[reWARDS] July '22 Budget

[Chuck]

@Chuck

Let us calculate how much liquidity is required for a 1,000 stETH swap based on different conditions.

Liquidity(in ETH)	Price Slippage	Price Slippage	Price Slippage
	1:1 weight(steth-weth)	3:1 weight(steth-weth)	5:1 weight(steth-weth)
50,000	0.04%	0.073%	0.15%
100,000	0.02%	0.04%	0.076%
150,000	0.015%	0.02%	0.054%

Set 5,000 stETH as the benchmark, we will have the following result.

Liquidity(in ETH)	Price Slippage	Price Slippage	Price Slippage
	1:1 weight(steth-weth)	3:1 weight(steth-weth)	5:1 weight(steth-weth)
50,000	0.2%	0.43%	0.79%
100,000	0.1%	0.21%	0.38%
150,000	0.06%	0.1%	0.24%

Look through the above tables, we can figure that the unbalance of the pool assets is one of the most influential factors of price slippage. About 4 times of liquidity(ETH and stETH combine) will be needed to keep a 1000 stETH transaction at the same slippage while pool weight went from 1:1(stETH-WETH) to 3:1.

So, keeping the LP APR at a level of more attractive compared to other ETH yield generated options and less attractive compared to the stETH staking yield is very important to build healthier liquidity pools. Fundamentally, our incentive target is to encourage more ETH to join in the pool, not more stETH.