[Circle of Tokens] 2. Proposal: Reduce XUSD lending pool rewards

Hello Sovryns,

the Circle of Tokens proposes changes to the liquidity mining rewards of the XUSD lending pool.

In summary:

-Reduce weekly SOV rewards for the XUSD lending pool from 15,000 SOV => 2,500 SOV
-New runtime of these rewards: 12 reward periods (~3 months). After that a readjustment will be made.
-2,500 SOV per week for 12 reward periods = 30,000 SOV total lending pool rewards for the next 12 weeks.

Reasoning:

Relevant data analysis can be found in this thread:

Sovryn has been paying very high liquidity mining rewards for a long time. In recent months, it has become clear that these costs are much higher than their benefits. Thus, the XUSD lending pool is running at a great loss to the protocol, although this is very unnecessary.

The XUSD lending pool, unlike the AMM pools, does not have an impermanent loss, and contributing liquidity is not as risky as in the AMM pools.
Furthermore, the Sovryn lending pools are structured in such a way that they yield a good APY, even without extra SOV rewards.
The SOV rewards should be seen more as a bonus for platform users, who are credited with voting rights in the bitocracy. The actual revenue in the XUSD lending pool should mainly consist of XUSD APY.
We therefore think it is reasonable for the lending pool SOV rewards to be much lower overall and also lower than the AMM pool rewards.

For both the AMM pools and the XUSD lending pool, we do not like that the dapp states that the rewards are recalibrated every week. In order for investors to plan for the longer term, we would like these terms to be extended to 3 months. This way a recalibration can be done every quarter. Our proposal for the XUSD lending pool should meet this criterion for the first time, if approved.

Stay Sovryn!

5 Likes

Thanks for streamlining Sovryn and hence making it more resilient. Also I appreciate your very thorough research and visualizations. Cheers!

5 Likes

Iā€™d approve a related SIP on the basis of (1) losses in strategically not essential pools are not acceptable/desirable, (2) I like the 3 months recalibration period (the weekly was a barrier for me in the first place). I highly appreciate the thorough analysis and pragmatic proposal. This is the spirit!