I’d like to start this with where we left off:
This was touched upon during the Parachain Summit. Thanks for mentioning this; now we can have some detailed discussions around it.
My understanding of avenues where the DEX liquidity incentives could come from is as follows:
- Trading fees
- DEX/Protocol token emission as subsidies
- Rewards by listed projects (in their native tokens, or other assets)
- Rewards/interest from other products (within the same platform or composable with other platforms) that entitled to the LP tokens due to additional utility granted
The availability of #1 will be dependent on actual adoption of this DEX, which will demonstrate the DEX’ Product-Ecosystem-Fit or lack thereof.
#2 already puts this DEX in disadvantages, if anything, since Statemint does not have any token emissions to subsidize the liquidity provision. If this DEX wants to use DOT as liquidity incentives, then it has to go through the same governance process as all the liquidity proposals. There are some ideas such as re-purposing a portion of the regular Treasury burns as liquidity incentives (e.g. Kappa Sigma Mu Kusama Society), which are quite interesting and will obviously also needs community approval.
For #3, this really is a decision by the projects themselves rather than anything else. In most cases, these liquidity should go to Ecosystem DEXs because their offer better trading experiences and more value add. However, there might be instances where, for instance, a Parachain who is a wireless infrastructure provider may have a significant portion of their tokens held by large Telcos who might be taking their first step by putting these tokens to a liquidity pool governed by Polkadot, or doing nothing at all with these tokens. Then this Parachain might opt for using this DEX as a gateway DEX first (at least getting those tokens out from the cold wallet first) and dropping some incentives there. More generally from the pure tech perspective, LP tokens are just normal assets on Statemint and thus can be transferred over XCM to other Parachains, where they have flexibility for creating incentive programs if they want liquidity in certain pools on Statemint
Regarding #4, this is where it could strongly synergize with the ecosystem. For instance, can DOT/USDT LP token be used as collateral to mint aUSD on Acala?
Let me know what you think @danreecer . Also welcome ideas and feedbacks from everyone.