[Circle of Tokens] Proposal: Reduce SOV/BTC AMM pool rewards

Bitocracy Circle of Tokens
1

Hello Sovryns,

exciting times are ahead of us! The launch of DLLR and the associated new DLLR/BTC AMM pool as well as the DLLR lending pool will necessitate changes to the existing SOV rewards.

In addition, the recent SOV value increase and with it, the associated APY increase in incentivized AMM pools gives us some room to make changes.

The proposal listed here is therefore based on 2 pillars:

  1. Preparation for the DLLR launch and the associated SOV incentives. We should make sure that new SOV rewards do not reverse the chosen path of stricter SOV spending. Nevertheless, incentivizing DLLR is of course very important.

  2. Stick to the strategy already outlined last year to spend less SOV as weekly rewards in the long run when the token price increases. The pool APY and the pool liquidity are the most important factors.

The SOV/RBTC pair currently offers the highest APY (~23%), followed by the XUSD/RBTC pool (~11%).

The SOV pool has more risk due to greater volatility, but is not as important as the XUSD/RBTC pool (and soon the DLLR/RBTC pool) in terms of trading volume and other Sovryn products like Zero. The SOV pool has also worked well in the past with an APY of ~15%.

Accordingly, the Circle of Tokens proposes to reduce the weekly SOV rewards for the SOV/RBTC pool from 25k SOV to 15k SOV. At current token price, this will correspond to an APY of 13-14%, which is much closer to the XUSD/RBTC (~11%) pool. This will save us 10k SOV/week for now and give us more room for DLLR incentives.

Any feedback is welcome!

Sacro

6 Likes
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@Sacro - I’d appreciate it if you could message me on discord. I have been working on a new model to help guide SOV reward distribution, and I’d like to discuss with you.

Hight level, I think we can use daily trade volume as a proxy measure for the amount of new issuance that the market can absorb and use that to guide distribution decisions.

7 Likes
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I would reduce the AMM rewards to no more than 10k SOV for both SOV and XUSD pools, and put the DLLR pool at 15k. We need to save on incentives that change will save us more tokens and it will also be in pair with current market conditions. I think we are spending 50k for both pools, with this change we will be saving 15k and adding an extra pool.

And with the condition that eventually also the DLLR pool would be reduced to 10k too.