Temp Check: Migrate the DAO LP from Minswap to Splash
Short Description: The Lenfi DAO owns a substantial part of the LENFI/ADA LP on Minswap. However, the decreasing MIN emissions make providing liquidity to the LENFI/ADA pool unattractive over time. On the other hand, Splash protocol is set to unveil its escrow voting system and veSPLASH governance, where SPLASH holders will have the power to choose which pools to boost with SPLASH rewards. This presents a compelling opportunity for the Lenfi DAO to reassess its current liquidity position. This post aims to gauge community sentiment on whether the Lenfi DAO should migrate its LP position from Minswap to Splash to capitalize on new reward opportunities and add another perspective on Lenfi’s long-term vision for sustainability.
Problem
The Lenfi DAO’s current LP position on Minswap amounts to ~42% of the total and offers ~9.5% APR in the LENFI/ADA pool, or 2078.4 MIN (~1.93% of the total daily emissions) and 66.4 ADA daily emissions. Meanwhile, the pool gets 6.15% APR based on the 30D trading fee volume. The figures surely represent strong returns in the short term. Still, the pool APR will likely continue to decrease as the decline in MIN emissions further diminishes the rewards potential. As a result, the low yield not only affects the attractiveness of farming for individual LPs but also limits the DAO’s ability to grow its treasury efficiently. Of course, we do not account for Minswap’s fee-sharing staking mechanism, which we will discuss down the line.
On the other hand, Splash protocol offers a unique opportunity: The project is set to launch its voting escrow mechanism in April. By migrating the DAO LP position, we could boost the LENFI/ADA pool with SPLASH rewards, which can then be staked as veSPLASH to earn a share of the Splash DEX’s protocol fees (Splash distributes 100% of its fees to veSPLASH holders). Additionally, owning a pool on Splash would allow the Lenfi DAO to add LENFI rewards as an extra incentive in a fully permissionless manner, enhancing flexibility and community governance over reward distribution.
Apart from the barebone benefits, the migration to Splash could reinvigorate interest in providing liquidity, deepen the pool’s resilience against volatility, and align with the DAO’s goal of maximizing value for its community. Since the DAO LP represents a big portion of the total LENFI/ADA LP on Minswap, individual providers will receive more rewards, which may potentially attract more holders to provide liquidity.
Further Overview of the Possible Solutions
To frame the discussion, here are the two primary options under consideration:
Option #1: Maintain the LP Position on Minswap
In short, Minswap is a well-established DEX with deep liquidity and a proven track record. Staying put avoids the risks associated with migrating to a newer platform and ensures continuity for current LPs. The trading volume on Cardano is still dominated by Minswap, which is, by far, the most significant incentive to maintain the LP there. Here are some useful metrics that showcase the total yield if we account for staking the earned MIN rewards:
Minswap APR (LENFI/ADA Pool with Fee Sharing)
Base LP APR (Provided Metrics):
- Total APR: 9.453%
- Trading Fees (30D): 6.15% = 266.5 ADA/day
- MIN Emissions: 1.752% = 74.82 ADA/day (2,078.4 MIN/day Ă— 0.036 ADA)
- ADA Emissions: 1.551% = 66.4 ADA/day
- TVL = ~1.56M ADA (148,817.8 ADA/year / 0.0954 = 1,560,000 ADA)
- Total daily rewards = 407.72 ADA/day → Annual = 148,817.8 ADA/year → 9.54% APR (consistent with 9.453% within rounding)
Fee Sharing (9-Month MIN Staking):
- Staking MIN APR: 15.507%
Breakdown:
- ADA APR: 12.08%
- MIN APR: 0.429%
- XER APR: 1.071%
- TOKE APR: 0.328%
- ROLL APR: 0.426%
- ZEKE APR: 1.173%
Total APR with Fee Sharing:
- Base LP rewards = 148,817.8 ADA/year
- Staking rewards = 4,233.99 ADA/year
- Total annual rewards = 148,817.8 + 4,233.99 = 153,051.79 ADA/year
- APR = (153,051.79 / 1,560,000) Ă— 100 = 9.81%
- Note: This assumes MIN is staked for 9 months continuously; actual APR may vary if unstaked or prices fluctuate.
Risks and considerations
The low ~9.6% APR and Minswap’s gradual reduction in MIN emissions make farming increasingly unappealing. This could lead to a gradual erosion of liquidity as providers seek better yields and avoid providing liquidity because of the lower rewards that could otherwise offset impermanent loss.
Option #2: Migrate the LP Position to Splash Protocol
Splash’s veSPLASH governance and reward-boosting mechanism offer a dynamic way to enhance yields for the LENFI/ADA pool. SPLASH rewards could be staked as veSPLASH, generating additional revenue from protocol fees. The permissionless nature of Splash also allows the DAO to deploy LENFI rewards flexibly, tailoring incentives to community needs.
Beyond immediate yield improvements, migrating to Splash aligns with a forward-looking strategy: the ability to influence pool boosts via veSPLASH voting empowers the DAO to prioritize its own pool, while the fee-sharing model provides a passive income stream that could be reinvested into the DAO, reducing reliance on external incentives like MIN emissions. Here’s a more detailed breakdown of the SPLASH emission schedule:
Emission schedule
The initial daily inflation stands at 32k SPLASH, corresponding to a 20.14% YoY inflation rate. This elevated rate will be maintained for a period of 91 days to incentivize liquidity provision through attractive APRs. Subsequently, the inflation rate decreases by 30% and continues to decline by 2^(1/12) each quarter, with each quarter lasting 91 days.
The APR is calculated for the 3 years following the vote escrow launch, assuming the spot price remains unchanged.
This estimation does not consider yield from protocol fees, which are paid in pure ADA.
|- | Daily SPLASH emissions | Est. Emission Rate | Estimated APR %|
|Q1 | 32,000.00 | 1,391.11 | 4.52%|
|Q2 | 22,400.00 | 973.78 | 3.16%|
|Q3 | 21,173.38 | 920.45 | 2.99%|
|Q4 | 20,013.92 | 870.05 | 2.83%|
|Q5 | 18,917.96 | 822.40 | 2.67%|
|Q6 | 17,882.01 | 777.37 | 2.52%|
|Q7 | 16,902.79 | 734.80 | 2.39%|
|Q8 | 15,977.20 | 694.56 | 2.26%|
|Q9 | 15,102.28 | 656.53 | 2.13%|
|Q10 | 14,275.28 | 620.58 | 2.02%|
|Q11 | 13,493.57 | 586.59 | 1.90%|
|Q12 | 12,754.66 | 554.47 | 1.80%|
If we take the volume figure for February (117,000 ADA) and assume that the LENFI/ADA pool takes 8% of the total fee share on Splash, this is what the rough returns will look like for Q1:
- Fees (8% of 117,000 ADA): 334.29 ADA/day → 7.71% APR (30D equivalent)
- SPLASH (Q1): 617.6 SPLASH/day = 84.61 ADA/day → 1.98% APR
- Total daily rewards = 418.9 ADA/day
- Annualized = 152,898.5 ADA/year
- APR = (152,898.5 / 1,560,000) Ă— 100 = 9.80% (Q1)
Note that this calculation does not account for the fee-sharing data provided beyond veSPLASH. However, you as a veSPLASH holder will also receive:
- right after the VE system launch: share of the ALL accumulated protocol fees to date
- after the VE system launch: a share of the 100% protocol fees weekly
The protocol fee (0.01% for most pools) is a small fee in ALL Splash pools that is collected for veSPLASH holders.
In essence, the Lenfi DAO will receive two roles in the system:
- LP
- veSPLASH holder
, and receive rewards in both streams
IMPORTANT NOTE: Migrating the DAO LP to Splash doesn’t mean it should forfeit staking MIN and earning % of the fees as a strategy. We can move the LP to capitalize on the stronger emission schedule on Splash while retaining the MIN rewards and staking them to earn a share of the Minswap fees.
Possible risks and considerations
Splash is a newer protocol and certainly has some catching-up to do in terms of adoption. Besides, the migration process, while planned to be gradual, carries execution risks that could temporarily affect liquidity or loan positions if not managed carefully.
Of course, there’s a minimal risk that the Splash DAO might not boost the LENFI/ADA pool, though discussions with top SPLASH holders indicate support for this migration. Splash’s lower trading volume compared to Minswap is another hurdle, but the ability to incentivize our pool and accumulate SPLASH for protocol fee revenue could offset this over time.
Some Comparative Metrics
- Minswap APR (with Fee Sharing): 9.81%
- Base LP: 9.54% (266.5 ADA/day fees, 74.82 ADA MIN, 66.4 ADA emissions)
- Staking MIN (9 months): Adds ~0.27% (4,233.99 ADA/year, mostly ADA at 12.08%)
- Splash APR (Q1): 9.80%
- Fees (8% share): 7.71% = 334.29 ADA/day
- SPLASH: 1.98% = 84.61 ADA/day
Key Differences
- Yield: Minswap’s 9.81% (with fee sharing) edges out Splash’s 9.80% (Q1) by a mere 0.01%, a negligible difference. Minswap benefits from staking rewards, while Splash relies on higher base fees and emissions.
- Trends: Minswap’s MIN emissions decline, and staking rewards depend on a 9-month lockup, while Splash’s SPLASH emissions drop post-Q1 (e.g., Q12: ~8.94%), but veSPLASH fees and LENFI rewards add unquantified upside.
Conclusion
To conclude, Minswap’s 9.81% APR (9.54% base + 0.27% staking MIN) narrowly beats Splash’s 9.80% Q1 APR (8% fee share) by 0.01%, a virtual tie. But while it excels short-term with staking, its declining emissions may not be feasible for the Lenfi DAO as an LP provider. Moreover, the pool is currently managed by Minswap, meaning we rely on their team (unless we initiate a change of management vote and win 50%+ of votes from LPs) to change the pool fees and are fully reliant on them to add rewards (e.g., LENFI). In that case, the Lenfi DAO might favor Splash long-term, where veSPLASH fees could tip the scales as volume grows. Additionally, the DAO will be able to add LENFI or any other rewards in a totally permissionless manner. Splash’s strategic edge makes it preferable for growth, despite near-term parity. If approved, a gradual transition ensures safety. Of course, the sought-after discussion will help refine the proposal before putting a formal off-chain poll.
