An Introduction to TELx Generalized Incentives
Generalized Incentives is a new TELx liquidity mining policy which incorporates diversity and time-based multipliers into a miner’s total liquidity and share of incentives across a growing list of eligible markets. The objective of generalized incentives is to scale the TELx marketplace alongside the introduction of new assets on the Telcoin application as efficiently as possible.
As consumers pay a fee to liquidity providers on every trade, the productivity of TELx depends on the adoption of the marketplace by users and their trading volume.
Conversely, the adoption of TELx by users at the application layer and beyond depends on the total liquidity available to consumers over time across a growing diversity of scarce assets.
Therein lies the problem: adoption requires liquidity and liquidity requires adoption. In order to solve this “chicken or the egg” problem, TELx produces TEL units at an average annual rate and miners can harvest those units by provisioning their liquidity to the network. Similar to how Bitcoin miners provision security to harvest the flow of BTC issuance and fees, TELx miners provision liquidity to harvest the flow of TEL issuance and fees.
In the current version of TELx incentives, issuance is allocated at a fixed rate to each individual market and miners harvest the flow of TELx issuance based on their pro-rata share of liquidity over time in each individual market. As an example, TEL/USDC, 80:20 liquidity miners harvest a proportion of 10mm TEL/quarter based on their pro-rata share of staked TEL/USDC liquidity vs others in that individual market.
This system works generally well with a limited number of markets; however, due to the scarce quantity of TEL units available over time through issuance, under the current system, the addition of each new asset and market requires a proportionate subtraction of the quantity of incentives available to be harvested on each market. In other words, adding new markets means decreasing incentives on existing markets.
In order to scale TELx liquidity alongside the introduction of new assets to the Telcoin Application as efficiently as possible, the generalized liquidity mining algorithm incorporates diversity and time-based multipliers to a miner’s liquidity across a growing number of new TELx markets.
In other words, with the introduction of generalized TELx incentives, miners harvest TEL issuance based on their total liquidity, across markets, sustained over time, rather than their pro-rata share of liquidity over time in each individual market.
- New assets in the Telcoin App: As we continue to rapidly scale the number of tradable assets on the Telcoin Application, we should also work to scale the TELx marketplace: empowering miners to benefit from Telcoin Application user volume while satisfying user demand for trading liquidity across a wide variety of new assets.
- Limited quantity of incentives: While there are a potentially unlimited number of assets and markets that applications, users, and liquidity miners would like to use, there is a fixed, limited quantity of TEL incentives that can be harvested by liquidity providers. Therefore, when the full quantity of allocated issuance is flowing to TELx, the addition of each new incentivized market takes away from the flow of issuance that can be harvested by liquidity providers on the existing set of markets.
- Allocation based on key design objectives of TELx: (1) liquidity across a (2) diverse network of markets sustained over (3) time.
- Leveling the playing field: Whereas the existing arrangement is efficient to deploy and works well overall as a mechanism for incentivizing liquidity, the total quantity of TEL that can be harvested is based exclusively on an LP’s pro-rata share of total liquidity over time on an individual market, across all markets. Introducing new multipliers levels the playing field to some extent, requiring more effort and a wider variety of risks to be taken.
- Compliant additions to TELx: By leveraging Telcoin’s compliance regime to determine new assets, we can compliantly regulate the addition of new assets to TELx in the interim while the Platform continues to decentralize toward full self-governance.
Goals and Non-Goals
Efficiency, fairness, and cooperative scalability of new assets: Introduce an efficient and fair process for scaling the TELx marketplace alongside the addition of new assets to the Telcoin Application without altering the existing incentives arrangement.
Altering the existing arrangement: The existing incentives arrangement will stay the same until decentralized governance goes live - at which point it will be up to governance how to regulate the flow of TEL units. Generalized incentives increase the total quantity of TELx incentives, and do not subtract from the existing set of incentives.
Beginning on Monday, May 9th and ending on August 7th, generalized liquidity mining will commence with three consecutive 30 day periods earning a total of 60 million TEL at a rate of 20 million TEL per period. Miners harvest from this quantity of issuance based on their liquidity, time, and diversity multipliers vs other generalized liquidity miners across the marketplace.
Issuance Allocation Formula
A total issuance of 60 million TEL is allocated to be harvested by liquidity miners via generalized mining at a rate of 20 million TEL per month.
- Issuance Quantity: 60M TEL
- Issuance per Period: 20M TEL/month
- Duration: 90 days
- Time Slots: 3 30 day periods
- Period 1: May 9th to June 8th, 2022
- Period 2: June 8th to July 8th, 2022
- Period 3: July 8th to August 7th, 2022
- Calculation: Every 30 days
- Calculation Mechanism: Off-chain script
- Distribution: 30-45 days after the beginning of each period
- Distribution Mechanism: Airdrop
Basis for Issuance Allocation: Multipliers
Liquidity miners harvest a pro-rata quantity of generalized TEL issuance based on their liquidity, diversity, and time multipliers.
In TELx generalized incentives, instead of your share of staked LP tokens determining your share of incentives, the quantity of TEL you harvest is based on the total average value (in USD) of your liquidity across all supported pools. We also introduce “multipliers,” a way to increase your share of incentives using the same capital.
To illustrate how this works, let’s start with a simplified example:
Imagine you have provided liquidity to two supported pools. The average value of your liquidity in pool A was $50 over the past week, and the average value of your liquidity in pool B was $60 over the past week. The average total liquidity for pools A and B over the past week was $50,000 and $100,000, respectively. This means that your share of incentives is $(50+60)/(50000+100000)=0.00073$ (you get 0.073% of total TEL incentives for that week).
TL;DR - to maximize your return, spread your liquidity as evenly as possible throughout eligible pools and avoid withdrawing previously deposited liquidity.
The new Generalized Incentives system has two multipliers that allow you to boost your share of TEL issuance. First, we have the diversity multiplier: liquidity providers are rewarded for contributing to many pools as opposed to just a few. Second, we have the Time Multiplier: liquidity providers are rewarded for remaining in pools for long, continuous periods of time.
These multipliers increase your “effective liquidity”. Your share of incentives is calculated as your share of total effective liquidity across all miners in all pools.
Optimizing for both of these multipliers can increase your effective liquidity by as much as 183 percent (2.83x)!
The Diversity Multiplier
The new diversity multiplier allows you to boost your earned incentives by provisioning liquidity to as many pools as possible. The maximum diversity multiplier is 1.5, meaning you can boost your effective liquidity by up to 50 percent by spreading out your investment across all eligible pools.
Let’s walk through an example:
You have $100, and there are two pools that are eligible for Generalized Incentives, TEL/MANA and TEL/MKR. If you put all $100 into the TEL/MANA pool, your “effective liquidity” is $100.
If instead, you put $75 into TEL/MANA and $25 into TEL/MKR, you benefit from the diversity multiplier. Your effective liquidity is now $125, a 25 percent boost!
Now imagine you split your capital equally, so $50 in each pool. Your effective liquidity becomes $150. You’ve boosted your effective liquidity by 50 percent without using ANY additional capital! 🤯
If you want to dive deeper on the math behind these numbers, see the Mathematical Formula section below.
The Time Multiplier
The time multiplier rewards LPs who keep capital in liquidity pools for long, continuous periods of time. Time multipliers are calculated on a per pool basis, meaning that your activity regarding one pool does not affect your time multiplier in any other pools.
Your time multiplier for your capital in any given pool increases by a factor of 1.05 every week. Everyone’s time multiplier is reset back to 1 every 90 days.
If you withdraw some or all of your liquidity from a pool, then your multiplier for that fraction of your liquidity is reset to 1.
Eligible Assets & Markets
Any asset x which has been added to the Telcoin Application, and has a corresponding pool address for liquidity mining.
In the first version, each newly listed asset will be announced alongside a corresponding liquidity pool with the parameters located below.
Liquidity Pool Parameters
The following list of liquidity pools will begin mining generalized TELx incentives on May 9th.
- Token Contract Address: 0x53E0bca35eC356BD5ddDFebbD1Fc0fD03FaBad39
- Add Liquidity: Balancer(Polygon) : TEL/LINK
- Liquidity Provider Token (LPT) Contract Address: Polygonscan: TEL/LINK LPT
- Token Contract Address: 0xA1c57f48F0Deb89f569dFbE6E2B7f46D33606fD4
- Add Liquidity: Balancer(Polygon) : TEL/MANA
- Liquidity Provider Token (LPT) Contract Address: Polygonscan: TEL/MANA LPT
- Token Contract Address: 0xb7b31a6bc18e48888545ce79e83e06003be70930
- Add Liquidity: Balancer(Polygon) : TEL/APE
- Liquidity Provider Token (LPT) Contract Address: Polygonscan: TEL/APE LPT
- Token Contract Address: 0x172370d5Cd63279eFa6d502DAB29171933a610AF
- Add Liquidity: Balancer(Polygon) : TEL/CRV
- Liquidity Provider Token (LPT) Contract Address: Polygonscan: TEL/CRV LPT
- Token Contract Address: 0x6f7C932e7684666C9fd1d44527765433e01fF61d
- Add Liquidity: Balancer(Polygon) : TEL/MKR
- Liquidity Provider Token (LPT) Contract Address: Polygonscan: TEL/MKR LPT
- Token Contract Address: 0x61BDD9C7d4dF4Bf47A4508c0c8245505F2Af5b7b
- Add Liquidity: Balancer(Polygon) : TEL/AXS
- Liquidity Provider Token (LPT) Contract Address: Polygonscan: TEL/AXS LPT
- Token Contract Address: 0xb33EaAd8d922B1083446DC23f610c2567fB5180f
- Add Liquidity: Balancer(Polygon) : TEL/UNI
- Liquidity Provider Token (LPT) Contract Address: Polygonscan: TEL/UNI LPT
Token Contract Address: 0x5fe2B58c013d7601147DcdD68C143A77499f5531
Add Liquidity: Balancer(Polygon) : TEL/GRT
Liquidity Provider Token (LPT) Contract Address: Polygonscan: TEL/GRT LPT
Time Multiplier Calculation
Calculation of the time multiplier is not easy to express purely with math.
To calculate the time multiplier for a specific user in a specific pool, we need to maintain a stack-like structure containing a user’s deposited amounts (measured in LP tokens) and their corresponding multipliers.
If this is the first round of incentives or we are resetting time multipliers, we skip the following calculation and set each user’s time multiplier to 1. We also create and save a stack for each user that contains:
If this is not the first round of incentives, we fetch the user’s stack from the previous round and multiply each element’s multiplier by 1.05.
We then iterate through the user’s deposits and withdraws during the current period and modify their stack.
When a user deposits into a pool, we push the following onto their stack:
When a user withdraws from a pool, we have to remove elements from the stack or decrement their amounts.
Once we have gone through all the user’s deposits/withdrawals, the final calculation of their time multiplier is:
The stacks for each user are saved to disk so they can be used in the next round of incentives.