Astroport Phase 1 Launch
Evaluating the vampire attack success + behavioral trends from lockdrop
More than a year ago, the then new and upcoming dex Sushiswap offered $SUSHI as incentives to bootstrap liquidity for the platform. Users would simply take their existing LP positions on Uniswap and move to Sushiswap to receive $SUSHI tokens. To everyone’s surprise, the plan worked and has since been coined as the first ever vampire attack.
Fast forward a year later, Astroport has attempted to recreate a vampire attack on the Terra ecosystem. To bootstrap liquidity, the protocol launched a lockdrop phase where Terraswap LP providers can port over their LP tokens in exchange for $ASTRO rewards. More on the lockdrop here: https://docs.astroport.fi/astroport/workstation/lockdrop/phase-1-or-lockdrop
The main difference here is that in the case of Sushiswap, users were free to move their liquidity out of the platform after receiving rewards and hence the TVL (total value locked) decreased gradually post launch. Astroport’s lockdrop on the other hand, incentivizes users based on the number of weeks their LP tokens are locked (up to 52 weeks). This way, the hope is that this incentive structure encourages people to lock up LP tokens for longer duration and minimizes risk of a slow and gradual decrease of the platform TVL.
Now, a vampire attack event in itself is neither good nor bad. People are free to choose which platforms they want to provide liquidity on. Personally, I think the event is for the better as it encourages competition and competition leads to innovation - just look at the products that Uniswap and Sushiswap have introduced.
Was Astroport’s vampire attack a success?
Since a vampire attack is about moving liquidity from one dex to another, three broad categories to evaluate its success come to mind - engagement (how many users participated?), liquidity (how much liquidity is locked in for a year?) and usage (how does the trading volume fare between the two platforms?)
I’ll cover the first two here and dive into the third post launch. Within each of these categories, I’ll lay out several quantifiable key metrics.
Engagement - number of users migrated out of TAM, number of deposit transactions
Liquidity - how much TVL is locked for 52 weeks essentially the base/minimum liquidity locked in the protocol for a year
Usage - trading volume comparison of Terraswap and Astroport post launch (something to look into in the future)
Category 1: Engagement
The first category is evaluating the community engagement throughout the lockdrop. One quantifiable metric from this category is percentage of participation from total addressable market (TAM). We’re essentially asking how many wallets participated in the lockdrop out of the total number of liquidity providers on Terraswap for 10 LP pairs chosen for the lockdrop?
Crunching the number tells me there are 87468 total liquidity providers on Terraswap - this is our max TAM. Actual numbers could be less since some wallets could have withdrawn liquidity completely.
On the other hand, there were 23k wallets that participated in the lockdrop, which means it managed to attract at least 26.7% of TAM - quite a substantial number if you ask me! If I were to estimate actual numbers, it would probably be around 30 - 40%.
We also see that there were 60k deposit transactions which means on average, each participant performed almost 3 LP token deposits to the lockdrop.
Next on engagement, we can also ask the question, how many users provided liquidity just for the purpose of the lockdrop?
In the graph above, the blue line shows the number of new liquidity providers on Terraswap. The spikes of 2k - 2.5k that you see in December actually correspond to the dates of the deposit part of the lockdrop! This clearly shows the interest that Astroport has brought amongst new users looking to provide liquidity.
Taking a closer look on new users, we see that there were 9k new wallets that provided liquidity on Terraswap from December 14 - 18. When these wallets were crossed checked with Astroport transactions, it turns out that 8015 wallets from this list actually did participate in the lockdrop which confirms our hypothesis that Astroport was driving new users to provide liquidity.
Category 2: Liquidity
Rather than looking at the total LP tokens migrated, we can make use of duration locked to figure out the ‘guaranteed’ liquidity Astroport would have for a year.
The graph below shows the number of LP tokens for each pair against the number of weeks locked in the protocol.
Note that the minimum number of weeks locked is 2 and the highest is 52. We see liquidity concentrated on both ends of the spectrum. Some liquidity providers prefer to lock 2 weeks to test the waters while others gave their full commitment, locking in liquidity for a whole year.
From this, we can then estimate the minimum amount of liquidity the protocol would have in a year assuming prices for each pair remain relatively stable.
The total guaranteed liquidity for 52 weeks amounts to 200M USD, with the bluna-luna pair making up 43% of the total. I think the reason why there’s a lot of liquidity for this pair is because there is little risk for providing liquidity for this pair and thus more people are willing to lock it in for 52 weeks.
At the end of the lockdrop, it was reported that there is 1B USD locked. Given that only 200M is locked for 52 weeks, it is not wild to imagine a scenario where liquidity will be slowly taken out of Astroport as LP tokens are unlocked, similar in the early days of Sushiswap. The hope here is that the emission incentives and locking mechanics of $Astro is enough to provide liquidity stickiness - something to monitor closely as LP tokens unlock.
At the same time, while it is debatable that 200M is not a super impressive number for a dex’s TVL, keep in mind this is the minimum liquidity or the worst case scenario the protocol would have for 52 weeks. Folks that locked up for less than 52 weeks can opt to continue LP-ing in Astroport so I do expect the actual TVL to be much higher throughout the year.
So, was it a success?
Here’s a recap of what we observed on chain:
A total of 23k wallets or about a third of total Terraswap liquidity providers locked their LP tokens on Astroport
The lockdrop event attracted at least 8k new wallets to provide liquidity and lock them in Astroport.
A total of 200M USD liquidity is locked in the protocol for 52 weeks - in the worst case scenario, at least the protocol has this amount of liquidity to work with.
Based on these alone, I would say the event was a success; there was substantial amount of interest from the community and also for new users and there is comfortable amount of guaranteed liquidity locked in the protocol. While the event was successful in driving liquidity, it doesn’t determine actual usage post launch. The true test would still be actual usage ie trading volume on the platform.
This is done by checking the first timestamp where a wallet provided liquidity on Terraswap
Behavioral trends we can expect from similar ‘lockdrop’ mechanics in the future
The lockdrop mechanics implemented was one of its first in Terra. Essentially users would have several days to freely lock up and withdraw liquidity. However, after a few days, users could only withdraw and the amount that they could withdraw is reduced.
In this section, we’ll explore the behavioral trends observed that came about because of how the lockdrop worked and make predictions for future lockdrop events.
Observation 1:
When presented with a range of weeks, it’s hard for users to choose an ideal ‘locked duration to rewards’ ratio. Which is why we see a large majority of users choosing either 2 weeks for minimum rewards and least risk or go all out for max rewards.
To be honest, I had expected this graph to be a bell curve distribution where the middle seems to have the best balance of risk to reward ratio. But I guess because the difference in rewards for locking up for 2 weeks vs say 25 weeks doesn’t seem substantial hence we see a lot of folks opting for only a 2 week lock.
I’d argue that most retail users would not care for the increased in lockdrop rewards between 2 weeks and 25 weeks if their capital is not very big in the first place. Hence, expect to see very similar distribution graphs for future lockdrop like the lockdrop for Mars (locking UST for a set amount of time to receive $Mars tokens).
Observation 2:
While there is a spike of interest as soon as the lockdrop launches, most of the liquidity will come nearing the end of the deposit phase as people wait it out. In addition, there were almost no withdrawals during the withdrawal period.
While there is a spike in the first hour of the lockdrop launch, most of the deposits come in on the final day of the ‘deposit’ phase. We can expect folks to wait out and gauge others’ interest since there is no added benefit of being early to this. In fact, we can see the obvious spike in the number of deposit transactions in the last few hours of the deposit phase in the graph below.
Referring to the first graph, we also see practically no significant withdrawals during the withdrawal phase (evening of Dec 19 onward). I suspect this is because the estimated rewards are shown to people as they deposit - you can think of it as feeling as if you already own the rewards. Hence, withdrawing would feel like you’re losing out a lot.
This trend of ‘last minute’ deposits would most definitely be the case for future lockdrops as there are no extra benefit to being early. It would however be interesting to reward those who are early and we might see a change in behavior.
The same can’t be said for the withdrawals phase. I believe we see very little withdrawals this time because the token that is deposited is an LP token where its purpose is solely to provide liquidity. In the case of Mars’ lockdrop where only UST is accepted, withdrawals might be high since there is an opportunity cost for locking up UST. At the end of the phase, people might reconsider after estimating how much rewards they would get.
Observation 3
The number of transactions where LP is locked for 52 weeks is the same whether users were the ‘first to ape’ or the ‘final hour depositors’.
I had to do a double take because the graphs looked so similar. For this lockdrop, we saw that being the ‘first to ape’ or first settlers did not make them any more ‘committed’ to locking up LP for 52 weeks any more than those who deposits in the last hour.
The implication of this is that it doesn’t make sense to reward early birds in a lockdrop setting because the ones who deposit late also gave as much commitment if not more in terms of number of transactions. In fact, if we measured the volume deposited in USD, this would tip towards last minute depositors.
If future lockdrops do implement rewards for being early, I think this would discourage a lot of major players from particpating. Ideally, we want to encourage informed decision making, not blind aping.
Recap on behavioral trends from lockdrop
Choosing number of weeks locked is hard - it’s hard for people to imagine the ideal reward to risk(locking up tokens) ratio and hence we see a clear dichotomy of least risk vs all out ape.
A huge chunk of deposit volume would come in in the last few hours of the deposit phase as people wait it out.
While withdrawal phase for an LP token-based lockdrop would see minimal withdrawals, same can’t be said where UST is used for the lockdrop as there is higher opportunity cost to consider.
Being amongst the first to deposit doesn’t make them any more ‘committed’ than ones who deposit in the last minute - both have the same amount of transactions locking LP tokens for 52 weeks.
The end, thanks for reading!
Link to all graphs and sql queries:
https://app.flipsidecrypto.com/dashboard/astroport-phase-1-analysis-FHfAhw
Fantastic article, thanks.