Intuition on Aligning Incentives

Overview of our logic in aligning market participant incentives and expectations

Depositor Incentives vs. Voter Incentives

The first thing one might think before depositing is that if a certain asset goes to zero, their principle becomes worthless. This is a very real concern, especially when LP'ing for less than optimal assets. In this case, the protocol aims to align the incentives of the voter with those of the depositor in a way that generates consistent and considerate portfolio allocations. Because the only users with voting rights are those that deposit assets, the interests of the depositors should be aligned majorly with depositors.

DAMO Holders vs. Liquidity Providers

What's in it for the $DAMO holder? Why should you hold $DAMO? Well, Liquidity Providers need $DAMO in order to control the portfolio allocations, which of course, they are directly invested in. Frankly, Liquidity Providers need $DAMO if they want a say over their asset allocations. Consequently, DAMO demand should rise in accordance with DIV demand.

$HAID Holders

Holders come in 2 flavors. 1) The risk-averse investor who is simply seeking safety in a multi-asset collateral-backed investment vehicle or 2) an opportunistic trader who spies a good arbitrage opportunity. Arbitrage trading will be heavy for the HAID/AVAX LP due to the nature that HAID represents real underlying value, so there will always be a natural arbitrage opportunity. The holder can comfortably live on the supply side of this arbitrage and sell their $HAID to the market when $HAID is overpriced (i.e. when the price of $HAID is greater than the value of its underlying assets). Therefore, the holder could sell their $HAID and go repurchase the assets they initially deposited for a profit.

Arbitrage Traders vs. Everybody

The presence of arbitrage traders will spell success for everyone involved in the protocol. This is because HAI DAMO has created enough of a market to allow for more advanced users (arb. traders) to get involved. Their trades help us stabilize price and provide real rewards to users. Keep in mind these are real rewards because they represent real underlying collateral, so this is not a farm token, these are real underlying assets. Simply put, when arbitrage traders win, the protocol and all of its participants win.