RE: SPS Governance Proposal - Reduce SPS:WETH Incentives by 50%
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As discussed on Discord, there are several reasons why I do NOT believe we should change this yet, at least not at the start of a bull run.
But before I go into that, I also wanted to mention one term which has been used a LOT to confuse the community, which is "underperforming". The success or performance of a liquidity pool isn't just measured in volume, it can also be measured in the success of the underlying asset. For example, one could argue that SPS:DEC is the most "underperforming" pool since it has given us the least benefit in terms underlying asset appreciation recently. Using this metric, SPS:WETH becomes the best performing pool. Therefore, I think it is unfair to use terms like that when describing a pool to confuse people who might not be involved in DeFi as much. Simply say least utilized or least volume, which are both technically true, whereas the term "most underperforming" is entirely subjective depending on what metrics you use.
To further explain this concept, the base asset that SPS is paired against is very important. If the base asset we're paired against increases in price, so does SPS automatically without any buy/sell pressure. If we are paired against multiple pools, the best performing one will get arbitraged with SPS being sold and bought back in the worst performing pool. In our scenario, SPS is constantly getting sold on the SPS:WETH pool and being used to buyback elsewhere by arbitrage bots. In fact, since the start of the year around 78 ETH worth of SPS has been bought from ETH pools more than sold, with very minimal changes in base liquidity providers. That means the ETH pool has provided us with 78 ETH worth of buying pressure just in the past ~2 months, currently worth $283,452. Of course no one can say for certain ETH will continue to overperform, but in a bull market championed by BTC/ETH, especially with EIP4844 very soon and ETH ETF supposedly in May, I do NOT want to lose SPS exposure to ETH right now.
The DAO can provide liquidity to ETH giving SPS exposure to ETH, but that means the DAO loses some exposure to ETH itself (through imperm loss). Personally, I'd like to see the DAO provide a little liquidity (in v3 infinite range 1% fee pool) AS WELL AS the community, thus reinforcing our exposure.
Another point is that more utilized pools such as DEC:USDC has a fair bit of volume, but that is actually reason for us to REMOVE the SPS incentive, not keep it. If a pool has adequate volume already, logically people will stay even if there is no SPS incentive since they are earning decent revenue just from LP fees, especially since DECs are stable users can earn a lot from v3 pools. If we remove ETH pool incentive, there will be no more liquidity. We want as much liquidity for SPS as possible, without spending too much SPS.
I actually vote to also remove the DEC:USDC LP rewards using the exact above logic.
I am all for removing the DEC:DAI pool since DAI is stable, it does not provide any appreciation for DEC and it also does not provide us with any volume. That is a no brainer.
For now, I don't think we should change the SPS:WETH or SPS:BNB rewards. I think we should also increase the SPS:DEC pool since it is our primary pool as it is the only pool to incentivize both SPS and DEC, it just makes sense to increase the incentive there. A small portion of rewards from removal of DEC:DAI (and maybe DEC:USDC) can be used to increase SPS:DEC.
I am also all for the DAO providing liquidity, BUT the DAO needs to provide on v3 1% infinite range for both SPS:WETH and SPS:BNB pools. I can go on about why this works on the next proposal but this post is long enough.
Previously posted this via wrong account oops
Solid points.
Thank you for your thoughts on this @cryptoeater ... I have not had time to go through the discord chat, but I would personally like to find middle ground that does several things:
reduce SPS emissions. I believe we pay out more than we need to in total, thus we have become inefficient overall.
work with people that are reasonable and understand goal #1 to find a good solution for which pools to cut and which to keep. I know we have a lot of smart players, and the goal would be to strike a fair balance.
I voted for this preproposal because I'm happy to see movement on making changes and reducing SPS emissions, but I'm also happy to work with you and others to find solutions as well. Whether we keep ETH:SPS or DEC:USDC or any other LP for that matter, I would like to see sincere compromise and focus on delivering to an objective in terms of emission reduction rate.
I believe @clayboyn has set out a target of 50% overall reduction from LPs in total. Whether we can get there or not will depend on us (all of us) working towards a common goal. I know I want a solution where people are happy with what we achieve as well. I don't think rushing or jamming through something that doesn't have broad support is a good way to solve this problem.
So while I voted for the pre-proposal, I am completely open to working with you and others to find a solution that we can live with, and more importantly improving the economics of the whole ecosystem.
If there is any edits proposed, it must happen now.
I mean now now.
Today. @clayboyn
This is not my proposal, so unless the author requests an edit it won't happen. I've made my personal stance clear. I think this is a nuclear option that unless further clarified or defined (DAO committing liquidity to ETH pool or compromising on a reduction instead of flat out end all inflation to ETH pools) then we're going to hurt ourselves with this. I voted no.
Otherwise it's a simple no vote.
Let me rephrase: it is a NO vote
Fine with me.
FYI it has been updated to something more reasonable now. If this changes your mind. I changed my vote as I said I would.
I'm 100% onboard with this goal. But I have made my thoughts clear that I do not like eliminating rewards altogether. I would vote for a 50% reduction in a heartbeat. I don't think this binary choice of all or nothing is a good solution. I will abstain.
It would never pass... every option I pitched that had multiple pools involved had people on one side refusing to support because of preferences. We're going to have to go pool by pool unfortunately.
Some investors would try to make this an opportunity to get better rewards for the pools they are invested in. Thank you for putting in your time to make things better here 🙂
Why would a pool that encourages external ETH-based funds be an appropriate initial target instead of the internal pools that slosh inflation around, with other inflation, for more inflation? It's makes my stomach turn. I've written more detailed thoughts throughout the comment section if you may have not seen them yet, including a direct message to the creator of the pre-proposal, so please feel free to skim over those to see what it feels like to be on the other side.
I will vote NO. I am understanding that you will vote NO as well
I've always thought it is cute that you make DECs plural (Dark Energy Crystals), but you keep SPS singular (Splintershards). Technically, both tokens are already pluralized, so you don't actually need to add the 's' to either.