AELIP-5: Pool 2 Liquidity Provision Mechanics

Author
StatusImplemented
ImplementorTBD
ReleaseTBD
Created2021-12-29

Simple Summary

This AELIP proposes a change to the mechanism for the Pool 2 staking and rewards distribution outlined in AELIP-3.

Abstract

AELIP-3 proposed that Synthetix StakingRewards.sol contracts would be used for staking both $AELIN (pool 1) and $AELIN/$ETH (pool 2) on the Optimism network. However, the Uniswap v3 AMM used for pool 2 on the Optimism network distributes a NFT instead of an ERC20 token, thus making it incompatible with the StakingRewards.sol contract.

The proposal is to utilize an off-chain script reading data from the Graph or an archive node to determine the amount of time and quantity of assets being LP'd on Uniswap v3 and then distribute 44 $AELIN to LPs via a merkle tree distribution contract after the month is over. At the end of the month, Aelin governance will re-evaluate this mechanism and move to an automated design if possible.

Motivation

The release of the $AELIN token is an exciting moment for the Aelin Protocol. Upon launching, there needs to be both token fee capture from deals as well as liquidity available for the token. Using the StakingRewards.sol contract is incompatible with these goals.

Specification

Overview

While Uniswap v3 gives liquidity providers more flexibility than v2, it makes on-chain staking mechanisms hard to implement. Using a staking contract can allow one tick liquidity positions to accrue an outsized share of rewards. Ribbon was targetted through this attack in their liquidity mining program.

Aelin Protocol would like to luanch on Optimism without taking on unnecessary risks. Therefore, we are going to reward only those LPs utilizing full range positions, similar to v2. This will reduce the risk that Aelin Protocol is exploited in a mechanism similar to Ribbon. The goal is to run this offchain mechanism for a month; the Optimism network is rapidly growing and there will likely be other options to implement in the near future.

Rewards will be computed off-chain and sent out after the end of the month through a distribution contract similar to the $vAELIN claim process. Each block processed in the month will have equal weights in the distribution calculation and capital will receive their pro-rata share of the rewards for the duration they are in the pool.

Pool: $AELIN/$ETH
Fee Tier: 1%
Amount: 44 $AELIN
Start: January 5th, 2022
End: February 5th, 2022
minPrice: 0
maxPrice: Infinity

Rationale

Technical Specification

Test Cases

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