ONSEN v2 discussion - How can we one-up the market?

The Onsen LM program has been ongoing for almost a month now.

Perhaps it is time to regroup as a community, discuss the pros and cons of the project and how we can recalibrate forward

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As a start, lets count our achievements!

In general, TVL and trading volume has grown and benefited from the Onsen program:

TVL: gained from USD1.1bn to 1.8bn (+60%)
24HR trading volume: jumped from USD0.1bn to USD0.35bn (+350%)

*arrows refers to Onsen start date.

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I believe that there are still room for improvements (against Uniswap) - let me share some thoughts :

  1. Transaction fees to LP (especially eth/stable/btc majors) can improve: UNI’s LP receive 0.3% in fees, while SUSHI’s LP receive 0.25% for the similar effort, which means SUSHI LP program loses out. The result is self fulfilling, LP goes to Uniswap because more returns, TVL pools gets larger and creates higher frictional volume.

    Of course, SUSHI’s LPs are also compensated through ONSEN emission, but why do LP still provide on UNI instead of SUSHI? I feel it is the lack of education. There was never an easy way to compare net returns of LP-ing between the two DEXs. We can change that right?

    Request: Could the community come out with an LP calculator to compare returns between Uniswap and Sushi? This will better educate the LPs to switch.

    In addition, are there other better ways to lube/incentivise LP over from UNI to SUSHI? Perhaps a incentivised 1 click “LP swap” that was used back in Chef Nomi days? Some form of IL insurance or better rewards for long vesting?

  2. More permissionless entries for Onsen: At this moment the onsen program is not dynamic or permissionless because it requires ‘centralised approval, or Maki to coordinate. This is not optimal because it’s centralised and not real time. Is there a way to make it easier? This will incentivise new projects to list on Sushiswap instead of its competitors.

    On this train of thought, we probably also need a way to filter out opportunists (which are just in it “listing mining”)

    Solution (“private room onsen”): Allow permissionless listing and unlock Onsen returns once a certain performance benchmark is reached. For example, when the pool size hits USD5m liquidity it auto kicks in some ONSEN rewards.

    This will help weed out fake projects, while encouraging quality ones to join. Who knows? Maybe future projects will start incentivising its community to reach OUR benchmarks - a win-win situation.

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Fishing for comments. And the core team too!

Eugin

3 Likes

afaik:

  1. we already have 1 click LP migration option (should be live on sushi lite, maybe it will be integrated also in sushi staging?idk)

  2. there are lots of dashboards and analytics you can use to choose between uniswap and sushiswap

I don’t think Onsen should be permissionless.
Listings are a business decision after all and we have to make sure that we don’t list rugs or scams or shit-tokens, therefore in my opinion a centralized approach is not only advisable (we want to choose the best tokens) but also necessary (we don’t want to incentivize rugs).

2 Likes

I think Uni’s only edge is permissionless listing of rug tokens to be honest.

Also - we could perhaps provide for fee % revision feature (to be approved by DAO) for undercutting purposes to attract more LP. Not sure how sustainable this is.

The thing with Private Onsen is tbh anybody can set the price for their tokens when they’re the first liquidity provider. IMO - a better performance benchmark to activate a “private” Onsen should be trading volume, not pool value.

I think the Onsen program is a great growth hack for projects & Sushiswap as it is.

I agree with @zafalijadev that it shouldn’t be permissionless. It’s a promotion of projects which should require a certain quality threshold and due diligence.

I believe you could charge projects but there is already decent value generated for LPs and Sushiswap as you pointed out @Eugin. In fact, I like the simplicity and would let this program run as it is.

I don’t know exactly what’s already “cooking” but I see additional opportunities in running competitions and trading challenges with users and projects - and here it makes sense to have projects commit funds.

(I think this model would similarly benefit projects and Sushiswap and I like it more than “paid ads” which almost always comes at a cost of quality in the long-term.)

you mean lowering fee % for certain pairs?
Like going from 0.25% to 0.2%?
I think this would be a race to the bottom

by the way I’m not sure what you mean when you say that Uni’s only edge is permissionless listing of rugs.
Rugs can be listed permissionless on sushiswap too but of course we shouldn’t incentivize them.

1 Like

To be honest I was writing down some ideas to improve Onsen.
Actually there’s not so much to be improved but we should have guidelines or criterias when choosing which tokens will be listed and which not…you know, for transparency and efficiency.

For instance I believe we should prioritize volumes: if your token is already listed and actively traded on uniswap it deserves to be listed over low-volume tokens.
This might sound dumb and somewhat taken for granted but it’s better if we underscore it.

I thought we could streamline the applying process by setting up a typeform or something like that in order to collect useful datas about the token and maybe some info about the devs themselves…we don’t want to list rugs.

2 Likes

Thanks for the suggestions!

I actually like the specially curated nature of Onsen. It makes projects feel screened and vetted, and builds trust for newcomers. I actually used to look forward to weekly chef menu, as a radar for what tokens the market is eyeing. So I prefer current style to permissionless listings.

The story the data tells has been great too - that despite having fewer pairs on the long tail, SushiSwap volume is not far behind Uniswap on some days. To me it implies that it’s the quality menu offerings that form the bulk of business for us. And for this reason I’m not in favour of lowering the trading fee %. There are other areas we can make more efficient and enticing before slashing our own revenue.

Great discussion :slight_smile: Happy to see so many twitter frens here hehe

there should be a balance between central and permissionless. or this will always happen: “At this moment the onsen program is not dynamic or permissionless because it requires ‘centralised approval, or Maki to coordinate. This is not optimal because it’s centralised and not real time.”
and the community will also always look to the core team to vet these projects and sometimes a really good project, could end being a rug in the long run, which could hurt PR between team and community. Happened with us in the Ocean community: Ocean team had purple badges and vetted projects launching their datasets. One of them actually ended up rugging and these guys were “legit”. Received grants and was one of the winners of the IBM Ai-xwatson covid hackathon that ocean was hosting.

The private room onsen, could definitely work (might need some tinkering around). The community should be responsible in vetting these projects and not be reliant on the core team to say what’s legit or not.

“Launchpads” are gaining traction in defi, this could be sushi’s “launchpad” program. The listing project has the responsibility to gaining appeal and trust of the sushi community. With mvp, info, graphics, etc. The listing project could even gamify their benchmark to attract more poolers.

Trust doesn’t come from a centralized entity. it’s an ongoing relationship between provider and community.

“At this moment the onsen program is not dynamic or permissionless because it requires ‘centralised approval, or Maki to coordinate. This is not optimal because it’s centralised and not real time.”

We have literally 60 days to prepare each new Onsen round, I don’t know why we need to be more dynamic or real time…we don’t need to hurry since we will always have 2 months to prepare the next round

sometimes a really good project, could end being a rug in the long run, which could hurt PR between team and community

Trust doesn’t come from a centralized entity. it’s an ongoing relationship between provider and community.

Well, community doesn’t have to trust Maki or team because the community is already involved in Onsen!
4 community members have been chosen to take part in the jury and 4 more community members will be chosen to take part in the next jury.

The private room onsen, could definitely work (might need some tinkering around). The community should be responsible in vetting these projects and not be reliant on the core team to say what’s legit or not.

we definitely need a private room to avoid tampering from third parties; jurors’ identities should be kept confidential.

TLDR if it ain’t broke, don’t fix it …we don’t want to overgovern things

2 Likes

Let’s see, we are trying to compete with Uniswap which is apparently more dominant in terms of LP rewards and a lower barrier of entry for long tail assets. Could feel like a losing battle if we compete directly in that sense.

People tend to go for the path of least resistance and Uniswap feels like an easier choice. For me, designing Onsen to be more quick in selecting protocols doesn’t seem like the ROI is that great. It will help but how does it compete with Uniswap’s seemingly frictionless process?

May I suggest leveraging on SushiSwap does better than Uniswap? Capitalize on the community strength combined with the tech. I am on social platforms (twitter & telegram) everyday and the love for SUSHI is unbelievable. Perhaps there is a way we could tie everything together and make that an appeal for users to participate in Onsen and every other Sushi solutions.

Don’t get me wrong, utility is important but the narrative behind it is equally or arguably more important when it comes to picking a DEX to support for the long haul.

A few comments from an outsider (unless you count LP’ing for Sushi and Sushi staking as an outsider…)

People aren’t always logical and don’t always follow the liquidity. As part of my involvement in INDEXcoop I’ve been looing at liquidity mining.

image

Liquidity is pretty mercenary, so AUV follows incentives until they even out.

For $DPI the volume correlates pretty will liquidity, which makes sense.

However, for $INDEX the volume still sits on UNI. And I’m not sure why. For smaller trades, it probably makes little difference. But larger trades should be on Sushi.

What can the sushi community do? I would suggest the following:

  • Publicise the fact you have the liquidity so trades are better on sushi
  • Encourage Dex aggregators to list Sushi pool - On the assumption that if you are larger, you should capture more volume.
  • Consider becoming a Dex aggregator

Regards

OA

P.S. I don’t see the coop joining Onsen for INDEX or DPI in the near future. [other than a small loopring AMM experiment…] we are trying to wind down DPI incentives and will likely roll over the current staking contract to save stakers gas. We have shyed away from incentivising INDEX and I don’t see that changing. However, we are launching more products which may have liquidity mining…

2 Likes

I like the idea of setting up a Private Onsen for the newer LPs. And as pointed out by @zDrago, trading volume is the better performance benchmark. So perhaps we can have a liquidity lockup for LPs in the private onsen; And once the benchmark is met, the liquidity will be unlocked and the LP will be moved to the ONSEN.

I believe legitimate projects will have no issues hitting the benchmark.

Pedro and I were writing down a few ideas concerning Onsen next round
Feel free to drop a comment, feedback or something

trying to make sushi tastier :sushi: :sushi:

Disclaimer: this is by no means a final version and it doesn’t want to be a rulebook.
Just a few suggestions for the next round by me (random community member) and @Pedrowww

I am a trader. I hope sushi surpasses Uni. At present, the price of uni surpasses sushi

1 Like