Summary
This proposal outlines adjustments to XVS emissions across all supported chains based on market performance and use cases. The adjustments include a reduction based on relative market participation, reallocations between supply and borrow incentives, and eliminating emissions for markets with negligible impact. Below is a summary of the proposed changes:
| Chain | Current Emissions (XVS) | New Emissions (XVS) | Reduction (%) |
|---|---|---|---|
| ZKSync | 7,500 | 4,230 | 44% |
| Arbitrum | 9,152 | 3,825 | 58% |
| Ethereum Mainnet | 26,664 | 13,595 | 49% |
| BNB Chain | 23,850 | 16,943 | 29% |
| Total | 67,166 | 30,372 | 43% |
A VIP will be required to make these changes, the actions for it will modify the reward distribution speeds on all chains, to match the ones in this proposal if approved by the community.
Details
Reduction Strategy
The reduction strategy is based on market participation (average supply and borrow over 90 days, or 60 days for newer markets) and the specific use cases of each asset:
- 30% Reduction: Markets with relative participation > 25%.
- 50% Reduction: Markets with relative participation between 10% and 25%.
- 75% Reduction: Markets with relative participation < 10%.
Supply and Borrow Incentives
To align emissions with market use cases:
Markets in the Core Pool
- Non-Stablecoin Markets: Primarily used as collateral. Emissions will focus on the supply side to incentivize collateralization and maintain liquidity.
- Stablecoin Markets: Predominantly used for borrowing positions. Emissions will focus on the borrowing side.
Markets in the Liquid Staked ETH Pool
- ETH Market: Emissions will focus on the supply side to incentivize market liquidity and provide favorable rates for looping with LST (Liquid Staking Tokens) and LRT (Liquidity Restake Tokens) markets.
This structure optimizes emissions for the most relevant use cases, improving rates and user experience.
LST and LRT Markets
Emissions for LST and LRT markets are eliminated. An analysis of Ethereum Mainnet markets concluded that emissions have a negligible impact on these markets’ performance. These markets operate effectively without incentivization due to their inherent utility in staking and looping.
XVS Vault
A 30% reduction is proposed for the XVS Vault across all chains. This gradual reduction aims to assess user behavior following the adjustment. Based on the results, further changes can be made in the future to optimize emissions for the vaults on all chains.
Tables for Each Chain
ZKSync
| Pool | Market | Current Allocation (XVS) | Relative Participation | Reduction | New Allocation (XVS) |
|---|---|---|---|---|---|
| Core | ZKSync | 900 | 27% | 30% | 630 |
| Core | ETH | 1,200 | 23% | 50% | 600 |
| Core | BTC | 1,200 | 14% | 50% | 600 |
| Core | USDT | 900 | 13% | 50% | 450 |
| Core | USDC.e | 1,800 | 22% | 50% | 900 |
| Vault | XVS | 1,500 | - | 30% | 1,050 |
| Total | 7,500 | 56% | 4,230 |
Arbitrum
| Pool | Market | Current Allocation (XVS) | Relative Participation | Reduction | New Allocation (XVS) |
|---|---|---|---|---|---|
| Core | ARB | 319 | 5.64% | 75% | 239 |
| Core | WETH | 319 | 6.75% | 75% | 239 |
| Core | WBTC | 638 | 15.33% | 50% | 319 |
| Core | USDT | 638 | 8.38% | 75% | 479 |
| Core | USDC | 638 | 9.43% | 75% | 479 |
| LST | WETH | 3400 | 28.26% | 30% | 1020 |
| LST | wstETH | 850 | 14.77% | 100% | 0 |
| LST | weETH | 850 | 11.43% | 100% | 0 |
| Vault | XVS | 1,500 | - | 30% | 1,050 |
| Total | 9,152 | 65% | 11,475 |
Ethereum Mainnet
| Pool | Market | Current Allocation (XVS) | Relative Participation | Reduction | New Allocation (XVS) |
|---|---|---|---|---|---|
| Core | WETH | 633 | 4.58% | 75% | 475 |
| Core | WBTC | 1,898 | 13.45% | 50% | 949 |
| Core | USDT | 2,279 | 7.96% | 75% | 1,709 |
| Core | USDC | 2,279 | 8.42% | 75% | 1,709 |
| LST | ETH | 12,375 | 65.59% | 30% | 3,713 |
| Vault | XVS | 7,200 | - | 30% | 5,040 |
| Total | 26,664 | 60% | 13,595 |
BNB Chain
| Pool | Market | Current Allocation (XVS) | Reduction | New Allocation (XVS) |
|---|---|---|---|---|
| Core | XVS | 1,200 | 25% | 900 |
| Vault | VAI | 3,750 | 30% | 2,813 |
| Vault | XVS | 18,900 | 30% | 13,230 |
| Total | 23,850 | 45% | 16,943 |
Supply and Borrow Emissions Distribution
| Chain | Pool | Market | Supply Rewards (%) | Borrow Rewards (%) |
|---|---|---|---|---|
| ZKSync | Core | ZKSync | 100% | 0% |
| ZKSync | Core | ETH | 100% | 0% |
| ZKSync | Core | BTC | 100% | 0% |
| ZKSync | Core | USDT | 0% | 100% |
| ZKSync | Core | USDC.e | 0% | 100% |
| Arbitrum | Core | ARB | 100% | 0% |
| Arbitrum | Core | WETH | 100% | 0% |
| Arbitrum | Core | WBTC | 100% | 0% |
| Arbitrum | Core | USDT | 0% | 100% |
| Arbitrum | Core | USDC | 0% | 100% |
| Arbitrum | LST | ETH | 100% | 0% |
| Ethereum Mainnet | Core | WETH | 100% | 0% |
| Ethereum Mainnet | Core | WBTC | 100% | 0% |
| Ethereum Mainnet | Core | USDT | 0% | 100% |
| Ethereum Mainnet | Core | USDC | 0% | 100% |
| Ethereum Mainnet | LST | ETH | 100% | 0% |
| BNB Chain | Core | XVS | 100% | NA |
| BNB Chain | Vault | VAI | 0% | 100% |
| BNB Chain | Vault | XVS | 100% | 0% |
Recommendations
The proposed adjustments aim to optimize XVS emissions based on the specific use cases and performance of each market, while relocating rewards to favor the most frequent market use cases.
- Reduce total emissions by 43%, reallocating incentives to markets with higher performance and relevance.
- Align emissions with use cases: supply rewards for collateral markets and borrow rewards for borrowing markets.
- Eliminate emissions for LST and LRT markets as data shows negligible dependency on incentivization for these assets.
- Gradually reduce XVS Vault emissions by 30% to evaluate the effects on user behavior and adjust based on observed results.
- Maintain flexibility to reassess emissions based on future market conditions and data.
