Smoothing Delegation Volatility


The first two days since the DAO voted to restructure the yield farming delegation dynamics have been a wild ride. The new incentives brought some 7.5-10% additional TVL, but with it some fierce competition as well. Currently, three pools have similar delegation percentages and with the SUNDAE/ADA LP receiving over 50% of delegation the other three are all vying to remain within the 80th percentile threshold to receive rewards. Whether due to initial volatility or delegates strategizing and timing their delegation intentionally, the result has been that any given pool may win out in delegation one day and lose the next. Of course, this is somewhat intentional as the power to choose which pools are incentivized is intended to be in the hands of SUNDAE holders. The continuously changing delegation landscape, however, means that the currently displayed HRAs can also be quite inaccurate and even display “Below Minimum Delegation” for pools that end up winning out at the end of the day. Pi has stated that changes to the UI are in the works to provide some additional estimates. In the meantime, many liquidity providers and farmers have stated their concerns about pushing this new liquidity away if the volatility of delegation, and therefore inconsistency in farming rewards, remains high.


There are a number of proposed methods to address this volatility issue, all of which involve averaging delegation over an extended period of time.

  1. Use an N-day moving average of the delegation. This means that all delegation received over the past N-days/snapshots (for example, say N=5 days/snapshots) is considered. This implies that it is roughly N-times more difficult to swing the delegation vote on the day of the rewards snapshot and so all parties have a better estimate of which pools may come out on top.
  2. Implement a time weighting to delegation, where initially when locked only 10% of the users delegation contributes, but this increases to the full 100% over a 24 hour period. The advantage of this solution over 1) is that it incentivizes delegators to hold their positions as opposed to changing them directly before the snapshot (which should make the real-time HRA estimates better). There are 2 implementation variants of different complexity:
  • 2a. Use the age of the UTXO to calculate the delegation weighting. This is the simplest solution and would be easy to release, but has the caveat that ANY change resets the UTXO. For example, if you top off your SUNDAE liquidity then you will have to wait 24 hours before your new delegation reaches its full potential.
  • 2b. Make it so that changes to your locked SUNDAE or SUNDAE/ADA LP and possibly minor changes to delegation don’t reset your weighting. This would be much more difficult to implement, but provides a better user experience.


This temperature check is intended to gauge the community interest in these options as well as initiate some discussion around what specific parameters would be best for these implementations (ex: N-value for option 1, rate and time of the “ramp-up” for options 2a and 2b).

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I’ve updated this to a discussion until we have a chance to discuss these options a bit more.

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How difficult would it be to disable the time weighting for newly created pools?