this post aims to report on the current situation with SIP-24 liquid SOV rewards. A large part of the data used here is taken from @CEK 's weekly staking updates. Many thanks for that!
If you follow CEK’s weekly posts, you already know that the number of voluntarily staked SOV has increased significantly in the last months. In addition, the average staking duration is getting longer and longer.
Of course, this also means that the SIP-24 rewards that the protocol has to pay out are getting bigger. With the possibility to use compound interest on the liquid SOV every 2 weeks, the SOV to be paid out can increase exponentially.
It is therefore necessary to keep track of how many SIP 24 rewards have to be paid out. It should be noted that the SIP 24 rewards continue to be paid out over a period of 3 years for sovryns that have stakes over such a long period of time. So even if the SIP 24 rewards are discontinued, the payments will continue for a long time for such stakers.
Here is the data for the year 2022: (Note: Higher VP multiplier = longer average staking duration)
W1: 2,170,490 Staked SOV; 8,965,000 VP; 4.13 VP multiplier
W2: 2,279,277 Staked SOV; 9,346,000 VP; 4.10 VP multiplier
W3: 2,315,403 Staked SOV; 9,723,000 VP; 4.20 VP multiplier
W4: 2,350,446 Staked SOV; 9,741,000 VP; 4.14 VP multiplier
W5: 2,412,911 Staked SOV; 10,136,000 VP; 4.20 VP multiplier
W6: 2,421,739 Staked SOV; 9,923,000 VP; 4.10 VP multiplier
W7: 2,456,507 Staked SOV; 10,234,000 VP; 4.17 VP multiplier
W8: 2,618,360 Staked SOV; 11,058,000 VP; 4.22 VP multiplier
W9: 2,641,585 Staked SOV; 11,350,000 VP; 4.30 VP multiplier
W10: 2,753,828 Staked SOV; 12,300,000 VP; 4.46 VP multiplier
W11: 2,767,724 Staked SOV; 12,800,000 VP; 4.62 VP multiplier
W12: 2,880,296 Staked SOV; 13,650,000 VP; 4.74 VP multiplier
W13: 3,141,452 Staked SOV; 16,180,000 VP; 5.15 VP multiplier
W14: 3,075,376 Staked SOV; 16,402,000 VP; 5.22 VP multiplier
W15: 3,249,095 Staked SOV; 18,253,122 VP; 5.62 VP multiplier
W16: 3,555,424 Staked SOV; 20,956,964 VP; 5.89 VP multiplier
W17: 3,565,077 Staked SOV; 21,221,324 VP; 5.95 VP multiplier
W18: 3,442,359 Staked SOV; 21,229,359 VP; 6.16 VP multiplier
W19: 3,389,228 Staked SOV; 21,674,688 VP; 6.39 VP multiplier
W20: 3,668,657 Staked SOV; 24,128,688 VP; 6.58 VP multiplier
If we run the numbers, convert the VP multiplier into the average staking duration in days based on the quadratic VP formula and calculate how much reward periods there are for the overall staked SOV tokens at each week, we can create a chart that shows how many liquid SOV in total have to be paid. We can then add some trendlines to guess how it may evolve over the next weeks. Here it is:
Compound interest and longer average staking durations may increase the cost of SIP-24 rewards by a lot very soon. It may not play out like drawn here, but we must monitor it. Maybe it’s also time to start a discussion if it’s reasonable to reduce the SIP-24 APY or cut it.
As a staker, I really enjoy the Sip-24 rewards and I’d be happy if they continue in some way. But there might come a time where there are not enough SOV available anymore to pay the SIP-24 rewards. Changes must be made at some point.
Please don’t hate me for this suggestion