Molecule has expressed intent on opening a GROW/ETH pool on Base chain in late February or early March. The aim of this proposal is to promote the pool’s stable expansion by rewarding existing and new GROW holders contributing liquidity through GROW incentives.
Overview
Background
To further expand accessibility to GROW, Molecule and bio.xyz are set to launch a GROW/ETH pool on Aerodrome Finance shortly, enabling direct transactions of GROW on the Base blockchain. Molecule will contribute all necessary GROW and ETH for the pool’s inception.
ValleyDAO aims to enhance this pool’s liquidity by providing additional GROW tokens for yield farming incentives, with Aerodrome Finance offering supplementary rewards to encourage GROW token holders to participate in liquidity provision.
Rationale
Base chain has been identified as a chain of strategic importance due to its cost efficiency and integration with Coinbase, making it a natural onboarding space for DeSci enthusiasts who are not yet familiar with the Web3 ecosystem. As of this proposal, Aerodrome Finance leads as the top decentralised exchange (DEX) on Base, measured by total value locked (TVL).
For ValleyDAO, supporting a pool on Aerodrome Finance aligns with our objectives by decreasing gas fees incurred through trading GROW, thus broadening participation and engagement with the GROW token. Encouraging liquidity provision not only benefits participants through fees and incentives but also stabilises GROW’s market value by deepening liquidity.
Expectations
Reduced Price Volatility: By incentivising community LPs, GROW’s overall liquidity offering will be expanded, making the token less susceptible to price fluctuations. This consolidates our continued commitment to strengthening the ValleyDAO ecosystem and ensuring sustainable growth of the project.
Yield Farming Rewards: GROW token holders will have opportunities to earn additional rewards through yield farming. By providing liquidity on Uniswap with their GROW tokens, holders can earn a share of the platform’s revenue or additional tokens as rewards.
Implementation
Enabling users to bridge GROW using Base Bridge:
ValleyDAO intends to make GROW bridgeable on Base bridge to allow the DAO and community members to bridge tokens onto Base from Ethereum Mainnet.
Supply LP incentives to Aerodrome Finance
We propose allocating 500 GROW weekly over 13 weeks (totaling 6500 GROW) from ValleyDAO’s Ecosystem Fund to incentivize liquidity provision on Aerodrome Finance. These incentives will be matched by Aerodrome Finance through their AERO token.
Conclusion
This proposal seeks to solidify our commitment to fostering a vibrant, community-driven liquidity ecosystem on Base. By incentivizing participation and providing clear benefits for liquidity providers, we aim to strengthen both GROW’s value and the overall ValleyDAO community.
Molecule’s LP tokens are not excluded from the yield farming, the reason is because we can’t control this as this is the mechanism of the liquidity pool.
Based on discussions with Aerodrome Finance team, they calculated that a target APR based on the current price of GROW and AERO (Aerodrome Finance token) would be the following if liquidity stays fixed at $150K, the APR from the AERO incentives:
$500 of GROW per week would get us ~$1500 in AERO, $1K → $3K in AERO, $1.5K → $4.5K AERO. Aero incentives are added on top of the GROW incentives, boosting the yield further.
$500 GROW incentives → 52% pool APR ($78K AERO annualized)
$1K GROW incentives → 104% APR
$1.5K GROW incentives → 156% APR
500 GROW is approximately $500, that’s why this number was proposed. We thought that $500 in incentives would be a good low number to try out this incentive program and see the results it generates. If successful, we could always increase it to $1000 or $1500/week through a new governance proposal.
We intend to get on the official Base Bridge. This is likely to be most accessible option for bridging to Base and was built by the Base team.
Bridging costs vary based on Eth gas fees and the price of eth at that time. Today it would cost approximately $30-$50 to bridge. I’d suggest exploring bridge prices over the weekend as they tend to be cheaper.
As Albert mentioned, we intend to use this 13 week period as a trial. Assuming this trial is successful, we will post another governance proposal to approve another round of liquidity for the pool.
The setup of the pool will depend on its timing—whether it starts with Aerodrome’s existing framework, similar to Uniswap v2, or after the expected Slipstream upgrade (slated to happen over the next couple of weeks), which mirrors Uniswap v3. Regardless of the timing, both options will result in a significant increase in the liquidity of the GROW ecosystem.
Thanks for clarifying Alex. Just wanted to also highlight that the chance of getting on the official Base Bridge is very low given the input that I’ve received from Base developers. They have a very unclear review process and I interpret it as that they’re only listing popular, mega high volume projects.
Running back into the limits of my Crypto/Finance knowledge again. I’ll support this as it seems experimental and mostly harmless at this scale, but I could be more supportive if I could get a brief simplification.
Hi Thomas, a ‘pool’ is a smart contract on a decentralized exchange. Think of it like a bag of tokens, say GROW and ETH. It allows a person to add GROW to the bag to grab ETH or vice versa. By adding ‘liquidity’ you basically add more tokens to this pool. This makes the pool more liquid, meaning that there is less price slips when someone wants to exchange one token for the other.
When a protocol provides pool incentives, they reward people for providing their tokens to the pool. In our case, people who add their tokens to the Aerodrome pool would receive GROW token and AERO token. This reward is called ‘yield’ and the activity of acquiring yield by providing liquidity is called ‘yield farming’. (I’d read up on yield farming before doing so to understand all the risks and benefits.)
Molecule is creating a pool on Base using their GROW & ETH tokens and we are proposing to help this pool become more liquid by incentivizing people to add their tokens as liquidity. We think promoting the pool is of strategic importance because a pool on Base charges users much less in gas fees than an Ethereum pool does, and because Base chain is a landing place for many people who are new to Web 3.
Thi sounds great, thank you for working this out!
I understood this is a test. Is there already an idea how much we would allocate if the test and governance proposal were successful?
Assuming the initial trial is successful, we may consider allocating a similar amount in the future. However, we will closely monitor the response from liquidity providers and the overall community engagement following the conclusion of this initial period before making any decisions.
. It gives GROW users some other way for NOW to use their GROW.