Funding Request for Liquidity Mining Program Extension from Polymarket

Really love this idea of using KPI options for this grant. I think that could really be used to measure how efficient we are being spending this much uma. I am not in favor of handing over $3m in uma tokens though without a using something like KPI options to distribute rewards as they are earned. I’d also be interested in seeing where the tokens used from this round of incentives ultimately end up. Ideally i would like to see this UMA finding it’s way into the hands of the people that participate. I’m not sure that the liquidity mining rewards are currently doing that as structured. I do think polymarket brings value to uma protocol but as kevin said would love to see that put into some measurables.

I actually have to push back a bit here as I’m highly doubtful that the interest in Uma is due to the liquidity mining program. On the contrary most of the markets have very low liquidity and I’d bet it’s mostly supplied by the poly market team.
Also, in response to @L-Kov ’s remarks about growing the Uma community I’ll say this: as I’m mostly a lurker on discord and can’t say that I’m any big value add. I would like to point out that out of the 20 or so poly market community members that participate in the “discussions” on uma’s discord, half of those 20 are there mostly to troll and many are outright disrespectful to both the Uma community and team. Many use homophobic and racial slurs and honesty it got so bad I stopped participating in the discussions. It may be better now, I don’t know, have not checked that channel lately.

Hey @random

I’m sorry you’ve not had such a great time in the discord recently. We have had a bit of trouble with moderating the voting channel recently. If you see any racism, sexism or homophobia, or even just general trolling, please do tag a mod and we will deal with it asap.

We’ve redesigned the voting discussion area on discord to have more signal less noise, if you have any other suggestions of how we can make that area more congenial drop in a post.

(NOTE:posted as forum admin )

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Thank you @Mhairi-UMA I appreciate it but like I said I mostly lurk so it doesn’t affect me as much as some of the others that interact with the trolls. The Uma team has done well so far in trying to keep civility and I’m sure it’ll get worked out. I’ll report it if any of that comes up again.

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The testing of the oracle has been productive (if combative at times), so the integration is clearly a success.

The important issues are:

  1. What is happening with the UMA when it is distributed?
  2. What KPIs are you going to use to better distribute rewards?
  3. How can we convert holders into long term users and supporters of the protocol?
  4. How well have you done at preventing abuse of the mining system?

Most tokenholders and team members have addressed 1-3 at length. I’m curious about point 4.

I reviewed your rewards page here: Polymarket - Rewards

And it looks like you distribute awards based on the fees paid through market volume and through providing liquidity for the duration of the program’s weekly cycles.

How are you preventing the first obvious issue, where people just perform trades to generate volume but not meaningfully engage with your protocol? Seems these people would be most likely to farm the rewards and leave, with Polymarket and the Oracle worse for the wear. I am imagining just running a bot that performs $1,000 trades in your highest liquidity market on both sides over and over. What methods do you use to identify this person and exclude them from rewards? And if they do it just several hours apart? You said you had some ways of doing this but didn’t elaborate on it.

How sophisticated is the liquidity tracking? Can’t I program a smart contract that would add lots of liquidity to a pool, then attempt to frontrun your users buys by pulling the liquidity beforehand and re-adding it afterwards? Have you experienced this, can you prevent it?

Now, what about the intersection of this where I can add liquidity to a featured market and perform transactions over and over through it until my funds are entirely converted into fees, which are then paid to myself. Isn’t this the best way to exploit the liquidity mining program? I would:

  1. Receive my own fees back to me (no loss)
  2. Pay an egregious proportion of the outstanding fees
  3. Obtain the liquidity mining rewards

More detail on this would help us make an informed decision about how much to award the proposal and for how long. I am more inclined to support longer proposal of more UMA if there are assurances with the KPI that awards are being appropriately dispersed to people who are REAL users of both of our protocols.

I’m looking forward to the team’s response. Thank you for writing this up!

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Just want to briefly respond to this. RL and Polymarket are working on a solution that should help with this. The idea is that the price request gets made when the market launches, long before it is resolvable. The proposer is only rewarded if they propose a correct value after the conditions are met for the market to resolve (they lose their bond if they attempt to resolve too early). This means that there would be no concept of preloading. Instead, proposers would be incentivized to respond as soon as there is a definitive resolution instead of waiting for a request to be made with a reward.

This doesn’t pertain to the proposal exactly, but I wanted to mention it nonetheless.

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We would be more than willing to implement KPIs to track the performance and viability of this grant based on @kevin 's feedback. I agree with TVS tracking; are there any other variables that should also be considered?

RE partnership and marketing, Polymarket will better show UMA on each market page by bringing it to the top of the header. The team can also create more marketing material such as a dedicated Twitter and Medium post about a formal partnership with UMA, the benefits of using UMA, and how UMA works. The team can also explore hosting a joint Twitter space about the benefits and the future of UMA.

RE token plans, the team has explored having a token but we are still working out the various mechanisms that other prediction market protocols have struggled with in the past.

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Thanks for putting together this proposal. I think a lot of people have expressed similar sentiments to mine, so I will be brief.

I really enjoy working with Polymarket, and I think UMA is the perfect resolution system for Polymarket. We have some issues to work through on the technical side, but overall, I think the integration has gone quite well and can be a real, long-term benefit to UMA and Polymarket.

It seems a bit odd to me that Polymarket would operate a liquidity mining program on their protocol, solely funded by the UMA DAO. At the end of the day, this is a Polymarket product that uses UMA as its resolution layer. Polymarket gets more benefit per dollar than UMA does, since the users are primary users of Polymarket and only secondary users of UMA. For that reason, I think UMA’s contribution to a liquidity mining program administered by a protocol as large and successful as Polymarket should have at least equal funding from Polymarket. A joint liquidity mining program where both protocols have “skin in the game” would be much more palatable to me.

To add to the above, a liquidity mining program solely funded by UMA almost feels as if the UMA DAO is being asked to pay Polymarket to integrate with UMA. Framed that way, it would follow that the Optimistic Oracle integration is a net negative to Polymarket, such that it needs to be compensated for using it. I don’t think that’s the case, but if it is the case, that would be important feedback for UMA’s Optimistic Oracle, and the integration should probably be be reworked. Once again, I think if Polymarket were to contribute equally or more, then this would feel more like a joint effort to increase usage rather than a net payment from one protocol to another.

Lastly, I think discussing the liquidity mining program in terms of the percentage of the treasury is a bit misleading. Distributing these tokens dilutes the circulating supply of UMA. That process should be considered carefully, as each token holder is effectively diluted a little each time a token in the treasury is spent. Adding UMA to the circulating supply has a real cost to UMA holders, not just the treasury.

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good writeup, and perhaps youre already aware and im just providing information you already know, but i wanted to chime in that poly has been contributing USDC to the liq mining program in roughly equal amounts to the uma

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Thanks for that info – I didn’t realize that was the case!

I would be interested to hear more details on Polymarket’s (or other non UMA) contributions over the proposed 30 week period.

I would also request that Polymarket update its ancillary data when it submits questions to the Oracle to include p4 as an option. Naively, when I go to these votes, if I do not reference the discussion on Discord I forget that the YES_OR_NO_QUERY has both a relevant p4 and that Polymarket will use that reporting in a unique manner.

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I want to clarify a few things, as I worry that my post may have come off differently than I intended.

I strongly support the collaboration between Polymarket and UMA. I want UMA DAO to actively be involved in fostering that collaboration. Both Polymarket and Risk Labs have put in a ton of work to making this integration work, and I think we have a great relationship. I know this has brought a lot of benefits to UMA, and I hope it has done the same for Polymarket. I also really appreciate Polymarket actively engaging with the UMA DAO. To that end, I am very interested in seeing a version of this proposal go through. I would just like to work through some of the points raised above.

Thanks for putting together such a well thought out proposal!

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Apologies for the delayed response, I was on vacation for a few days.

@pemulis1 You’ve made some great points and I think Polymarket would be happy to experiment with UMA-denominated bonds and rewards for some markets and make a commitment to voting whenever possible.

I also agree that a bot responding to questions when possible is a desirable end state of the Optimistic Oracle. Market reporting should be as open and competitive as possible to drive speed up and prices down! This is exactly the behavior that the Polymarket integration is catalyzing which is in turn making the OO a more compelling solution for other projects.

@Mhairi-UMA The size of the request is based on a few factors. First conversations with RL suggested that if the liquidity mining program funded from their balance went well it would make sense for Polymarket to request an extended, expanded grant from the UMA DAO. This request is 3x longer and on a weekly basis only 1.65x larger. Second, an expectation for continued Polymarket user growth.

Lastly, the rapid expansion over the first half of the program is expected to coincide with new market structure improvements to Polymarket that will enable significantly more TVL, volume and markets. To your point that future reward expectations will motivate users to switch to alternative markets, I want to stress that this is a very small liquidity mining program in the broad context of DeFi and that Polymarket has become the largest prediction market in the world without a token and, until recently, without a liquidity mining program. This period of incentivization allows Polymarket to experiment with structural improvements that will make it more scalable and sustainable. This is quite different than the one off uPUNK and uGAS historical comparisons as Clayton highlights.

“I think that the (relatively) high number of disputes that we have seen recently have prompted some interesting thinking and is a general benefit to the UMA protocol.”

I strongly agree on this point.

“I guess my primary concern is that a 40 week programme (incl the initial 10 weeks) creates future expectations, which may see liquidity shift to alternative markets once that ends.”

Polymarket has become the largest prediction market in the world without a token and, until recently, without a liquidity mining program. This period of incentivization allows Polymarket to experiment with structural improvements that will make it more scalable and sustainable.

@Clayton

“The conversations in our community around disputes have been extremely stimulating and useful for the oracle. Both teams have put a lot of effort into this working well, and it is indeed a groundbreaking relationship for UMA’s oracle.”

I agree! I think it is safe to qualify Polymarket as UMA’s most established integration to date.

@Everythingblockchain

The initial grant was $100000 for 10 weeks. The proposed grant is $3MM for a 30-week period which is 10 times more.”

It seems your math is a bit off. To clarify, the original grant was 100,000 tokens over 10 weeks. The proposed grant is 495,000 over 30 weeks. 3x longer, and only 1.65x greater on average per week.

@Optimistic These are great questions. Will respond to them below.

  • What is happening with the UMA when it is distributed?

Admittedly, I am not aware of a very thorough investigation of what is done with the UMA once it is distributed, however many of the Polymarket community members now tout $UMA as one of their holdings. Some on-chain metrics could be pulled (ie number of wallets still holding UMA that claimed UMA), but none are seem straightforward or very accurate.

  • What KPIs are you going to use to better distribute rewards?

Polymarket is interested in extending the program with little disruption, so ideally Polymarket and the UMA community can come up with some amount under the current proposal. I worry the process to decide on KPIs will be overly cumbersome and they will ultimately be a bit contrived.

  • How can we convert holders into long term users and supporters of the protocol?

If Polymarket users are confident in the functioning of UMA as an on-chain oracle, I would imagine that they will champion it in other contexts.

  • How well have you done at preventing abuse of the mining system?

I would say Polymarket has done a stellar job preventing abuse and the program is designed to be adaptive in the face of unanticipated, counterproductive behaviors. The community actively polices each of the exploitive behaviors you have discussed and each week sandwichers and wash traders are removed from the generated reward proofs. This has set a precedent that has discouraged this type of behavior. Additionally, the ruleset has been evolved multiple times (see Polymarket discord) to improve its efficiency and further focus its impact. Polymarket monitors various health metrics for the program including volume to liquidity ratio, volume dispersion, the number of markets with significant liquidity etc. All Polymarket trading is on-chain and auditable by anyone and there are multiple community-built data tools that are widely used including PolymarketWhales.

@mrice32 As @CrunchWrapSupreme highlights, Polymarket has contributed USDC in amounts roughly equal to UMA contributions over the initial 10 week period, but for the same reason RL is delegating to the DAO past that point Polymarket is also delegating to the DAO for additional rewards. It’s not sustainable for entities without a token to contribute incentives on the scale of a DAO. With that said, Polymarket continues to make significant financial contributions to liquidity operations including bootstrapping markets with initial liquidity, This grant would complement Polymarket’s existing activities, providing additional fuel for market formation and development.

To your point of Polymarket getting more value per dollar than UMA does, I am not sure I agree. Polymarket is a customer of UMA, the protocol. I don’t think it is unreasonable for UMA to financially motivate this integration. It’s very common for growth stage companies to spend aggressively on user growth and I think this is a very similar relationship. For example, market deployers currently fund a $50 UMA resolver reward per sports game resolution which, compared to alternative sports oracles, is exorbitantly expensive. Sufficient and substantially cheaper alternatives to UMA (ie chainlink) exist for this specific use case, but Polymarket has committed to UMA as an integration and is helping improve unit economics in the process. It’s my opinion, although biased, that UMA should aggressively preserve this integration, which means opening up the war chest just a little. The exact purpose of the 35M UMA treasury is to “be distributed to encourage protocol growth”.


Overall, I think the relationship between Polymarket and the UMA community has been quite symbiotic to date: a win-win. I hope that my answers above can provide missing detail and additional clarity. Polymarket would like to continue the existing liquidity mining program without any gaps, which means a tight turn around on the proposal and vote. Given the positive impact Polymarket has had on the progress of UMA’s Oracle in such a short period of time, and the reasonable ask in the proposal, I hope we can push this over the line quickly so we can get back to building together!

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Do you have a link to your Discord?

Some on-chain metrics could be pulled (ie number of wallets still holding UMA that claimed UMA), but none are seem straightforward or very accurate.

Could there not be an analysis of walllets that have interacted with both the polymarket contracts and the UMA voter contract. That would give an indication of how many polymarket users actively participate in securing the oracle.

It’s not sustainable for entities without a token to contribute incentives on the scale of a DAO

I can agree with you there, but that just raises my curiosity level about why you aren’t going in that direction, as it seems like an inherantly safer route for a prediction market which could be caught in poorly defined regulatory schema.

I think there’s been some good feedback here from UMA tokenholders and in the light of that feedback I think I’d prefer that the proposal was adjusted to take some of those suggestions and modifications into account.

( NOTE posted a member of the UMA DAO, rather than forum admin )

I also agree with this, and have setup alerting to catch the bot if it tries any funny business. I lost 4000 dollars on a wrong resoluition that would have been saved if a bot had resolved it for me haha

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It would be much easier to track this (and would very likely lead to much higher engagement) when UMA instututes polygon based voting. Lot of polygon users flee eth because they dont like to pay gas fees, even if its refunded eventually, so its basically impossible for them to contribute in a meaningful way. I know uma has said theyd add that in the future!

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Very productive discussion, and I would echo a lot of the sentiments already expressed. I think a future iteration should have more visibility on metrics and increased promotion from Polymarket. This is a very, very good program and should be promoted as such.

The UMA/Polymarket relationship is a great one for both sides. The Optimistic Oracle is given real-world, iterative usage by people doing something productive on-chain. The Oracle is being tested and re-tested with resolutions pretty much every single day. 99.5% of those are uninteresting and swiftly resolved, but the .5% that are disputed have wound up in a process that I’ve been impressed with. It shifts dispute resolution from an opaque decision made by, typically, a single person to instead a large group of people who vote for the best solution.

I would think that as Polymarket continues to grow, we’re going to see Polymarket odds cited and discussed in the media beyond the somewhat insular world of crypto. A lot of the things being predicted on Polymarket are of interest to a large number of people who wonder whether something is going to happen (e.g. when will a vaccine be approved, will that boat leave the Suez canal, will the Elon Twitter deal actually happen, who will take the US Senate in 2022, etc. etc.). And for UMA to be there as essentially the backbone of each market seems like a potentially very good thing for UMA in the long-run.

How many crypto projects are actually doing something useful these days that’s not some hypothetical in a white paper? 1%? Less? So it’s important to put things in perspective here that UMA and Polymarket are in a mutually beneficial relationship that is producing real results, and it would be great to foster this relationship and water it a little bit, give it a little love and affection so that everyone can benefit :smiley:

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Sorry for messing up the maths here. :sweat:
However, I would really want your perspective on the long-term roadmap about PM’s token. Any rationale for opting or not opting to go that route?

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