VIP 9 : Further VALUE emission reduction

Summary

Current VALUE emission is 1.45 VALUE per blocks as follow:

  • 0.25 VALUE/block for three v1 vaults (WETH, ETH/USDC and ETH/WBTC UNI LP)
  • 0.20 VALUE/block for governance vault
  • 0.60 VALUE/block for 2 liquidity pools WETH/VALUE and vUSD/VALUE
  • 0.20 VALUE/block for USDC/VALUE 60/40 FaaS pool
  • 0.20 VALUE/block (scale up to 1 VALUE/block) for MultiStables Vault

At the time of writing, we have around 433k VALUE left as incentives. At the current emission rate, we will have around 45 days left for reaching the cap of a total of 2.37mil VALUE.

There’s a need to redirect the current emissions to more valuable components of the ecosystem

Motivation

While high liquidity is very important for VALUE, at the current stage of the project, we feel that we already have enough liquidity for VALUE even without the 2 liquidity pools WETH/VALUE and vUSD/VALUE.

For a comparison, the three v1 vaults have around 30mil$ TVL and an average APY of 10%, bringing 3mil$ annual profit to farmers while 14% of this profit (420k$ annually) will go to governance vault stakers. The 3 vaults are only receiving a total incentive of 0.25 VALUE/block, and we believe TVL would rise if we increased the incentive reward.

The 2 liquidity pools receive 0.6 VALUE/block (240% more than vaults v1). Assuming the average trading volume of the two liquidity pools are 500k$ daily (fair estimate), 0.3% swap fee and 30% governance vault reward distributions, its revenue is 500000$*0.3%*30%*365=164k$ annually. Even at double the estimate at 1mil$ volume daily, the two liquidity pools only bring 330k$ annually to the ecosystem. In comparison, the two liquidity pools get 240% more rewards but only bring 40% (up to 78%) revenues as vaults.

From this the calculation and given the current situation of VALUE emission, we feel encouraged to redirect the current emissions to more valuable components of the ecosystem. (Incentive should be given to those which deliver more revenue). As the current two pools are the only two legacy pools remaining, we want to upgrade or close them entirely to upgrade and bring them to parity with FaaS pool tech.

We will give more details in our upcoming November Roadmap this week, but here are some previews: the 3 vaults at v1 will get major upgrades to vaults v2. In particular, the two UNI LP vaults will be upgraded before the UNI emission comes to the end (17-Nov). Our solution will let UNI farmers continue to automatically farm another crop with their current liquidity without exiting the vault. With the purpose of attracting major farmers to our ecosystem (by our calculation our vault tech could absorb up to 50mil$ TVL for each vault without killing the APY, so another 100mil$ TVL for Uniswap LPs without farming UNI), we propose the following:

  • Halt current emission of 2 liquidity pools WETH/VALUE and vUSD/VALUE as soon as possible, saving 0.6 VALUE/block that will be redirected to new vaults next week
  • If the community feels the need to have liquidity for vUSD, we will propose a new FaaS pool for vUSD, with the amount of the incentive and trading pairs to be chosen by a community vote. Nevertheless, we suggest not to do it before we roll out the final specification of vUSD lending. We do not encourage speculation of vUSD before its specifications have been finalized.

Mechanics

Community will vote for halting current emission of 2 liquidity pools WETH/VALUE and vUSD/VALUE

For : Halt current emission of 2 liquidity pools WETH / VALUE and vUSD/VALUE

Against : No change

VIP 9 Voting will start on Thursday, Nov 12, 2020 8:00:00 GMT+0 and it will end on Sunday, Nov 15, 2020 8:00:00 GMT+0. The implementation of the verdict will be arranged as soon as possible after the voting is over.

As a reminder, VIP 9 Voting will not cost gas and all Governance Vault v2 stakers will be able to vote without hindrance. Stakers may also re-vote before voting ends (to avoid spam, each voter can only re-vote after a 1-hour cooldown period).

Written by

Bring True Value to DeFi — https://valuedefi.io

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