CIP-9: Should CowDAO renew its COW liquidity incentive program

CIP: 9
title: Renew COW liquidity incentive program
author: middleway.eth
status: passed
created: 2022-05-26

Simple Summary

The original liquidity incentive program (CIP-4) will end on 2022-06-19, marking 12 weeks from its launch.
This proposal is intended to renew incentives for liquidity providers of the COW token.
In light of the recent discussion, the outlined proposal contains few changes:

  1. On mainnet, it is proposed to use COW tokens for incentivizing (bribing) veBAL votes for boosing BAL rewards of the Balancer COW pools
  2. The sections for “Protocol owned liquidity” is removed as there are plans to propose active treasury management which could more efficiently manage liquidity positions.


DEXs are the main trading venue for the COW token. It is important to ensure that COW liquidity pools maintain a baseline of liquidity that allows trading.
In light of the market downturn, it is quite clear that the liquidity goals for the previous proposal were not met. Providing liquidity for COW is deemed by liquidity providers a risky endeavor that requires decent return to make it worthwhile. At the time of writing APYs on Balancer mainnet pools are 30-60% while on Swapr Gnosis Chain pools the situation is similar if taking into account carrot tokens that will not fully convert.
Current state of COW liquidity pools:

Goals for the next 12 weeks of the program:

  • Maintain the current liquidity of COW
  • Reward users who are willing to provide liquidity and take the impermanent-loss risk
  • Limit rewards to not attract speculators but mainly long term believers in COW.
  • Reasonable COW spending to not create too much sell pressure (from potential farmers)



CowDAO will use 750k COW tokens to establish a liquidity reward program for 12 weeks.
The program is proposed to incentivize few liquidity pools:

  • Balancer pool: 50%COW/50%ETH

CowDAO will use COW tokens to incentivize (bribe) veBAL holders and boost BAL rewards: 12 weeks of 40k-COW-per-week.
It is expected that boosted BAL rewards will take a week due to the voting process. For the first week an additional 30k COW direct incentive is proposed.

Gnosis Chain

  • Swapr pool: 50%COW/50%ETH
  • Rewards schedule: 12 weeks of 20k-COW-per-week

**GNO pools on Balancer and Swapr are expected be incentivized by Gnosis DAO using GNO


Allocated COW tokens (510k COW) will be sent to a 2/3 multisig with middleway.eth, mastercow.eth and CowDAO as signers. This multisig will send 40k COW bribes every two weeks for the COW/ETH balancer pool on Hidden Hand

Gnosis Chain
DXdao will implement a reward strategy that will include base rewards and an extra performance reward in Carrot tokens. It is considered to move to an 8-week campaign cycle to reduce operational overhead for LPs.

Any remaining COW tokens that (for any reason) were not used for its intended purpose of rewarding COW liquidity, will be returned to CowDAO after 12 weeks.

Rewards will be assessed and potentially changed from bribs to direct rewards by CowDAO or multisig signers during those 12 weeks.


It is proposed to be executed by transfers of COW tokens out of CowDAO mainnet Safe:

  1. 510k COW to eth:0xa8193E38C17E879CaC6CdBB996E49bc24Ad65C7c - Dedicated safe for this program operations
  2. 240k COW to gno:0x9467dcFD4519287e3878C018c02f5670465a9003 - Multisig on Gnosis Chain that has been used by DXdao for launching Carrot and SWPR campaigns when not through the DAO

Safe Transaction Data

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		"contractMethod": {
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Transaction simulation


  • Liquidity is essential for any token. This program will encourage community members to provide liquidity for the COW token.
  • Decent liquidity will enable new participants to buy COW with minimal friction.
  • Dampen COW token volatility


Phase 2 proposal: Snapshot


Highly opposing any liquidity incentives at the cost of COW, especially given the fact that

  1. COW has no intrinsic value at the moment, there is really no reason to hold it rather than farm and dump
  2. Liquidity should not be the priority or focus of the protocol, especially in a bear market. The initial liquidity was abundant to seed the liquidity pool, and there has been plenty of COW in circulation by heavy sell pressures. If there is demand in COW, slippage is a simple reflection of the token being oversold, and the DAO has no reason to intervene the market and subsidize the buyers.

Hey friends, Solarcurve from Balancer here. I’d like to clear up some things and suggest an alternative strategy.

Balancer does not have any ability to match incentives - 100% of emissions are determined by veBAL voting. If the COW pools don’t get votes, they do not get BAL incentives.

Using COW for liquidity mining is not an effective way to subsidize liquidity. A better approach would be to bribe veBAL voters to vote for COW pools using Hidden Hand. Lido has been doing this for awhile and you can read this tweet thread about it - I believe you would comfortably reach a 3x ROI on spend. Meaning for every $1 of COW you bribe per week, the pool would get $3 of BAL emissions per week.

The procedure is very simple - deposit your bribe to Hidden Hand no later than Monday each week, tweet about it, let us know in our TG chat and we’ll spread the word. There is a 10 day cooldown for veBAL to change their votes so you can set a bi-weekly bribing schedule to save some money. Make it known that you will be bribing every two weeks for the next 12 weeks and I expect voters will be happy to show you some love :slight_smile:

This is also a much better approach since you plan to add liquidity using treasury funds. Your treasury probably doesn’t need to farm more COW - by farming BAL instead, the treasury can start building its own veBAL position which represents free emissions to COW pools forever.


Hi Zekraken here also from Balancer. I fully agree with Solar’s strategy here. As a veBAL holder myself I’m usually looking for a nice juicy bribe. Another added benefit that isn’t explicitly called out above you get with driving BAL emissions towards your pool is that prospective investors will likely buy COW to LP if the rewards are enticing enough.

1 Like

@clay I agree that we need to be cautious and deliberate about COW emissions.
I have to disagree that liquidity does not matter in a bear market.
IMO Liquidity and trading are tightly coupled and once both dry out, it’s harder to initiate the market from scratch.

@solarcurve @zekraken that’s an interesting option that we’ve mentioned before but I wasn’t sure about the current status.
I’m going to draft an alternative section for the Balancer incentives, Would appreciate your review. We’d need to gather community sentiment on which option is preferred


The proposal was updated to reflect the option of using veBAL bribes per @solarcurve suggestion.
Please express your opinion!


Indeed, bear market or not, liquidity matters.

My doubt at this point is due to low trading volume with $COW. Wouldn’t it be better to create a UNI V3 concentrated liquidity position from $0.14 to $0.16 ($0.149-$0.151 or whatever)?

For illustration purposes, COW/ETH on Balancer (29k volume for the last 24h) and Uniswap (much less but there’s not much liquidity at this price range):

Instead of giving $COW directly to liquidity providers we would be buying and selling $COW at this price range. Increasing the trading volume on UNI V3 will also increase the arbitrage activity everywhere, allowing liquidity providers to get more from fees. Worst case CoW DAO ends up with more $COW instead of less (at this price range it shouldn’t be a bad thing for CoW DAO). Best case CoW DAO gives more confidence to the market, stop the bleeding and ends up with less $COW.

1 Like

@prometheus I guess you’re referring to the Protocol Owned Liquidity section?
It includes supporting the COW/GNO pair because those are both assets that are available in the DAO’s treasury. Of course it further aligns the interests of CowDAO and Gnosis DAO as it means CowDAO is willing to take the COW/GNO price risk.

You are talking about a COW/USD pair, if we try to defend that with Treasury funds, we might end up cutting down on development runway

1 Like

I should have said it was a reference for this price range, not meaning we should back a COW/USD. I think we can make the existing pairs stronger/more liquid using concentrated liquidity (COW/ETH and/or COW/GNO) to drive more volume at this price range but I understand the risk of using some ETH and GNO for that purpose (just like using any other asset).

Anyway, everything is a risk, if the selling pressure continues and the demand isn’t going up price will continue going lower making each $COW less valuable, with or without incentives, with or without concentrated liquidity. Meaning I’m not really sure what is the best.

This proposal is more about COW token’s liquidity, and for that I do think your proposal to add concentrated liquidity is interesting although then we might need to be more conscious about the specific strategy requirements.

I don’t think that adding more liquidity will necessarily lead to specific price action, but it should help with the efficiency of price discovery.

1 Like

LP incentive for an asset that’s been constantly sold without sign of uptrend is just providing exit liquidity and more sell pressure.

If there were a legitimate reason to increase liquidity and trading volume, then deploying a market maker would even be a better option than using COW as incentive.

The question is, why now? Why doing so while knowing that the liquidity would be just quickly extracted? There was enough liquidity at the beginning, and the market decided that COW was not worth holding, hence the liquidity is running dry. If one day the market thinks that COW is worth buying, it will return the previously extracted liquidity. There is really no reason to intervene the natural behavior of the market here.

Let’s put it this way, if the market decides to sell more COW and extract all the liquidity after this LM program, are we gonna keep running another round of LM? What’s the cup-up? How do we decide when to stop?


I agree with @clay here. There is little upside to continuing this program.

Initially it was necessary, however, now we need to look at ways to reduce sell pressure, even if it means less overall liquidity available (in the short-term).


I mentioned above I respectfully disagree @clay @netrunner.eth

If this proposal goes to voting, you’ll have the option to vote “No, make no change”
Would you like to propose an alternative reward budget or you’d vote for ZERO rewards?

I would vote for “ZERO”, until there is a consistent and clear sign of price picking up, and then we can revisit this proposal.

1 Like

The proposal was updated and simplified.
If there are no major inputs in the coming days, I would like to move it to the voting phase on Monday.


Of course the people with most voting power at the moment are the people that are stuck with vCOW tokens and linear vesting, and those people need exit liquidity so this proposal is gonna pass. This DAO needs strong leadership with a vision for the future.

This proposal has passed and is already executed

30k of COW rewards were sent to the balancer safe for direct incentives and 40k COW rewards were allocated to the COW/ETH pool on

Small update,
Looking at the relevant dune dashboard we spent ~$3100 (worth of COW) on the bribe and gained ~$4300 in bi-weekly BAL emissions. It’s a “positive ROI” but not to the extent we’d like to see. It might improve though as voters see this bribe continue to happen.

The next bribe should go out between July 7th and the 14th.
It was suggested to consider bribing the Aura marketplace next time. That would need to go out by the 11th. There was a 1 ETH bribe on VST stable pool, it got double the votes you got. That’s the kind of ROI we were hoping to achieve…

I believe there are more mercenary voters in Aura than native veBAL, plus it does not require paying gas to vote as it uses snapshot. Might be worth trying Aura and seeing if the results improve.

The downside is that existing voters on the native veBAL will stop getting incentive if the reward is fully shifted Aura.

Additional update here
Summery of activity so far:

  • 30k COW were used for direct LP incentives in the gage
  • four direct Balancer bribes, one of them with increased amount were submitted using total of 180k COW
  • An additional bribe posted on Aura totaling 40k COW
  • 260k COW is still left in the dedicated safe: Safe

After experimenting and observing the outcomes there are few takeaways:

  • Bribing might provide a positive ROI (meaning, LPs earn more BAL than the original COW amount that went into the bribe).
  • The tooling to measure the ROI are not that easy to use.
  • On Aura there’s an additional AURA reward for LPs that stake their LP tokens but it seems reasonable to ignore this extra reward as not all LPs will actually get it.
  • ROI is critically dependent on voters for every bribe round - this requires active marketing and might result in negative ROI if not enough voters are voting for the COW pool
  • Managing the incentives on a weekly or bi-weekly cadence is time consuming, especially if additional considerations like voting and marketing are needed

For the reasons above, I think there are two ways forward:

  1. Use the remaining COW for direct incentives of the cow/eth pool
  2. Return the funds to the CoW DAO treasury

Looking forward for comments and feedback.
If not further feedback is provided, we’ll continue with (1) next week


curious to hear why you believe Aura rewards should be ignored? Why would some LP’s not take advantage of extra free money?