This report evaluates the success of SushiSwap's wstETH/DAI liquidity pool incentive program, which began on August 18, 2021. The incentive program offered rewards to liquidity providers and was intended to attract capital and provide liquidity to the pool. To evaluate the program's success, we examined the pool's average TVL before the program began, the percentage increase in APR incentivized by the program, the percentage increase in TVL achieved, the percentage of liquidity providers who became yield farmers during the program, the average duration of the program, and the percentage of TVL pulled out from the pool after the program ended. After reviewing the data, we concluded that the program was successful in meeting its goals.
SushiSwap is a decentralized exchange (DEX) that operates on the Ethereum blockchain. It utilizes an automated market-making (AMM) algorithm to ensure liquidity for a wide selection of ERC20 tokens. The Onsen Incentive Platform, a secondary product of SushiSwap, has been launched in order to initiate liquidity mining incentives. This initiative helps the DeFi ecosystem by allowing for future interoperability opportunities and improving market efficiency for the endorsed tokens.
LIDO LM Program
On August 18, 2021, a news was published on the LIDO blog, the first few paragraphs of were as follows:
In light of the recent proposal, SushiSwap has joined forces with Lido to launch their wstETH/DAI liquidity pool with liquidity mining incentives. This recent implementation allows users to have access to more forms of stETH liquidity as well as improving the efficiency and interconnectivity of protocol integrations.
Users can provide wstETH (wrapped stETH) as liquidity to the respective pool to earn trading fees and additional incentives.
The pool will be allocated 200,000 LDO for the first month, with up to 13,500 SUSHI allocated from SushiSwap as well."
Weekly Staking Volume of wstETH/DAI Over Time - Incentive Program : 2021/08/18 - 2021-09-18
Average Monthly SLP Deposit Amount
Average Monthly SLP Depositors
The first look at the above graphs leads to the conclusion that this program was successful. But before we can draw a reliable conclusion, we need to examine various aspects of this program using the available data. Let's take a look at the level of capital withdrawals from liquidity pools and, of course, yield farming pool, and see how users have evolved over time. Are user entries and exits balancing out, or has investment and new user entry declined significantly? The following charts provide the answers to these questions.
Weekly Net Deposit Volume (Deposit minus Withdrawal) of wstETH/DAI SLP Tokens - Incentive Program : 2021/08/18 - 2021-09-18
Depositors vs Unstakers from wstETH/DAI Yield Farm
Weekly Cumulative Deposit / Withdraw / Current Farm Balance (Net Deposit)
Unfortunately, the number of users who participated in the liquidity provision has decreased at this point, so the amount of SLP tokens allocated to Yield Farming has decreased from about 300,000 at the end of the incentive program to about 1,000, which shows a significant decrease.
Therefore, we can conclude that this program was able to attract users at the beginning of its journey, but with the completion of the incentive program, the number of users has decreased significantly.