[PROPOSED] KICK-11: Support Community Efforts of Improving $KARATE Liquidity on Hedera

General
1

kick: KICK-11
title: Further Support Community Efforts of Improving $KARATE Liquidity
status: WIP
author: @usualape
discussions-to: https://gov.karate.com

created: 2024-10-04T12:29:00+0000
requires (optional): N/A
implementation (optional): TBD

Simple Summary

This KICK proposes participating in the SaucerSwap Incentive Program, the Bonzo Protocol, and the liquidity partnership with Amplifi Overview | SaucerSwap , to support the community efforts of improving $KARATE liquidity.

Abstract

To help with recent community efforts to improve the liquidity of $KARATE, this KICK proposes participation in the SaucerSwap Incentive Program, Bonzo protocol and the liquidity partnership with Amplifi.

SaucerSwap is the most liquid DEX on Hedera. It offers the ability to provide additional rewards to stakers through its LARI incentive program.

Bonzo is a new AAVE-style lending platform launching on Hedera. By combining the SaucerSwap incentive program with a Bonzo pool, liquidity providers will be able to borrow $KARATE on Bonzo to provide liquidity on SaucerSwap.

Amplifi Liquidity is a DeFi market maker which collaborates with projects to design tailored liquidity strategies that enhance liquidity pools, stabilize token prices, and promote sustainable growth. Their expertise in liquidity management increases Total Value Locked (TVL), boosts trading volume, and ensures long-term price stability, driving project success.

Participation would entail allocating $KARATE “rewards” to specific SaucerSwap and Bonzo pools. The pools could be $KARATE/HBAR, $KARATE/USDC, etc. This proposal supports $KARATE/HBAR.

These rewards may be increased as specified until we reach a goal TVL on SaucerSwap of ~$250k.

Similar to the previous effort, through newly incentivized pools, the community will have incentive to increase $KARATE liquidity, which is needed to achieve the league’s governance, gamification, and open-IP development goals.

Motivation

To achieve the league’s governance, gamification, and open-IP development goals, there needs to be liquidity for the $KARATE token.

Our efforts in onboarding Karate Combat fans onto $KARATE to distribute league token ownership have been remarkably successful. We have a peak MAU of 120,000 and an average of 50% Month-on-Month growth on that figure.

Currently SaucerSwap pools don’t have enough $KARATE liquidity to service and expand existing demand.

A grant of $KARATE to the Bonzo protocol, the SaucerSwap Incentive Program, and Amplifi will help service demand by incentivizing community members to provide $KARATE liquidity.

Specification

Overview

If approved, this KICK would authorize Sensei Foundation or its designee (“Sensei”) to set up a rewards pool for the $KARATE/HBAR pair in the SaucerSwap Incentive Program and Bonzo with help from Amplifi.

First this involves interacting with the SaucerSwap V2 Contract to set the specified rewards amount and duration. The proposal is to grant 32,000,000 $KARATE over a six month period. If these rewards are exhausted before the goal TVL another 20,000,000 $KARATE can be issued as a refresher.

Secondly, through the Bonzo protocol, Sensei will issue a grant of 20,000,000 $KARATE to reward stakers of $KARATE.

Sensei will then lend Amplifi 48,348,106 $KARATE who will match the amount with a $30k HBAR grant from The HBAR Foundation to provide SaucerSwap liquidity.

Rationale

SaucerSwap is amongst the most popular DEX protocols on Hedera, having processed $1Bn of transactions to date.

The SaucerSwap Incentive Program offers a solution for incentivizing liquidity by rewarding community members with rewards for providing $KARATE liquidity.

The Bonzo Protocol allows liquidity providers to borrow $KARATE to stake onto SaucerSwap.

While the partnership with Amplifi will allows us to benefit from their expertise in creating liquidity in DeFi markets through the above provisions.

Technical Specification

$KARATE rewards would be provided through the “LARI Program” on the SaucerSwap V2 Contract (SaucerSwap V2 | LARI ).

The LARI Program will be set up to target the existing $KARATE/HBAR pool created by the community. (SaucerSwap Info )

This KICK proposes ~$20k of rewards, 32,000,000 $KARATE, from the community treasury, for a six month duration. This amount, at the moment of writing, would make it the largest Incentive Program on SaucerSwap, making it competitive and therefore providing material incentive for community participants to provide $KARATE (LARI Weights | SaucerSwap).

The Bonzo Team will create the lending pool on behalf of the community and Sensei will provide a 20,000,000 $KARATE grant towards the incentive rewards for staking on that pool. This lending platform provides straightforward AAVE style pools (Bonzo Finance Labs · GitHub).

Amplifi will stake their $KARATE allocation directly onto SaucerSwap in conjunction with their HBAR grant (New Liquidity Position | SaucerSwap).

Depending on the success of community participation, through a subsequent proposal, $KARATE holders can vote on whether to “rollover” (extend) program participation, increase or decrease $KARATE rewards, add additional liquidity pairs, or withdraw $KARATE rewards back into the treasury.

Test Cases

N/A

  • Incentivize $KARATE liquidity on Hedera
  • Do not incentivize $KARATE liquidity on Hedera
0 voters
3 Likes
2

It’s a yes from me. This proposal was well laid out and liquidity provisions are absolutely vital to the growth of the ecosystem.

6 Likes
3

You should add Sirio Finance to the list. They are another borrowing and lending platform coming to mainnet soon and are currently working to add Karate as a supported asset.

1 Like
4

  1. Any chance we could extend out the rewards to 12 months. (I see 30k usd of karate being 300k in 12 months. Just a vision…)

  2. Make all the liquidity awards locked for 2 years after harvest… Please! This will help solve the rich man who gives no fucks about the community problem.

  3. 30k usd of $karate is way undervalued compared to $30k hbar or usdt. I will provide some sauce/karate liquidity or bonzo/ karate… I can see sauce and bonzo potential growth. The money changers can find a way to get to usd from there…. I have had my ass whipped by impermanent losses that became very fucking permanent. I don’t see a way to fairly compensate the coming impermanent losses for karate/ usd or karate/ Hbar liquidity providers that is also fair to the people who support the community by fandom. I understand that liquidity providers are important. I do. But the fans and the fighters are much more important than the filthy rich assholes who only care about their money.

2 Likes
5
  1. Great idea, the proposal allows the community to decide to extend it

Depending on the success of community participation, through a subsequent proposal, $KARATE holders can vote on whether to “rollover” (extend) program participation, increase or decrease $KARATE rewards, add additional liquidity pairs, or withdraw $KARATE rewards back into the treasury.

  1. Unfortunately the platforms don’t really support that but the way the incentives work is that the incentives are proportional to the volume of liquidity provided––so the stakers are incentivized to not dump in order to avoid permanent loss.

  2. With increased liquidity we should expect to actually see the price become less erratic. If the initiative begins going against the interests of token holders for whichever reason, another proposal can be done to return the incentives back to the community treasury.

3 Likes
6

Feel free to make a proposal when they do, would be happy to support it.

1 Like
7
  1. It is my understanding that you can not participate in Up Only Game if your KARATE tokens are in a SAUCE liquidity pool, so enhacing liquidity could impair game participation. Could you design a way to use your SAUCE liquidity tokens to participate in the game?
  2. Right now SAUCE Hbar/Karate pool gives 71% APR, which seems enought incentive to compensate the risk of imparmenent loss. But most Karate token holders prefer to play Up Only Gaming for simplicity and still high APR rewards without any risk. If Up Only Gaming rewards would be diminissed that could incentivize liquidity in DeFi protocols.
  3. Up Only Game rewards and Liquidity pools rewards could create too much dilution and press price down which could damage the entire ecosystem. Karate token price is a termometer of ecosystem health for all of us to watch.
  4. Liquidity should be simultaneously enhaced by providing INTRINSIC VALUE to Karate tokens via governance, utility AND yield from the real revenues of the ecosystem, instead of only TREASURY DIBURSEMENT.
2 Likes
8

It’s a yes for me.

  1. First and foremost, this plan is very well communicated here and is sensible and coherent.
  2. The proposed first batch of LM rewards is very small compared to the circulating supply. Not a big deal from a supply effects standpoint.
  3. Additional liquidity for KARATE is very much needed.
  4. KARATE sitting in wallets is stagnant supply that is likely not that valuable. It’s value should not definitely not be destroyed by inflationary rewards given to more active participants, but it should also not be given the same treatment. UOG participants and LPs on the other hand are generating value for KARATE - they both deserve to be compensated.
  5. A borrow/lend market for KARATE seems much less important to me for an asset like KARATE. It should definitely get less LM rewards. I don’t see where the demand for leverage on KARATE should come from, but promoting a healthy money market for KARATE certainly isn’t a bad thing.
2 Likes
9

Some more thoughts…. I hope we get to vote on this matter on the app after everyone has had some time to think more about it. I would love a valid rebuttal to the following:

  1. When people provide liquidity they are willing to sell their assets for another asset (or ponzi scheme). If nobody is willing to provide liquidity at low prices, it means nobody wants to sell at low prices. Let liquidity run dry. When the price rises I will provide some liquidity:)

  2. The wealthy often stake or provide liquidity chasing absurd APRs. They don’t HODL. They sell immediately and “take profits.” Guess who they “take” those profits from… If hbar is not able to lock rewards for some finite time frame yet, do NOT provide rewards for liquidity that will dilute the value for those of us who want $karate to be successful in the long run. Let the liquidity go dry.

  3. Bitcoin skyrocketed because there was no liquidity willing to sell at $0.25 anymore. Then $2.50. Then $250. Then $2500. And so on.

Is a lack of liquidity really a bad sign? I certainly do not want to sell at these levels. Nobody should. Why should we reward those who do?

1 Like
10

You have a good point. We are probably at or near bottom prices so the risk of impermanent loss could be significant, even pairing “karate” with “hbar” (saucerswap) which could also rally massively in next years.
Providing karate/hbar liquidity in Saucerswap, you could be “limiting” your upside to 50-60% APY…
Usually liquidity and utility go up hand in hand. Once karate token utility is recognized, karate token holders will be naturally more willing to lend into Defi. I will vote in favor of this proposal, but I would like the governance main focus to be in the utility side of the karate tokens. To improve fundamentals, and let the market do their thing.

1 Like
11

Good points here; I am excited about the idea of the Karate Combat application / accounts being an entry point and amazing distribution model to bring net new users into the Hedera DeFi ecosystem. Activating this distribution model is one of the most important aspects — getting users / accounts / liquidity out of the Karate Combat app and into ecosystem wallets, like HashPack, that enable them to participate in DeFi, while also retaining the ability to continue using Karate Combat via the web interface and ecosystem wallet connectivity.

It’s worth noting on the impermanent loss side of things (DEXs) that for decentralized lending protocols like Bonzo Finance, there is no impermanent loss because each pool is a single asset pool — so that should be quite enticing. I’m also excited about the prospect of folks lending $KARATE, and especially borrowing $KARATE in order to utilize the tokens for their true utility.