In the past, LYDRA:HYDRA had never had a LM plan. It was a pool deployed via DAO treasury.
This enabled the tokenomics to save emissions, while utilizing the idle DAO treasury.
Based on this we recommend to enable new emissions which cause inflationary pressure only on the pairs that require external non HYDRA capital.
As for why we don’t put all pools tied to LYDRA (e.g. LYDRA:USDC <> LYDRA:HYDRA)
It’s a switch from a 2-hop system with high fees, to 1-hop system with (HYDRA:USDC)
The main rationale of switching to HYDRA pairs instead of LYDRA is because in the past HYDRA had a very high inflation (~25%), this caused the staking APR to directly compete with the APR of the LM pools.
Which really lowered the efficiency of spending because each pool was directly competing with that high staking APR.
With the new tokenomics, the actual systemic APR is much lower which directly addresses the efficiency issue with LM. This is due to a combination of powerful tools.
- vesting
- slashing and premature vesting leading to burns
- low unvested APR
- macro-factor that acts like a handbrake on inflation in general
The combination of all of these tools, enables HYDRA staking to be much more prudent as a system and APR (especially when not vested). Even with high APR vesting factored in for loyal members, the systemic inflation will likely be in the ~7%- 8% in the end.
Based on this, the focus is to enable seamless direct transfers with as low fees as possible.
The LYDRA:HYDRA pool has volatility on its own which is also strategic to not put at the core of the entire liquidity system of HYDRA.
So in a nutshell
- more efficient trades as fees
- 1-hop direct transfers
- more simplified flow for LPs : especially for users who are not willing to vest, the LM could be a very attractive alternative without having to deal with LYDRA
- lower volatility arising out of LYDRA itself which we saw hurting the dex volumes on legacy hydra, meaning lower potential impermanent loss for LPs
