This is a proposal to launch Sushi Swap KPI options, using the UMA protocol. Inspiration taken from this interview between Clayton from UMA and 0xMaki from SushiSwap.
What is a KPI option?
A KPI (Key Performance Indicator) is an incentive used to grow a certain metric. There are several approaches that could be used by SushiSwap, which we will explore here.
An example of a KPI option is the UMA KPI option. On march 31st, UMA completed an airdrop of 1 million KPI options tokens (uTVL-0621) to 7135 addresses that had participated in the governance of those protocols. UMA targeted Sushi Swap,Yam, BadgerDAO, and Balancer. Some of you in the Sushi community were probably recipients. Those options are then redeemable on 06/21, with a payout based on the TVL of UMA.
What can UMA do?
Well, Sushi Swap is a community just like us SuperUMAns, in that we share the same values, and the same goals, GROWTH and adoption. UMA’s infrastructure can be used to launch these KPI Options as well as to co-promote our coordination.
Clayton Roche from UMA, recently had a chance to interview the great 0xMaki where he had some suggestions he would like to see.
#KPI option 1: When the liquidity pool (the metric we would use) hits X amount, 10m to 50m was suggested, the KPI token would double in value.
#KPI option 2: When Sushi Swap hits xxx,xxx trades in the next 3 months (KPI options could be the incentive to achieve that goal.)
#KPI option 3: When TVL on Kashi hits 100m. A KPI option could be given out for migration from Lvl1 to Lvl2 to encourage the growth in that pool.
Concerns for the Sushi community?
One concern that 0xMaki had was the system being manipulated. This could happen if, despite a widespread airdrop, the options were collected by a few whales who would game the system. This concern needs to be addressed in the design.
KPI Options for SushiSwap Proposal
UMA’s community of “Super Umans” visited the SushiSwap discord to discuss this proposal with the community. Based on responses we gathered from those who participated, focusing on Kashi adoption is the key goal right now.
Furthermore, it seems that people are most interested in targeting TVL in Kashi.
Risks + Mitigations
To mitigate the risk of someone concentrating a lot of options tokens then manipulating TVL, I propose that the Option be pegged not to TVL at the moment of expiry but to the 30-day average TVL at expiry.
This would make it quite costly to manipulate TVL, because someone would have to lock their own capital for that entire period to increase the value of their own tokens.
Another risk is the Sushi tokens being held in UMA’s contracts. It has been audited by Open Zeppelin. There have been no security concerns with UMA’s collateral storage.
The concerns with UMA are typically around the financial engineering of a particular synthetic, for example, if the value of a collateral were to drop suddenly and positions were unable to be liquidated in time to keep the synth fully collateralized. This scenario simply does not apply to KPI Options, as they are fully collateralized by definition.
We propose that Sushi consider locking 5 million SHUSHI tokens to mint the call options, so there would be a maximum upside of ~$60 million. However, the target TVL for Kashi for this maximum payout should justify such a high possible payout.
It is certainly reasonable to have these tokens expire valueless if the target is not hit. In UMA’s case, for our airdrop, we decided to have them expire at a minimum of .1 $UMA, but Sushi is under no obligation to do that. There is no downside to this in terms of distributing Sushi if the goals are not met! If the goals are not met, the foundation behind SushiSwap would just retrieve their tokens.
- In UMA’s case, we distributed most of the options but withheld some for the community, to be distributed as incentive-aligned bounties.
- We propose that Sushi run this campaign targeting developers + reward them alongside hackathons.
- Especially for developers, if they are rewarded in such a way that by collaborating with each other they can maximize their own payout, you might see a new type of buidling emerge.
Open Questions + Next Steps
What should the payout ranges be? What TVL level in Kashi would justify distributing $60 million in SUSHI for?
Who should receive them?
The next steps are:
Gather community feedback from Sushi and integrate into a proposal that specifies more details of the airdrop + construction.
Solicit someone, ideally from the Sushi community, to take point on writing the UMA Improvement Proposal for the Option token. UMA would pay a bounty for this and would accept a matching bounty from Sushi if they were inclined!
“Everybody is a winner in 2021” - 0xMaki