Summary
This proposal aims to adjust the XVS emissions on the Ethereum Mainnet based on a thorough analysis of TVL proportions and sensitivity to emission adjustments. The analysis includes categorizing markets into two tiers, assessing the impact of past emission changes, and making informed recommendations for emission adjustments. The following table presents the proposed new emission adjustments:
| Pool | Market | New Allocation (Change) |
|---|---|---|
| Core | WETH | 844 (-25%) |
| Core | WBTC | 2,531 (-25%) |
| Core | USDT | 3,038 (-10%) |
| Core | USDC | 3,038 (-10%) |
| Core | crvUSD | 750 (-50%) |
| Core | FRAX | 300 (-50%) |
| Core | sFRAX | 300 (-50%) |
| Core | TUSD | 100 (-50%) |
| Core | DAI | 250 (-50%) |
| Curve | CRV | 188 (-50%) |
| Curve | crvUSD | 188 (-50%) |
| LST ETH | ETH | 16,500 (-10%) |
| LST ETH | wstETH | 1,800 (-50%) |
| LST ETH | sfrxETH | 400 (-50%) |
| Total | 30,225 (-21%) |
Details
Considerations
All prices and market TVLs are considered for July 12, 2024
TVL Analysis
The TVL participation for each market is analyzed to filter out the most significant markets. The goal is to identify markets that hold a significant portion of the total TVL and categorize them into two tiers.
- Tier 1: Markets with more than 5% in TVL
- Tier 2: Markets with less than 5% in TVL
The following table shows the TVL participation:
| Pool | Market | Supply Amount | Borrow Amount | TVL Proportion |
|---|---|---|---|---|
| Core | WETH | $7,250,000 | $1,650,000 | 5.53% |
| Core | WBTC | $8,530,000 | $4,080,000 | 7.84% |
| Core | USDT | $4,590,000 | $3,750,000 | 5.18% |
| Core | USDC | $4,940,000 | $3,920,000 | 5.51% |
| Core | crvUSD | $1,700,000 | $1,370,000 | 1.91% |
| Core | FRAX | $424,650 | $360,740 | 0.49% |
| Core | sFRAX | $1,780,000 | $925,250 | 1.68% |
| Core | TUSD | $1,000,000 | $303,780 | 0.81% |
| Core | DAI | $770,770 | $500,190 | 0.79% |
| Curve | CRV | $220,000 | $120,000 | 0.21% |
| Curve | crvUSD | $371,000 | $94,410 | 0.29% |
| LST ETH | ETH | $39,000,000 | $32,650,000 | 44.53% |
| LST ETH | wstETH | $31,880,000 | $8,740,000 | 25.24% |
| LST ETH | sfrxETH | $896,250 | $358,620 | 0.78% |
The Tier 1 markets identified are WETH, WBTC, USDT, USDC, ETH, and wstETH, as they have more than 5% in TVL. All other markets fall into Tier 2.
Sensitivity Analysis
The sensitivity analysis aims to determine how responsive each market is to changes in emissions. This helps in understanding which markets are more sensitive and how they should be treated during emission adjustments.
The following table showcases the effects of past emission adjustments on the TVL for specific markets:
| Market | Event | Supply Difference | Borrow Difference |
|---|---|---|---|
| vUSDC_Core | Emissions reduced 25% | -15.85% | -16.87% |
| vUSDT_Core | Emissions reduced 25% | -14.83% | -14.02% |
| vWBTC_Core | Emissions reduced 25% | 4.18% | 1.74% |
| vWETH_Core | Emissions reduced 25% | 8.01% | 52.41% |
| vWETH_LiquidStakedETH | No change | 2.21% | 0.54% |
| vwstETH_LiquidStakedETH | No change | 0.04% | 0.10% |
| vUSDC_Core | Emissions reduced 100% | -34.73% | -43.89% |
| vUSDT_Core | Emissions reduced 100% | -55.35% | -57.37% |
| vWBTC_Core | Emissions reduced 100% | -35.56% | -63.39% |
| vWETH_Core | Emissions reduced 100% | -37.00% | -36.05% |
| vWETH_LiquidStakedETH | Emissions reduced 100% | -61.05% | -62.64% |
| vwstETH_LiquidStakedETH | Emissions reduced 100% | -1.34% | -0.34% |
| vUSDC_Core | Emissions restored | 4.17% | 23.21% |
| vUSDT_Core | Emissions restored | 44.28% | 41.78% |
| vWBTC_Core | Emissions restored | 30.84% | 80.11% |
| vWETH_Core | Emissions restored | 74.89% | 70.00% |
| vWETH_LiquidStakedETH | Emissions restored | 28.91% | 32.44% |
| vwstETH_LiquidStakedETH | Emissions restored | -2.89% | -2.59% |
Graph of Sensitivity Analysis
Market sensitivity will be calculated by averaging the relative variation in TVL over 3 days before and after the change in emissions.
Market TVL Sensitivity to Emission Adjustments:
| Pool | Market | TVL Sensitivity to Emission Reductions |
|---|---|---|
| Core | WETH | 18.26% |
| Core | WBTC | 24.74% |
| Core | USDT | 57.03% |
| Core | USDC | 52.37% |
| LST ETH | ETH | 61.85% |
| LST ETH | wstETH | 0.28% |
*Note: An increase in TVL after the emission change is considered to have a sensitivity of 0, indicating no negative effects from the emission changes.
Final Recommendations
Based on the analysis of TVL participation and sensitivity to emission changes, the final recommendations for emission adjustments are made. Markets with significant TVL and high sensitivity to emission changes are given priority to maintain their stability, while less significant and less sensitive markets are subject to greater reductions.
| Pool | Market | Current Monthly Allocations | Adjustment | New Allocation |
|---|---|---|---|---|
| Core | WETH | 1,125 | 25% | 844 |
| Core | WBTC | 3,375 | 25% | 2,531 |
| Core | USDT | 3,375 | 10% | 3,038 |
| Core | USDC | 3,375 | 10% | 3,038 |
| Core | crvUSD | 1,500 | 50% | 750 |
| Core | FRAX | 600 | 50% | 300 |
| Core | sFRAX | 600 | 50% | 300 |
| Core | TUSD | 200 | 50% | 100 |
| Core | DAI | 500 | 50% | 250 |
| Curve | CRV | 375 | 50% | 188 |
| Curve | crvUSD | 375 | 50% | 188 |
| LST ETH | ETH | 18,333 | 10% | 16,500 |
| LST ETH | wstETH | 3,600 | 50% | 1,800 |
| LST ETH | sfrxETH | 800 | 50% | 400 |
| Total | 38,133 | 20% | 30,225 |