The amount of INDY currently being used for liquidity rewards is 4,795 per epoch until 21-DEC-23. The amount of INDY currently being used for stability pool rewards is 28,768 until 21-DEC-23. This has perhaps contributed to the situation where the majority of iAsset liquidity is huddled in the stability pools. To use iUSD as an example, as of the writing of this post, 3.69 million iUSD have been minted, 2,171,784 of that are in the stability pool–That is about 59%. We obviously want good usage of the stability pools, but we also need good liquidity on exchanges to promote the easy use and trading of iAssets, and we don’t currently have that.
While we obviously need more users minting more iAssets and more protocols willing to use iAssets in the Cardano ecosystem, we might also consider increasing the liquidity staking rewards for the remainder of the year. The Indigo DAO controls 21 million INDY, a small part of which could be used for this. If we were to triple the amount of INDY used to reward stakers from 4,795 to 14,385 effective 4-FEB-23, this would use 632,940 of DAO INDY through 21-DEC-23. At this point, staking rewards were already scheduled to increase to 9,590, and we could then have a discussion to let that decrease occur, use more DAO INDY to maintain 14,385 per epoch (that would cost 350,035 INDY for the full year), or use another figure all together.
I put together the above math for discussion, we could just double the staking rewards instead of triple, or use some other number. I do not have strong opinions as to the exact amount, I just currently feel rewards are too low compared to stability pools. I am posting this for discussion, not necessarily a formal proposal to vote on at this time. If we come to consensus, perhaps a vote proposal can be created.
40% for stability pools is more than far as SPs are the bread and butter that keeps the protocol a float. Plus we have to consider how many iassets will be online by the end of the year, and how divided SP indy rewards will be at that time.
I do agree in that I wish indy staking rewards were slightly better, but i dont like the idea of taking from the DAO to do so. The 2% protocol fees earned from staking is where the real money comes from once we have more active users and liquidations.
It’s also worth clarifying DAO INDY holdings a little bit. I looked at current tokenomics breakdown again after I posted the above message. The DAO actually controls 25,550,000 INDY, but 21 million of that is allocated to the current rewards schedule. The treasury resserve balance (aka, currently unallocated for anything) is 4,550,000. So, increasing the liquidity staking rewards could come from that reserve, or they could come from pulling some of the other staking rewards forward in time. Or some combination of both. Or neither, and continue with the current schedule. The DAO has the power, with consensus here, to make these changes.
I would personally be disinclined to touch the reserve at this point.
I think another angle of how the problem you raised can be approached is Indigo team proactively reaching out to other Cardano DeFi protocols to insure utility for iAssets. For example, iUSD can be lent on AADA for 15-20% APR (market consensus currently) - this is great example of boosting iUSD liquidity and demand. The same should be arranged for iBTC and iETH. So Indigo team should nudge other teams to onboard iAssets.
I would like to point out that Indy price as well as the amount of rewards is what determines the aprs - currently based on the overall price action of indy the price of indy is on a steady decline as people farm rewards and sell for more ada to further compound those rewards. I think adding more quantity of indy rewards would not be prudent at this time as it will likely just accelerate the price decline of the indy token reducing the value of rewards for all those on the indy protocol. I did some rough math not precise at all and came up with approximately 43% apr in indy staked 84% ieth sp and 100% ibtc sp this last epoch at an indy price of 5.00 ada/indy. ** IF ANYBODY HAS MORE PRECISE NUMBERS PLEASE PROVIDE. The fees are not yet enough to buoy the indy price and make it an attractive investment vs the stability pools which seem the safest most rewarding investment on the platform at this time. I would rather see some more incentives provided to the indy stakers in the way of fees/indy rewards to make it more competetive with the SPs in these early stages of adoption since fees arent very high yet and INDY price health is essential to all activity on the indy protocol. The dexes themselves should provide competitive incentives for itokens to attract more liquidity since they have a vested interest in having more liquidity as well than the other dexes but supplementing all the dexes from indys pocket seems like it would stretch indy a bit too thin and drive the indy token price to new lows in a much more rapid way.
“people farm rewards and sell for more ada to further compound those rewards.” it is not the people its the indigo team it self. They have fueled more than 50% of the tvl with ada from the Indy dumps, they are the ones harvesting the lions share, which drives the price of indy towards the hard zero and below. The indigo team is the only entity responsible for this “fair distribution” which is straight up rug pulling on the DAO members and there is liquidity yanking as well, hapening on minswap mostly. They do this to secure their own protocol their perpetual profit out of thin air. without giving any regard for the future.Synthetic indeed since there is absolutely no organic tvl its all a scam and this dao is a fars .That is the reason they will neglect any suggestion trying to prevent them from getting filthy rich on the back of cardanians and their ada. These people should be investigated!!!
I think we can increase the relative Liquidity rewards by decreasing the Stability Pool rewards