XP3: Extending and Modifying Initial Liquidity Incentives

Our Community Vesting program has been an incredible success to date, attracting over $150m in TVL (total value locked) and over $80m in AUM (assets under management). We launched with an initial 10 week program on 8 pools and, due to the positive feedback from the community, it makes sense to extend these rewards in some capacity.

While we are proposing a 6 week extension, there are three key considerations that require discussion: 1) the overall emissions rate, 2) the capital efficiency of incentives, and 3) the emissions rate on the XTK-ETH pool.

On the overall emissions rate, we allocated 8% of XTK supply for the initial 10 week program, which is not sustainable. While we need to reduce rewards, we also don’t want to make a dramatic cut in payouts, preferring instead to gradually moderate the program.

The second consideration is the effectiveness of our current programs. While we have been emphasizing secondary liquidity for our xAssets, we realize that these initiatives are more effective and efficient for certain products than others. For example, the designs of xSNX and xAAVE require some sort of lockup and can therefore cause complications with respect to exit liquidity (making secondary liquidity critical). In contrast, we can guarantee 100% exit liquidity on xKNC and near 100% on xINCH at any given time, making secondary liquidity less critical.

On the XTK-ETH pool, there is a broad consensus in our community that emissions should be increased, at least until single asset XTK staking is made available. We have taken this input under consideration.

For these reasons, we will be reducing emissions rate on most pools (except XTK-ETH, which is increasing), while also experimenting with single asset staking (no LP positions required) for certain assets. We’re excited about single asset staking as we get to figure out as a community what the market-based steady-state APR looks like when we remove IL risk while still providing rewards. Although we expect APRs to settle well lower than where they are currently, we know many community members have been asking for single asset staking opportunities and this will allow us to experiment with a few assets over a short 6 week period while increasing overall capital efficiency. Rest assured that single asset XTK staking will be coming eventually.

We are proposing these emission rates over the 6 weeks starting May 6:

  • xSNXa Balancer pool: 700k XTK per week
  • xAAVEa Balancer pool: 300k XTK per week
  • xAAVEb Balancer pool: 700k XTK per week
  • xKNCa Kyber pool (new): 500k XTK per week
  • xKNCb single asset staking (new): 50k XTK per week
  • xINCHa single asset staking (new): 250k XTK per week
  • xINCHb single asset staking (new): 75k XTK per week
  • XTK-ETH Uniswap pool: 400k XTK per week

We will reassess in 6 weeks and will likely make some changes, experimenting with new models of incentives, potentially including a xAAVEa/xAAVEb xU3LP pool to increase capital efficiency and obviate the need for two xAAVE pools.

10 Likes

These proposed cuts help to lower the XTK dilution while focusing on the most important pools that benefit from a large amount of Liquidity. I believe this is a great solution for now and can be fine-tuned over time.

Like this we cut the weekly dilution from 8 Million XTK to ~ 3 Million on the vesting program.

I am for this proposal.

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