Proposal: Emissions Adjustments for ETH Mainnet

Summary

This proposal recommends adjusting XVS emissions on Ethereum Mainnet by reducing them by 36%, based on an analysis of TVL proportions and market sensitivity. Additionally, 77,853 XVS is requested for distribution over the next 4 months. The following table outlines the proposed emission adjustments:

Pool Market New Monthly Allocation (Change)
Core WETH 633 (25%)
Core WBTC 1,898 (25%)
Core USDT 2,279 (25%)
Core USDC 2,279 (25%)
Core crvUSD 0 (100%)
Core FRAX 0 (100%)
Core sFRAX 0 (100%)
Core TUSD 0 (100%)
Core DAI 0 (100%)
Curve CRV 0 (100%)
Curve crvUSD 0 (100%)
LST ETH ETH 12,375 (25%)
LST ETH wstETH 0 (100%)
LST ETH sfrxETH 0 (100%)
Total 19,464 (-36%)

Details

Considerations

All prices and market TVLs are considered for Sept 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 3% in TVL
  • Tier 2: Markets with less than 3% in TVL

The following table shows the TVL participation:

Pool Market Supply Amount Borrow Amount TVL Proportion
LST ETH WETH $37,830,000 $34,390,000 41.41%
LST ETH wstETH $24,430,000 $20,390,000 25.70%
Core WBTC $12,350,000 $7,740,000 11.52%
Core USDT $6,340,000 $4,810,000 6.39%
Core USDC $7,220,000 $5,080,000 7.05%
Core WETH $3,620,000 $1,680,000 3.04%
Core crvUSD $1,310,000 $957,033 1.30%
Core TUSD $1,000,000 $802,010 1.03%
LST ETH sfrxETH $969,010 $913,420 1.08%
Core sFRAX $505,760 $301,230 0.46%
Core FRAX $398,440 $271,440 0.38%
Core DAI $275,210 $218,170 0.28%
Curve crvUSD $216,230 $154,570 0.21%
Curve CRV $134,180 $80,510 0.12%

The Tier 1 markets identified are WETH, wstETH, WBTC, USDT, USDC, as they have more than 3% 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 the past emission adjustment on the TVL for specific markets:

Market Event Supply Difference Borrow Difference
vUSDC_Core Emissions Decreased 1 August 6.81% 9.71%
vUSDT_Core Emissions Decreased 1 August 9.81% 10.27%
vWBTC_Core Emissions Decreased 1 August 3.50% 0.05%
vWETH_Core Emissions Decreased 1 August -0.88% -0.72%
vWETH_LiquidStakedETH Emissions Decreased 1 August -0.10% -0.30%
vwstETH_LiquidStakedETH Emissions Decreased 1 August 0.01% 0.00%

Graph of Sensitivity Analysis

Market sensitivity will be calculated by averaging the relative variation in TVL over 5 days before and after the change in emissions, based on the latest changes in emissions on August 1.

Market TVL Sensitivity to Emission Adjustments:

Pool Market TVL Sensitivity to Emission Reductions
Core WETH -0.80%
Core WBTC 0%
Core USDT 0%
Core USDC 0%
LST ETH ETH -0.20%
LST ETH wstETH 0%
  • 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

Following the August 1 adjustment, the impact on market TVL was minimal, with slight reductions of 0.8% in the ETH Core pool and 0.2% in the LST pool. Based on these results, the following recommendations are proposed:

  • Remove Emissions for Low TVL Markets:

    Eliminate emissions for markets with less than 3% TVL participation due to their minimal contribution.

  • Remove LST Market Emissions:

    LST markets, like wstETH, showed negligible response to emission changes, supporting the removal of their emissions.

  • Replicate August 1 Adjustments:

    Since the August 1 adjustments had minimal impact, apply the same approach to the protocol’s most significant tokens.

Pool Market Current Monthly Allocations Adjustment New Allocation
Core WETH 844 25% 633
Core WBTC 2,531 25% 1,898
Core USDT 3,038 25% 2,279
Core USDC 3,038 25% 2,279
Core crvUSD 750 100% 0
Core FRAX 300 100% 0
Core sFRAX 300 100% 0
Core TUSD 100 100% 0
Core DAI 250 100% 0
Curve CRV 188 100% 0
Curve crvUSD 188 100% 0
LST ETH ETH 16,500 25% 12,375
LST ETH wstETH 1,800 100% 0
LST ETH sfrxETH 400 100% 0
Total 30,227 -36% 19,464

This proposal will ask for XVS funding to support these incentives up to January 2025. The needed amounts per distributor are the following:

Distributor Monthly XVS Amount Total XVS Amount for 4 Months
Core 7,088 28,353
Curve 0 0
LST 12,375 49,500
Total 19,464 77,856
5 Likes

Another XVS emission reduction… this step is really welcome i think. The community has always supported these reductions. As we know for ETH, emissions are deployed mainly for initial marketing and attracting TVL. So now is the right time to gradually reduce it.

1 Like

I support the reduction of XVS emissions.
Strategic emissions and reductions are important.

Adjusting XVS emissions on Ethereum Mainnet is important for Venus protocol! Less XVS emissions will benefit the prices of XVS. So go ahead

1 Like