TORN UNI-LP staking?

There is one demand that keeps coming up in the Tornado Cash community, an opportunity to Stake TORN to get rewards. Some of you have been proposing to achieve this with a TORN anonymity mining program. While it is possible, I think there is not enough privacy demand for the TORN token to justify the creation of a new anonymity pool. In market cap terms, TORN is small compared to other major assets like ETH, DAI, or WBTC.

A better and simpler alternative would be to setup a Uniswap ETH/TORN LP staking pool using the battle tested Synthetix staking contract. The staking pool would distribute TORN reward coming from the governance treasury. In DeFi, this is commonly known as the pool 2 strategy.

TORN liquidity are very thin, a $30k swap currently causes more than 2% slippage. As a consequence, it is hard to enter any sizable TORN position.

I personally used to have mixed feelings about a pool 2 for TORN. But after putting things into perspective, the Tornado cash governance treasury have 55% of the TORN supply vested over 5 years. This is about 5.5 million TORN of which 275k have already vested and can be spent now by governance. Every month, an additional 91666 TORN is made available (vesting contract). For comparison, the current TORN circulating supply is 558k. We could leverage this treasury to boost TORN liqduity.

If there is a strong support for this, I could put together a proposal for making it happen.

Let’s poll…

I support creating a Uniswap ETH/TORN LP staking pool to earn TORN rewards.
  • YES
  • NO

0 voters

If the above passes, we should decide an amount of TORN token to distribute.

How many TORN token to distribute ?
  • 200k
  • 120k
  • 50k
  • 0 :upside_down_face:

0 voters

And finally, we should decide over how much time to distribute these rewards.

How long should the reward program last ?
  • 4 months
  • 5 months
  • 6 months
  • 7 months or more

0 voters

Update: Adding a poll on what AMM to use

For the LP reward program, we should use
  • Uniswap
  • Sushiswap
  • 1inch

0 voters

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First off, thanks @Rezan for getting the conversation started.

SUSHI is a much better option than UNI in my opinion. Here’s why:

  1. SushiSwap is more open to working with different protocols and they are already sponsoring TORN by providing SUSHI rewards for TORN/ETH pool on SushiSwap.

  2. If we choose UNI, then users have to decide between earning UNI vs earning SUSHI, fragmenting liquidity. If we choose SUSHI, they can stack both and earn SUSHI and TORN.

It’s also possible to do both (maybe even add 1inch to that). Having more arb trades means LPs earn more. So I’d suggest leaving some more TORN in treasury for other staking contracts.

6 Likes

Can you elaborate more on what a Synthetix staking contract actually does? I’m familiar with LPs earning .3% or whatever of the swap fee. But this adds extra TORN rewards out of the treasury to the stakers as well?

For the reference, current data:

Uniswap:

  • Liquidity: $3,432,018
  • Volume: $1,205,004
  • Fees: $3,615

Sushiswap:

  • Liquidity: $1,875,473
  • Volume: $353,682
  • Fees: $1,061

1inch:

  • Liquidity: $1,860,028
  • Volume: $82,672
  • Fees: $961

As we can see Uniswap provides more fees to LPs due to higher volume. In addition some new users know only about Uniswap, so I think Uni should have decent liquidity.

3 Likes

Wouldn’t it make more sense to give $TORN utility before incentivizing people to provide liquidity?

At the moment, you can’t do anything with the token except vote, so there’s really no reason to purchase the token if you had no interest in voting.

We should give people a reason to want to own $TORN, then add LP on uniswap or some other dex

3 Likes

There is no use for uni as well. At least you can earn Sushi but for uni it’s only airdrop. Can’t even vote

1 Like

Yeah, but uniswap is the platform for trading, and they have a protocol fee switch that will get flipped on in the future.

TORN doesn’t have an equivalent fee switch. We’d just be incentivizing ETH/TORN LP for no real reason, and diluting the market share value of people who currently hold $TORN.

Sure you could argue that it is hard to enter a large torn position right now, but there is no reason for anyone to actually want to enter a large torn position.

The potential utility should be proposed before incentivizing people to accumulate tokens to take advantage of that utility, not the other way around.

2 Likes

Agreed. Without legit utility for torn, most people would still sell their torn tokens.

I am not in favor of providing the liquidity mining, from a utility perspective.
The reason is that blue chips like Uni and comp do not perform such self mining.
Personally, I feel it would be preferable to encourage them to be able to use it as collateral in aave etc.

Can I participate in governance with LP tokens?
Also, if we do this proposal, we need to provide appropriate apy for the liquidity we seek.
For the current mainstream 6 month 120k, the value dropped is 14M.
Uni’s liquidity is 3M, so the apy will be 900%.
Too much rewards will degrade the quality of the community. apy should be less than 100, which means that for this amount of rewards, liquidity is looking for 10 times what it is now.
This is an indication that we want Uniswap to lock 1/4 of the total circulating volume by simple calculation.

If LP tokens are not allowed to participate in governance, it results in a lack of decision-making tools.

We should then consider whether the reward amount is appropriate.

2 Likes

Let me add a poll for Uni vs Sushi vs 1inch.

It’s the contract used all over DeFi for LP farming. You deposit AMM LP shares and earned some reward pro rata to the total amount deposited in the contract.

This can be added in the future. Not a big deal imo.

Unfortunately no and I don’t think it would be trivial to implement.

It’s wrong to assume that the pool would stay at 3M. It would obviously drive more deposits. Remember the 1inch TORN LP reward program, it was around 100% APY for the most time.

1 Like

I partly agree with what mamedai says. For now, there are only 13.6K torns in the uni pool, which could never be the situation with the new staking pool. Let’s do a simple calculation.

Let’s say we start the LP staking on May 1st. The torn circulation in 6 months would increase from about 560K to 1.1M, not counting the governance treasury release. I think the new ETH/torn LP staking pool would attract at least half of the torn tokens to enter, which means 280K to 550K torn tokens for this year. At the price of $125, it equals to $70M to $138M liquidity. So the 6-month 120k reward could lead to only 22.9% apy(0.12M*$125/$104M*2).

In this case, we need more torn rewards in this time or we can increase the reward level later by another proposal. I suggest the later since we can adjust the reward amount according to the uni liquidity at that time.

3 Likes

amm不要单纯的仅限于一个平台。uni sushi 1inch 都是挺好的平台 loopring也挺好的

TORN-ETH LP at least have half vote power, if it doesn’t support governance, can we think another ways which reward and governance are all both considered.

After some consideration, I suppose I wouldn’t be opposed to a small amount of torn (<150k) being distributed over a 6-12 month period.

At the very least, the increased liquidity might give us exposure, which could have a positive effect on TVL.

I am clearly the minority here but I am somewhat reluctant in doing this. I do not see particular benefits in adopting this strategy, at least in this specific point in time.
TC does not need this sort of degen-friendly advertisement gimmick to gain momentum, nor does it need anymore liquidity as of now.
Low circulating supply (outside treasury) is actually an advantage, tokenomics wise; trading this off for temporary visibility and increased liquidity does not seem a good deal to me.
Would focus first on setting up a multisig and perhaps revenue flows.

2 Likes

The primary aspect to the conversation is TORN utility, currently TORN can be used for voting. If we extend a liquidity program, that’s an additional use case. The liquidity mining program will may push up the TORN price, and will certainly extend the distribution of the token. Once this is achieved, it will be easier to extend another use case such as using TORN for collateral into something like TORN into AAVE or Maker.

Perhaps an option on liquidity mining would be to start smaller and test the strategy to see how much liquidity can be provided and scale up from there, so run a test for one or two months with a set of rewards, and re-adjust based on liquidity allocated and gain in TORN token distribution.

1 Like

We need some mechanism to stabilize the TORN price. I support your multisig idea, can you create a proposal for this?

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Thank you and I agree. Let’s wait for the liquidity mining program to get started and then we can definitely look into this. Meanwhile, I will start a thread to collect overall community sentiment around it.

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