⚗️Staking Mechanics

Staking on most DEXs heavily favors short term liquidity providers. The problem is especially exacerbated on Concentrated Liquidity Market Maker(CLMM) DEXs like UniswapV3. For example, Ribbon Finance ran a short lived incentive program using Uniswap's V3 staker to promote liquidity in their RBN/WETH pool. However, this was exploited by sophisticated individuals setting up an automated strategy that consisted of the following:

1. Depositing liquidity into the minimum possible range.

2. Exiting the position when it went out of range.

3. Selling the received rewards.

4. Swapping into a new minimum range position around the current price.

The program ended with 77% of the rewards going to just 14 accounts, all using this same strategy. It’s pretty clear that this is not an ideal outcome, both from a liquidity provision perspective, as well as from the perspective of rewarding the RBN community.

Our Solution

Our staking model is designed to reward users for more time spent in the price range, ensuring that everyone is rewarded fairly for their contributions. DoveSwap's innovative staking model includes a vesting period, meaning that if you provide in-range liquidity for less than the vesting period, you receive significantly decreased rewards. This means that individuals who attempt the hyper-concentrated short term liquidity strategy outlined above will get virtually no rewards, and in fact their returns will almost certainly be negative due to swapping and slippage costs.

In our current farms the vesting period has been set to 7 days (will be updated). This might differ for future farms.

To break it down:

If your LP is in range and staked for 4 hours, you'll only make 1/6 of the APR if you choose to unstake.

You'll only be able to get your full APR after your tokens are staked for longer than the vesting period.