Andre Cronje wrote an article introducing an options-based liquidity mining mechanism to reduce liquidity "locusts."
This option allows users to purchase project tokens at a specific discount price within a specified period.Source: Andre Cronje's Blog
Organizer: Gu Yu
YFI founder Andre Cronje wrote today to introduce an options-based liquidity mining mechanism and provided corresponding prototype code to help projects reduce liquidity "locusts" and lower token sell-off pressure.
In the past, most liquidity mining users would regularly sell the tokens earned from mining, which created significant selling pressure on the secondary market for project tokens, somewhat detrimental to the long-term development of the project.
According to the article, the options-based liquidity mining mechanism was jointly proposed by Pods Finance and the Sushi team, specifically referring to the ability for project parties to provide options-based token rewards to liquidity miners instead of directly distributing token rewards. This option allows users to purchase project tokens at a specific discount price within a specific time frame.
Andre Cronje also summarized this mechanism using the example of the CRV price. If a liquidity miner mines 1000 CRV tokens, it means they will receive the right to purchase 1000 CRV at a price with a 50% discount from the spot price (assuming the CRV price at the start of mining is $2, the exercise price would be $1) within one month. If, one month later, the CRV token price is still $2, the mining user can use $1000 to purchase 10000 CRV and gain a profit of $1000 upon selling.
At the same time, Curve can obtain $1000 in assets from the user's purchase funds, "this portion of the profit can be distributed to veCRV holders, or allocated to the foundation, treasury DAO, etc., or even used for market making and providing additional liquidity," Andre Cronje stated.
However, if during this one-month period, due to the selling by many mining users, the CRV price drops to $1, then the liquidity mining users will have no profit incentive to exercise their purchase rights, and these 1000 CRV tokens will not be claimed and can even be returned to the project treasury.
