SIP-00XX: Conservation of SOV LP Rewards

Bitocracy SIP | Sovryn Improvement Proposals
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Summary

On behalf of SOV stakers, this proposal is intended to re-prioritize our incentivization of Sovryn’s liquidity pools with conservation in mind, and prepare for prioritization of future pools while minimizing SOV emissions where possible.

Motivation

Sovryn has been expending 420,000 SOV per month on the following liquidity pools:

RBTC/SOV - 30,000 SOV/week, 120,000 SOV/month

RBTC/XUSD - 15,000 SOV/week, 60,000 SOV/month

RBTC/MYNT - 15,000 SOV/week, 60,000 SOV/month

RBTC/ETHs - 15,000 SOV/week, 60,000 SOV/month

RBTC/BNBs - 15,000 SOV/week, 60,000 SOV/month

Lending Pool: XUSD - 15,000 SOV/week, 60,000 SOV/month

I propose the removal of SOV rewards from the RBTC/ETHs and RBTC/BNBs pools for the following reasons:

  • ETHs & BNBs are not assets that are of high utility within the Sovryn DeFi suite, and are not aligned with Sovryn’s mission to build a world on top of Bitcoin.
  • We must prioritize pools that support assets among project tokens or assets that add utility to our system and ETHs + BNBs have no utilization or strategic alignment with Sovryn.

By removing rewards for these two pools, we are saving 120,000 SOV per month and reducing the emissions rate of LP rewards by 28.5%. We can better use these tokens for future pools on our platform, such as the Zero Stability Pool.

Closing

With the SOV stakers’ support, we must focus further on conservation of SOV emissions as we roll out more products that bring value accrual to $SOV as well as Sovryn’s users.

License

Copyright and related rights waived via CC0.

8 Likes
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Valid points, any actions that will reduce emissions are positive. I support this one.

3 Likes
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Yeh i think this is a good idea.

Since Sovryn mission is to be a Bitcoin focused DeFi protocol. Maybe the Bitcoin lending pool can receive some of the SOV tokens. As yields are currently at 0.29% on the dapp for lenders. Might give more incentives to lend out RBTC on lending page of the dapp. Just an idea.

4

rBTC/SOV is getting demolished with IL right now even with 30K SOV/week. Are you recommending any of the ETHs & BNBs rewards be re-allocated to other pools to compensate as well?

I also think we run the likely risk of BNBs and ETHs leaving the eco-system if no rewards are accruing. I think we should propose an unofficial PoL type model. Basically we offer to buy out the rBTC/ETHs or rBTC/BNBs LP tokens for discounted SOV. If we’re going to lose that liquidity we might as well try to buy it for the treasury.

I think a 15% discount on SOV price for LP tokens is a reasonable offer to get the conversation going.

3 Likes
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Reasonable suggestions.

As it stands, adoption is so low and the utilisation on those token pairs so minimal, that paying this much for liquidity is a poor trade-off. Liquidity needs to go hand in hand with those assets under management actually being utilized on a daily basis.

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I agree that a higher degree of management of these rewards is absolutely necessary.

Currently the token emission curve is diverging too much from the adoption curve and ideally you would have the two curves following each other closely or even be identical.

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some thoughts on this . . . not sure what the right move is here but if it benefits sovryn, then ok. not saying that my experience is applicable to others but just wanted to state some things. i’m a believer in btc and eth and have some of both. when i looked at this ‘new thing at sovryn’ it was familiar to see that liquidity pool that i could relate to. so many other things were foreign re: rsk and the bridges and the liquality wallet that i first used, etc. all strange to me. but with that familiar pool, i started digging in more over the summer and soon i was listening to every community call and even heard some cool ‘freestyle’ raps to kick things off (wink, wink). anyway, just relating that i got pulled in and really love this project, the team and spirit and what sovryn is trying to build. will i go away if the pool is eliminated? no, but seeing those two wrapped (pegged) tokens gave me the familiarity to press on and maybe others from afar as well. all the best.

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If i read the tokenomics correctly, we currently have ~3million new SOV hitting the open market each month. What real impact would 120.000 SOV per month more or less have? Especially, when we risk loosing liquidity? I wouldn’t cut it completely, maybe reduce rewards for both pairs by 50%?

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I think that a good portion of the 3mil tokens remain within the treasury and most of the tokens are either vesting unlocks or rewards/subsidies .
Any reduction in emissions are welcome IMO.

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I’d also welcome a reduction in emissions. Having 90 mil SOV unlocked by the start of 2024 is long way of pain going forward. Bad token price performance will keep away new investors and users alike. Price is always important and a signal most people are looking at. I’m just not sure if the bitocracy is in a position to change the tokenomics now. 120.000 SOV/month less emission is a start but i don’t think it’ll do anything considerable for the price of the SOV token. Much more is needed here. But it’s worth the try anyway.

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Agree with risk of BNB and ETHs LP going to zero. The incentive just wouldn’t be strong enough for most to stay. Some (or most) of that liquidity will flow into riskier pairs like rBTC/SOV and rBTC/MYNT which may benefit the SOV price but will also reduce APY in those pools causing others to bail.

I would be in favor of redistributing those rewards the pools mentioned above or the 15% discount. Although I suspect introducing the discount will require additional work from the development team.

1 Like
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hi sacro - thx for your comment . . . like i said in my message, the tokenomics is above my pay grade but just wanted to emphasize that i ‘came for the pool but stayed for the project’ . . .

1 Like
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The RBTC/ETHs and RBTC/BNBs pools have been much more stable than SOV/RBTC pools where the impermanent losses have been staggering. For those of us that stake our AMM rewards (all of mine from my AMM pools are reinvested in the protocl) and support the system it would be difficult to lose those pools that allow for mitagation of impermanent losses from the SOV/rbtc pool. I personally would have to take those resources out of the system but the RBTC/ETHs and RBTC/BNBs allow me to stay fully engaged. SOV/RBTC currently is a ‘risky’ pool, Keeping some less risky pools may keep some LP involved like it does for me. Right now, SOV/RBTC is not a good deal, whereas some SOV yield for BNBs and ETHs with minimal impermanent loss is… and a little of all of them is doable.

that said, removing those pools and increasing (or adding that 30k sov/month) to the rewards for the SOV/Rbtc WOULD BE INTERESTING. (may even bring some SOV investors back)

so in summary:

  1. I would be concerned that removing the ETHs and BNBs without increasing the SOV rewards or adding other less risky pools (of impermanent loss) would make for a net investment loss for the protocol as would be the case for me.
  2. increasing to the SOV/RBTC rewards (seperately or with the SOV currently used for BNB/ETH pools) might be interesting and could bring back investors to the SOV AMM… which would directly increase the price of SOV token, which would also be nice.
4 Likes
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The sentiment of conserving LP rewards sounds sensible however ETH and BNB are major crypto assets. Is there much volume on these pairs? Will removing them be seen as a backwards step in terms of the bigger picture?