Funding Request for Liquidity Mining Program Extension from Polymarket

  1. What is happening with the UMA when it is distributed?

I took a look and found about 34% of addresses that were distributed $UMA as rewards through the Polymarket liquidity mining program still hold $UMA on Polygon or Ethereum. However the actual percentage of people still holding UMA is likely to be even higher than this, because users often have wallets on Ethereum with different addresses. This is quite a high percentage IMO for a token rewards-based program; it shows that there is a significant proportion of people holding $UMA, and not selling it afterwards. Likely they want to have some say in the resolution process of Polymarket markets.

5 Likes

I think it’s important to focus this conversation on what’s being proposed, it’s too easy for this conversation to continue endlessly. What’s being proposed by Polymarket is an extension to the current liquidity mining program; the objective of which is to catalyze a healthy, liquid marketplace. The ruleset by which rewards are distributed is subject to change and has been evolved and will continue to be evolved by Polymarket to better serve the objective. Conversation around PM’s approach to the program and its long-term roadmap are outside the scope of the proposal and not particularly relevant to the discussion in my opinion. The discussion should stay focused on the proposal at hand, which again is a 30 week extension of the liquidity mining program on Polymarket funded by a grant from the UMA DAO. To cut through the noise, I think it makes sense to start a poll with the existing proposal. As @Mhairi-UMA has brought to my attention, to do this will require a mutlisig address to be defined in the proposal. I will revise the proposal and start a poll once this address has been determined.

3 Likes
Do you support moving forward with this proposal?
  • Yes
  • No

0 voters

5 Likes

I’m dumb but how does a multisig being a signer on a multisig work since the private key is unknown?

EIP-1271

On other note, the above seems like good proposal :+1::sunglasses::grinning:

4 Likes

ty sarah. that is pretty cool

I’m not how you managed to type so much without really addressing a lot of the issues that were brought up. I feel like nothing changed in your proposal at all and voting on it now feels like this is being forced.

As outlined in the UMA DAO Funding Proposal Process Medium post, to pass a proposal to snapshot, a discourse proposal must have a poll that is 7 days in length and signals a majority support. Based on Polymarket’s preference to not have any down time in the program, it’s required that this process starts. It’s hard to tell what is make or break for voters here so I think it makes sense to get a poll started and use the pending result of that to motivate the next step.

6 Likes

@Domer summarizes the synergies of Polymarket and UMA very well. Completely agreed that it is in both projects’ interests to continue to grow together.

However, if this is seen as a growth investment by the UMA DAO, it seems necessary to try to better quantify the long term positive impact for UMA as well as some clarify a few Polymarket roadmap items.

Organic liquidity, in the smart contract AMMs displayed on Polymarket, is being provided at the highest levels ever and trading activity has increased. March, 2022 was the best volume month for the AMM contracts displayed on Polymarket in a year.

It would be really useful to have clearer visibility into this impact from the initial LM trial that Polymarket ran.

  • How many total users participated in liquidity provision during the LM trial? How many of these were new LPs?
  • How is “organic liquidity” defined? How much organic liquidity was there during LM, and how much was there pre-LM?
  • With the assumption that “organic liquidity” is defined as liquidity provided by a party other than Polymarket (or potentially its partners), were any of the rewards used to compensate Polymarket for its liquidity provision, or were all rewards passed on to “organic” liquidity providers?
  • What avg % return did Polymarket liquidity miners get from the initial program?

With these stats in mind, why was 495,000 chosen as the number of tokens to request? What impact on Polymarket’s platform do you project that this will have (especially in regards to TVL since this is mostly what matters to UMA), and what indication is there from the original LM trial that this is true? Especially curious about the choice to increase the UMA/week ask. Is this to compensate for the fact that Polymarket will not continue matching UMA rewards, or do you see this amount of tokens accelerating growth for a particular reason? $3MM over 30 weeks results in an APR of about 86% assuming Polymarket TVL of $6MM, which is higher than it’s been throughout the LM pilot with rewards being paid from UMA and Polymarket together.

What can be done to combat the conflict of interest whereby Polymarket administers a program that could conceivably pay Polymarket for their liquidity provision or other protocol activity?

Additionally, like @Mhairi-UMA highlighted, setting a precedent that Polymarket will rely on UMA for liquidity incentivization does not seem healthy long-term for UMA. @L-Kov you compared this investment to - growth stage companies spending aggressively on user growth. This is a decent comparison, but this type of “growth investment” is usually done in a manner where there is a longer term sustainable model for company operations/revenue beyond the initial “artificial” growth stipend. What is Polymarket’s plan for liquidity incentivization beyond the funds asked for here? Should UMA expect that this type of support will continue to be asked for, or is this simply a stop gap until Polymarket implements a different solution?

What is Polymarket’s long term plan for market structure/liquidity provision? It seems possible that the main reason why Polymarket needs heavy liquidity incentivization is because LPing in AMM style binary markets is risky and takes a lot of active management. Rather than simply trying to offset massive IL risk with LM rewards, could implementation of a different market structure (like an order book) have more impact on total liquidity and the long term health of Polymarket?

1 Like

fully support :ok_hand: 。。

2 Likes

DELETED - proposal has been updated with a multisig address.

(NOTE - posted as forum admin)

A good proposal.

I’ve been using Polymarket since Sept 2021 when we were still using Ethereum, and have been very actively using Prediction Markets since 2016. Prior to that I sporadically traded the UBC and Iowa Election Markets (dating back to 1993 and Telnet!). During the past 20 months, Polymarket has made incredible progress and built a strong community of users!

From my point of view, Polymarket is well positioned to be an industry leader in predictions markets just at a point when the prediction market total marketcap is set to grow at an exponential pace.

I’ve also been following crypto-currency since June 2011, and am happy to see that (unlike many other projects) Polymarket has a well developed use case.

As such, UMA would benefit greatly from partnering with Polymarket.

I’m also an amateur data scientist and I enjoy making statistical models to predict the future (or explain the past). For instance, I recently built a (admittedly imperfect) model for predicting the number of Ukrainian refugees - as I felt that it could be both profitable and helpful to the UNHCR and other organizations (they never got back to me). While I lost considerable money on it, I think that accurate data models can often help us improve the world. And that is something everyone can hopefully get behind, regardless of your ideology.

4 Likes

DO IT​:partying_face::partying_face::partying_face::partying_face::partying_face::partying_face::partying_face::partying_face::partying_face::partying_face::partying_face::partying_face::partying_face::partying_face::partying_face::partying_face::partying_face::partying_face::partying_face::partying_face::partying_face::partying_face::partying_face::partying_face::partying_face::partying_face:Now

@L-Kov could I suggest modifying the proposal to receive funds in a mainnet Gnosis Safe? It will be easier for the DAO to send $UMA to a mainnet safe rather than a Polygon safe and you would need a mainnet safe for voting with your $UMA, anyway. If you’re planning to be an active voter, it would make sense to primarily hold $UMA in a mainnet safe and periodically send some over to a Polygon safe for liquidity mining distributions.

3 Likes

Very good point @pemulis1, Polymarket will redeploy the safe on mainnnet and update the address accordingly.

4 Likes

Thanks for bringing this up, i agree that this lm program definitely needs some tweaks. seeing that there’s several issues (including formulating KPIs) i would suggest that the polymarket team submit a short term proposal to extend the current LM program for a few weeks while working on really resolving some of the issues that have been brought up here. This feels kind of rushed and i can’t vote yes for the proposal as it stands now. I do appreciate all the responses and ideas being shared here. I think many of the suggestions can make this program much more efficient and effective

1 Like

@pdlozqng Thanks for these constructive questions. A condition of the RL initial 100k token grant was that any UMA earned by Polymarket-associated LPs would be circulated back into the program. Polymarket has obeyed this rule. Additionally, Polymarket provides liquidity as a loss leader and avoids significant liquidity provision in markets that are selected for rewards. I want to make it very clear, because it hasn’t been explicitly noted before, that Polymarket is not profiting or generating revenue from the liquidity mining program. Polymarket’s intent with the liquidity mining program is purely to encourage liquidity provision and create a more robust on-chain marketplace. If this proposal passes, Polymarket will operate under the same understood ruleset whereby it will avoid earning/claiming UMA rewards directly and if it does, those will be recycled back into the program.

  • How many total users participated in liquidity provision during the LM trial? How many of these were new LPs?

1434 users/addresses have added liquidity during the LM trial, 1234 of them being new LPs

  • How is “organic liquidity” defined? How much organic liquidity was there during LM, and how much was there pre-LM?

Organic liquidity is a blanket term for non-Polymarket liquidity provided for the purpose of getting fees or rewards. Organic liquidity has increased 243% since the start of the program. Based on the above statement that Polymarket avoids providing liquidity on incentivized markets, one can essentially assume all the liquidity in incentivized markets is “organic”

What avg % return did Polymarket liquidity miners get from the initial program?

This is a very hard (impossible) number to quantify as liquidity provisioning on Polymarket is a quite active affair. Given the binary nature of event markets, an LP who remains in the pool from creating to resolution will suffer ~100% impermanent loss. This means that returns from providing liquidity are highly dependent on individual LP strategies and market profiles. The ruleset, and tools for providing liquidity are open source and the markets are on-chain, so I think it is safe to assume providing liquidity is an increasingly competitive affair; anecdotal evidence from the community would corroborate.

With these stats in mind, why was 495,000 chosen as the number of tokens to request?

This number was chosen as it is a reasonable expansion of the per week rate of the initial program and it is expected to give enough powder to catalyze market formation around upcoming structural improvements.

What impact on Polymarket’s platform do you project that this will have (especially in regards to TVL since this is mostly what matters to UMA), and what indication is there from the original LM trial that this is true?

OI has increased 46% during the liquidity mining program (from start to peak). An interesting dynamic here, is that OI/Volume ratio is actually decreasing which likely means 1) the supply side is becoming more efficient and 2) there are compelling alternative USDC yield opportunities in the space. Polymarket has plans to iterate on the ruleset in the 30 week period to add some incentivization around OI, as there is an obvious opportunity cost to locked capital.

Is this to compensate for the fact that Polymarket will not continue matching UMA rewards, or do you see this amount of tokens accelerating growth for a particular reason?

Both. Polymarket will continue to make significant contributions to liquidity operation costs (particularly initial liquidity endowment), but the additional USDC subsidies for the program are eventually expected to end. The acceleration of rewards is intended to accommodate this tapering but more importantly, it is meant to coincide with structural improvements that are expected for Polymarket. These structural improvements, which have been in development for awhile, will create a more dynamic and sustainable supply side, but are also expected to require some kickstarting; hence the acceleration.

$3MM over 30 weeks results in an APR of about 86% assuming Polymarket TVL of $6MM, which is higher than it’s been throughout the LM pilot with rewards being paid from UMA and Polymarket together.

As mentioned above, the APR calculation for LPs is complex and market/agent dependent so this is not an accurate figure.

What is Polymarket’s plan for liquidity incentivization beyond the funds asked for here? Should UMA expect that this type of support will continue to be asked for, or is this simply a stop gap until Polymarket implements a different solution?

You are correct in your assumption of this effectively being a bridge to a more sustainable future. The defined schedule anticipates sustainability, hence the initial increase to a reward peek at the 20 week mark, then a decrease to zero. As you can imagine, Polymarket, more than anyone, understands the importance of a sustainable marketplace. The supply side of Polymarket is currently flawed and requires incentivization to work across many markets. This is a result of poor market structure, specifically the application of constant product automated market makers to binary event contracts. Polymarket has always known this shortcoming, but the existing market structure was simple and quick to develop. It has been Polymarket’s plan to improve the market structure and there is an ongoing effort on that front, the results of which will be public during this 30 week period. Polymarket, as you can understand, is unready to share all of the details, but it will be a significant improvement, and one that should allow for a sustainable liquidity fly wheel.


I spent much of the weekend thinking about this proposal and the community’s response and want to be quite candid in my thinking here. I recognize my obvious bias, but I think it is well understood by everyone in this thread that a relationship between Polymarket and UMA is beneficial to both sides. In a similar vein, success for Polymarket equals success for UMA. Polymarket is obviously very incentivized to optimize the rewards program and motivate activities that make Polymarket more successful. Polymarket took a large risk integrating UMA as a resolution source. The integration took a significant investment of resources by Polymarket. It is undeniably the most active and prominent integration for UMA to date. I understand the skepticism of some users in this forum as this is the largest grant vote to date (as far as I’m aware), but there are examples of grants (here is a great comp) by platforms/projects in the ecosystem that were larger, provided with much more enthusiasm and made at much earlier stages even before there was a clear symbiotic relationship. If Polymarket had come to the UMA DAO 5 months ago and proposed a grant of this size or larger with the KPI being the integration, I think it would have been a no-brainer. While we can get bogged down in specifics, I think the community should consider that the largest KPI of the Polymarket<>UMA relationship, the integration itself, has already been accomplished. Sure the liquidity mining program can be optimized (and it’s in Polymarket’s shared interest to do), but I don’t think relatively small metrics should get in the way of this proposal passing. I think an extension, then another proposal wastes time and energy that could be invested in the aligned activity of improving the program. Polymarket has shown that it actively iterates the program and does so through user input and will consider UMA’s input throughout the 30 week period. Polymarket has made a bet on UMA and UMA should make a bet on Polymarket.

11 Likes

wonderful idea! i wish this proposal will be passed!

The result of the 7 day temp check was

  • 54 voters
  • 83% in favour
  • 17% against.

The proposal has gone forward to a snapshot vote.

Link to snapshot

If the proposal achieves 51% of votes with a quorum of 10% of the circulating supply it will go forward to the UMA voter dapp for UMA tokenholders to vote on-chain.

The final results on the snapshot vote for this proposal were

  • Against - 11M UMA (92.08%)
  • For - 945K UMA (7.92%)
  • Quorum - 12M / 6.6M

Consequently this proposal will not go forward for an on-chain vote