$MIST is only present on Ethereum Mainnet which limits the growth of our community in a blossoming L2 and multichain world
Solution
Deploy the Crucible smart contracts and bridge the MIST token contract to every chain/L2 on which Alchemist products start generating revenues. Create MIST based rewards programs (MIST-ETH LP at a minimum) for the community on those chains to be funded by the revenues generated by our products there, rather than those revenues going back to Ethereum Mainnet.
Ensures that our community grows organically where our revenues and products find success
Incentivizes robust MIST-ETH LP cross-chain
Reduces the friction/overhead associated with having to always move revenue value back to Ethereum mainnet
Drives more utility and value to back $MIST
Brings in new members into the community by removing the cost of Ethereum Mainnet transactions
I think this is an easy decision to make and one I support. The cost of a Crucible for many is prohibitive to them joining our community. Fairer access to Defi is what Alchemist is all about, and this would be a big step in the right direction.
I think we should however build out more conservatively to ensure there is sufficient liquidity across chains. Community vote one which one to choose first (Polygon, Avalanche, etc).
Good point. In addition to the revenue generation requirements we should also open this up to a community vote. But maybe we can have the products revenue keep accumulating on those chains without distribution until the community votes to move there. Otherwise if we send the revenue back to the Ethereum Mainnet Aludel rewards program the existing stakeholders have the incentives to prevent us from going to new L2s/chains and opening up new markets.
Just to say I’m certainly for a model like this. Crucible integration to an L2 is near completion and this could be good timing to consider something like this.
I believe revenues in Mainnet will always exceed those of alternative chains, however the offset of gas costs on participating to a reward program on a L2 chain will certainly make economic sense for users. Most likely it will mean a user will be better off overall on their ROI, as it’s common for the fee to subscribe and unsubscribe on mainnet to be relatively excessive (not even including obtaining the LP and minting a Crucible, which we all know isn’t a cheap endeavour right now). Now that gas averages above 120 gwei on mainnet and is often above 200 gwei at many times during the day, users even with an reasonable LP size are also finding their rewards consumed by gas.
The flipside to consider here is that the biggest proportion loss to future revenues will be to the Largest LP holders which currently are a small minority on mainnet (will analyse these shortly), although the effect of such an implementation of making our ecosystem more accessible to the majority of users in the space (smaller users who are currently priced out), and potentially turning more of the circulating supply to become locked up, could be seen as a potential upside for the larger current LP holders
Every L2 would become a pretty significant adminstrative burden no? Alongside this, you end up fragmenting liquidity of the token, there is alot of utility that can be built on a pretty thick liquidity pool and you lose that by deploying a pool onto every scaling solution.
Also, the APY of these L2 pools are unlikely to be competitive with APYs of L2 native apps that direct all their incentives to that L2.
It is also unlikely to be competitive with our own L1 pool as the majority of it’s APY is generated via inflation not revenues. How would inflation be affected if this proposal were to be adopted?
Also it’s fairer to split revenue across L1 LPs and L2 LPs by their relative liquidity than to give profits from each chain to each pool
Ultimately this feels like a solution to a simple problem, that will probably introduce many other problems and issues to deal with.
I think it probably makes more sense for Alchemist to choose one L2 for it’s second liquidity pool, and build that up from the treasury/multisig rather than incentivise it via rewards. It would be a cheaper way to onboard people to the project, and doesn’t introduce a host of other questions which must be dealt with. It also allows Alchemist to strategically deploy new liquidity pools to chains where it makes sense to have one, rather than every single chain which we operate on. (It might make sense to operate on a chain but not have a liquidity pool on that chain)
One L2 to begin with make sense as previous posters have stated. It would be a gradual process should it be desired. Inflation IMO should remain for L1 rewards, a lower APY on L2 would be offset by the significant cost of L1, many smaller holders are excluded from L1 as described by Joeh. Over time we can analyze the adoption of any implemented L2 and discuss/vote accordingly.
Really strong points, we would definitely need to consider looking into automation if this is a route to be explored, managing L1 distribution is a relatively mundane process and expanding this further should ideally be done at the smart contract level if it was to be implemented.
I’m not well versed in the cross-chain DEX liquidity issues, would fragmented LP potentially cause a stronger price impact and more AMM/arbitrage opportunities? I assume that increasing transaction volume could be beneficial overall to LP holders due to fee structures, however if price impact is stronger this might be a negative depending on which direction the market movement is at the time.
Also do you think the most likely path/effect would be L1 liquidity being moved to L2, or majority new liquidity will be established in L2 and have low impact to L1 liquidity? Personally I was thinking the latter due to the incentivization may not be as appealing as mainnet, therefore making participation lower, which I assume would actually cause a competitive APY as more rewards will be available to a smaller audience.
Protocol bootstrapped LP should definitely be in the interest of Alchemist in terms of an investment and risk management should be considered - maybe we can make another topic on this as there could be a lot of missed opportunities. Getting the community to add to the liquidity in a chain would certainly support our products usability (if the utility incorporates MIST) but there is a strong argument about the ‘fair’ aspect as you raised.
Initially it may appear to be a fair solution as the cost to establish liquidity on an L2 might be considerably less, therefore less incentivization, however if an L2 starts yielding strong revenues then I wonder what the social effect will be (will users start to migrate their LP, acquire more or remain passive and do nothing?), will their activity balance any unfair advantage to L2 if any exists? I see L1 liquidity overall being at an advantage due to inflation distribution, would this make it more acceptable if new contributors to L2 are opting in knowing they may be at a potential disadvantage as it’s a new enterprise?
If the idea is to be able to make crucibles on other chains, maybe we should consider chains where we could also have reward programs, either with protocols with which we already have them, or with others .
From my perspective, all rewards should go to all crucibles, regardless on which chain the crucible lives.
Why do I say that?
Let’s say we can put the crucible on the polygon, there will not be inflation rewards, and it will not receive rewards from copper ETH (which is by far the most significant).
if so, no one will move their crucible on the polygon.
I would then propose a budget for airdropping some MIST on the new chains for current Crucible holders. This would incentive them to use the new chain and provide them some kickback to the fees that they spent on mainet.
The solution that’s being implemented for L2’s in Crucible won’t allow cross-chain movements, Crucibles in different chains will be independent from each other, meaning that you’d have to mint a new Crucible in the L2.
Hopefully this gives a bit more context to how the functionality may work
This is good stuff. Feels more like the early days on discord. First, I’m more of a thinker than a do’er. Feel free to point out my ignorance anytime.
Understanding that crucibles (NFTS) must exist on each chain, can they be created on the L2 in such a way that they are “entangled” with a crucible on mainnet? Those that choose to become entangled to a mainet crucible (with LP in the L2 crucible) can signal for corresponding inflation rewards on the Aludel 1.5. Those that don’t link a crucible receive no benefit, but also don’t incur the cost of mainet fees.
No. Teams will already have to figure out how to perform revenue share for L2s and it can be fully automated. From personal experience it’s just as much of a burden to send it all to mainnet. Even more so actually because bridging would be involved.
The Crucible team wants to go to L2s and other chains.
The MIST community wants to go to other L2s and chains.
So no burden there. L2s are the future for most consumer facing products in crypto.
You end up with liquidity that is proportionate to revenues on those chains, so it won’t be a big deal. Our community won’t be dropping 10 million worth of liquidity provision if there’s only 20K a month worth of revenue on Polygon for example.
That’s actually the other really nice benefit of establishing a reflexive relationship between revenues on new chains/L2 and the community. Everything will auto scale and incentives will align. New L2 revenue will result in community moving some liquidity there. If revenue scales so will our presence on that chain as a community. Not to mention the fact that in the early stages all the community members with skin in the game (participating in rewards programs) on those chains will have huge incentives to be advocates for our products there, bring us more business, and thus further increase revenues.
See previous answer about reflexive relationships and the synergies between our products and our communities when incentives are aligned.
This breaks the reflexive relationship between our products on a particular chain and the community with skin in the game on those chains. It favors incumbents, and would discourage liquidity provision to new chains that have revenue because majority of that revenue will just go back to L1 whales.
Alchemist having to manage LPs across chains is more inefficient. How does one decide how much LP to provide. When does it make sense to reduce. When to increase it. What if the bet is wrong. Then that LP needs to be removed. The proposed solution w/ community participating in this regulates itself and auto-adjusts based on conditions. Is there revenue on that chain? What’s the opportunity like relative to other chains? What are market conditions like and what is the narrative? Etc.
By outsourcing these decisions to the community we’re building a resiliency into the system that auto-scales with demand, our presence, and our success on new chains.
I disagree that it’s cheaper.
You’re not taking into account the positive externalities of a system where community has skin in the game. The biggest strength it creates is that it tightly engages community that has skin in the game with Alchemist governance and the success of our products. This reflexive relationship is critical to building successful high quality products.
Alchemist “strategically deploying new pools” would only centralize control, decision making, and the administrative burden for a decision which the Alchemist community, through its actions, is more well equipped to make. Free markets always make the best decisions when compared to a central authority.
yep. exactly. I think this is most likely to result in aligned incentives for our products on L2s and an engaged community interested in the success of those products.
I think we’d want to make sure the incentive to have healthy L1 liquidity is always there. inflation rewards staying solely on L1 could be one way to do that.
The administrative burden of distributing rewards proportionally across all chains/L2s would be a nightmare.
Rewarding each chain proportionally to the activity that it produces would create the best incentives. If there are revenues to be shared on Polygon I think community will definitely create crucibles and participate in rewards programs there. They’ll also work with the teams building on Polygon to drive more revenue to them.
We’ll be able to scale up to new chains organically that way. Let product revenues and the community guide where to go as they are most likely to be in tune with the narrative of the markets and its activity.
