Liquidity seems to be one of the biggest concerns in the ICP ecosystem. I’m wondering if we could have a small ICP inflation given as a reward to users who bridge the assets to ICP. Maybe start with just 1% (could be lower) of the ICP token supply given as a reward annually. There could be a way this might be gamed but the objective is just to get the ball rolling regarding this idea of rewarding minters for bootstrapping liquidity in the ecosystem. There are plenty of options on ETH for yield farming/native Eth staking and lending dapps that could generate 3%+ risk-free for the users. This is just my proposition for increasing the Liquidity. As you can see ICP is not a meaningful chain in terms of TVL or defi activity.
Pros of more liquidity:
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Enhanced Liquidity: Injecting additional tokens into the ICP ecosystem by inflating the token supply by 1% could significantly improve liquidity. This increased liquidity would lead to smoother trading experiences and reduced price volatility, making the platform more attractive to traders and investors.
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Market Stability: Improved liquidity can contribute to a more stable market environment, fostering confidence among stakeholders and encouraging greater participation in the ecosystem. This stability is essential for the long-term growth and sustainability of the ICP platform.
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Confidence Boost: Taking proactive measures to address liquidity concerns demonstrates a commitment to the project’s success and instills confidence in the community and potential investors. It signals that the project’s leadership is attentive to market dynamics and willing to implement necessary adjustments to drive growth.
Cons of token minting for rewards:
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Value Dilution: Inflating the token supply, even by a small percentage, may dilute the value of existing holdings for current token holders. This could lead to concerns among long-term investors about the erosion of their purchasing power over time.
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Inflationary Risks: There’s a risk that injecting additional tokens into the ecosystem could create inflationary pressures, albeit a small one but inflation.
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Community Concerns: Some members of the community may express reservations about altering the token supply, fearing the potential negative impacts on the ecosystem’s integrity and the fairness of the distribution of rewards.
In conclusion, the proposed reward mechanism offers tangible benefits in terms of liquidity improvement and market stability. The slight token inflation might not bode well with some members.
