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Community Call #17 Summary: Launching the Liquidity Tournament
1. What Is the Liquidity Tournament (LQT)?
The LQT is not just another DeFi rewards campaign, it’s a protocol-integrated incentive system where delegators and liquidity providers (LPs) work together to bootstrap liquidity useful to traders on Penumbra’s DEX.
- Delegators vote each epoch (~2 days) on which assets should receive incentives.
- Liquidity Providers are rewarded based on real execution volume, not idle deposits, meaning only liquidity that’s actually traded against earns rewards.
- This structure aligns with Penumbra’s privacy-first and utility-oriented approach, ensuring that incentives serve traders rather than whales or wash-traders.
2. Governance in Action: From Signal to Software
Launching the LQT took a coordinated, community-driven sequence:
- Signaling Proposal: 100% consensus to pursue incentive mechanisms.
- Software Deployment: Validators adopted the backend logic powering the LQT.
- Incentives Proposal: A final governance vote approved the first tranche of 100,000 $UM over 14 days, split 50/50 between LPs and delegators.
With this third step, the tournament moved from infrastructure to action.
3. The Mechanics: How to Participate
For Delegators:
- Stake your UM tokens to receive DelUM, allowing you to vote each epoch.
- Votes determine which asset pairs (e.g., USDC/UM) get incentives.
- You receive rewards proportional to your stake and voting streak, as long as the pair you voted for surpasses the 5% vote threshold.
For Liquidity Providers:
- LP rewards are based on how much execution volume their positions facilitate.
- LPs are encouraged to price liquidity competitively, better price = more trades = more rewards.
- Liquidity can be added via the new, one-click interface in Veil.
4. New UI Tools for Easier LPing
The Penumbra Labs team introduced a streamlined liquidity management system:
- Simplified Liquidity Creation: Users can select pre-filled curve shapes optimized for stable or volatile pairs.
- Liquidity Presets + Advanced Edits: Users can fine-tune their positions with intuitive sliders.
- Consolidated LP Dashboard: Positions created from the same strategy are grouped, improving clarity and ease of management.
These UI improvements reduce friction for new users and enhance the overall experience for active LPs.
5. Privacy Is Preserved at Every Level
A major highlight: participants remain anonymous.
- LP and voting activity cannot be linked to wallet identities.
- All votes and liquidity positions are executed privately, but still visible in aggregated form to the protocol.
- Even social sharing elements (like post-epoch social cards) are opt-in and client-side.
This ensures Penumbra’s core value of default privacy remains intact, even amid reward mechanics.
6. Leaderboards & Social Dynamics
- Delegator Leaderboard tracks participation streaks and total rewards.
- LP Leaderboard displays positions ranked by execution volume and fee generation per epoch.
- Social cards (opt-in) let users share achievements post-epoch, enhancing community engagement without compromising privacy.
7. Looking Ahead: Deeper Insights & Tools
Penumbra Labs hinted at upcoming improvements:
- Better historical data visibility for LP performance.
- More strategic tools to inform liquidity provision choices.
- Continued educational materials, videos, step-by-steps, and UI guides to make participation accessible.
Final Reflection:
The LQT launch is more than a product update, it’s a clear sign Penumbra is a fully functioning, privacy-preserving DeFi ecosystem, complete with structured incentives, active governance, and a community-first approach. With the DEX, Prax wallet, and reward tooling now tightly integrated, Penumbra is positioned to show what shielded finance can really look like.