Concentrated Liquidity Vault Upgrade - Auto-compound

Summary

This proposal outlines an enhancement to Quasar's Concentrated Liquidity vaults through the introduction of an Auto Compounding feature. This upgrade will automate the reward claim process for users. Rather than manually claiming rewards, all concentrated liquidity vaults will now automatically claim and resupply rewards, converting them to the appropriate asset ratio and redepositing them into the vault. This process will effectively benefit the underlying Osmosis pools by increasing the Total Value Locked (TVL) in the pool and vault and, in turn, increasing the value of individual user deposit in these vaults. This upgrade also allows users to benefit from receiving exponential APY instead of linear APR. The implementation of this feature is also an essential prerequisite for the launch of Liquid Staked Vaults (LSV).

Motivation & Rationale

The proposed upgrade to Quasar's Concentrated Liquidity vaults, driven by user demand, represents a pivotal step towards the next generation of vaults. Immediate and future key benefits of this upgrade include:

• Enhanced User Experience: This modification, a response to user requests, aims to elevate the overall user experience with the Quasar platform.
• Higher APR (APY): By implementing auto compounding, this upgrade is expected to increase vault APRs permanently as vault generated rewards will be compounded and used most efficiently. This will enhance the attractiveness and competitiveness of the Quasar concentrated liquidity vaults.
• Innovative Vault-Based Incentives: The introduction of non-compounding, vault-based incentives allows protocols to reward liquidity providers more effectively.
• Tradability of Vault Shares: This upgrade sets the stage for creating tradable vault shares, significantly improving asset composability. This will allow users to turn their entire Quasar concentrated liquidity vault deposits as liquid tokens across all of IBC DeFi.
• New Utility for Vault Users: This development makes vault shares fungible, allowing them to be used as collateral in combination with other DeFi services, marking a first in the liquid usability of LP shares.

Details and Specification

The proposed enhancement to Quasar's platform involves integrating an auto-compounding mechanism into both existing and new concentrated liquidity vaults. This improvement will phase out the current 'claim rewards' feature in the Quasar app, replacing it with an informational alert for users not up to date with the upgrade. The auto-compounding feature will be deployed in three phases for existing concentrated liquidity vaults, based on the Total Value Locked (TVL) in the vaults. The initial phase will upgrade vaults up to $100,000 TVL, followed by vaults up to $500,000 TVL, and concluding with the remaining vaults. There shall be a one week review timeline between the three phases each. Each vault will benefit from the auto compound mechanism, leveraging an internal swap router that prioritizes low-slippage and low-fee Osmosis liquidity pools. Post-upgrade, vault shares will become fully fungible, marking a significant step towards Liquid Staked Vaults (LSVs). This upgrade alters the reward accrual method. Rather than separate reward accumulation, vaults will increase the number of underlying tokens per share over time. To keep users informed and engaged, Quasar will introduce a new visual indicator on its app to represent this ongoing accrual, similar to the current accrued rewards feature. Users with already accrued and unclaimed rewards shall get their rewards auto-claimed when the upgrade happens. The roll out of this upgrade is planned for end of January or early February 2024. Nevertheless, the schedule after upgrade can be fixed with the following time frames:

• T+0: Auto compounding upgrade is getting deployed to all vaults with $0 - $100,000 TVL.
• T+0 until T+7: Monitoring of the upgrade behavior on upgraded vaults.
• T+8: Auto compounding upgrade is getting deployed to all vaults with $100,001 - $500,000 TVL.
• T+8 until T+15: Monitoring of the upgrade behavior on upgraded vaults.
• T+16: Auto compounding upgrade is getting deployed to all vaults with $500,001 and above TVL.

The upgrade shall be communicated in advance on the official Quasar Twitter / X channel (@quasarfi).

Voting

• By voting YES, you agree to the changes above proposal suggests.

• By voting NO, you disagree with the changes above proposal suggests.

• By voting ABSTAIN, you express no opinion on the matter.

• A No With Veto vote indicates a proposal either (1) is deemed to be spam, i.e., irrelevant to Quasar, (2) disproportionately infringes on minority interests, or (3) violates or encourages violation of the rules of engagement as currently set out by Quasar governance.