Proposal to Reallocate a Portion of Existing Rewards from Existing ETH Stablecoin pools to Fund Rewards for dfxStables Pools
Overview
Recently, DFX announced the next phase of its growth with the introduction of dfxStables. dfxStables are a fractional stablecoin comprising 95% of that stablecoin and 5% DFX. To read more about dfxStables, we recommend checking out the latest dfxCAD Article, it will tell you everything you need to know.
dfxCAD Article: dfxCAD: The Time is Now. ⌛. Website | Twitter | Telegram | Discord… | by DFX Finance | Apr, 2022 | Medium
There will be three new fractional stablecoins created –
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dfxCAD – (95% CADC / 5% DFX) -
dfxEUR – (95% EURS / 5% DFX) -
dfxSGD – (95% SGD / 5% DFX)
With these three (3) new stablecoins, there will be four (4) new dfxStables pools created –
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dfxCAD/CADC – (50% dfxCAD / 50% CADC) -
dfxEUR/EURS – (50% dfxEUR / 50% EURS) -
dfxSGD/xSGD – (50% dfxSGD / 50% xSGD) -
dfx3pool – (33.3% dfxCAD / 33% dfxEUR / 33% dfxSGD)
In order to help motivate liquidity providers to provide liquidity in these four new pools, we need to provide rewards/incentives. We do not want to increase the total amount of DFX given as rewards each month. Instead, this is a proposal to reallocate a portion of the existing DFX rewards already used to incentivize liquidity to the existing stablecoin pools.
Motivation
dfxStables are the clear next step for our stablecoin ecosystem. Our fractional stablecoins will produce a revenue stream for our protocol that is necessary for sustained and continued growth. As a protocol, we should incentivize liquidity providers to mint dfxStables and to provide liquidity in these new dfxStables pools.
Specifications
The dfxCAD/CADC liquidity pool already exists, and the other three (3) dfxStables pools are in the process of being finalized.
Proposed Changes
Currently, there is approximately 568,750 DFX/month allocated to the existing stablecoin pools that is used to reward and incentivize liquidity providers.
In order to incentivize liquidity in the dfxStables pools, but not increase the total amount of DFX distributed each month, we should reallocate 160,000 DFX from the 568,750 monthly DFX rewards currently given to the existing stablecoin pools and use that 160,000 DFX as rewards for the dfxStables pools.
Because we are reallocating existing rewards instead of adding more DFX to the rewards, this proposal will necessarily reduce the amount of DFX each existing stablecoin pool receives for rewards each month. To free up 160,000 DFX, the rewards for the existing pools will be reduced by approximately 28% each. Here is a breakdown of the changes –
The 160,000 DFX would be allocated as follows to the dfxStables pools –
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dfxCAD/CADC – 40,000 DFX/month -
dfxEUR/EURS – 40,000 DFX/month -
dfxSGD/xSGD – 40,000 DFX/month -
dfx3pool – 40,000 DFX.month
Pros and Cons of the Proposal
Pros –
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This will create demand for dfxStables, because liquidity providers will want to take advantage of the reward incentives for participating.
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The demand for dfxStables will bootstrap liquidity for dfxStables.
The protocol itself benefits from this liquidity, by using dfxStables to generate fees for the protocol itself. -
Reallocation of existing rewards, as opposed to adding new rewards, helps maintain proper tokenomics and does not flood the market with additional DFX.
Cons –
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This will reduce the current reward allocation to existing stablecoin pools on ETH by 28%.
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The reduction in reward allocation to those existing pools will lower APY.
Summation of Proposed Incentives & Changes
Current LP rewards for existing ETH stablecoin pools reduced approximately 28%.
This reduction will free up 160,000 DFX.
Use those 160,000 DFX to incentivize liquidity in new dfxStables pools, equally distributed as 40,000 DFX per pool.
LFG