[DRAFT AIP] Emissions adjustments (CVX Bonds, More bribes and tALCX)

ov3rkoalafied

[Edited 12/6]
Another emissions adjustment! Proposed adjustments:

ALCX/ETH SLP: 25% -> 25%
tALCX: 5% -> 10%
ALCX: 15% -> 10%
alUSD3CRV LP: 10% -> 0% (RETIRED)
alETH Saddle: 3% -> 1%
Bribes: 12% ->9% split thus:

alUSD ~ 4.7% -> 4.5%
alETH ~ 4.7% -> 2%
d3 ~ 2.6% -> 2.5%

Bonds: 30% -> 45% split thus:

ALCX/ETH: 10%->10%
DAI: 10%->15%
ETH: 10%->15%
CVX: 0%->5%

The overarching reason for these changes is that many users are waiting for v2 to create new vault positions (as can be demonstrated by low alAsset volumes and by general community sentiment) - so instead of renting more liquidity than we need, we should take this time before v2 to gain more permanent value for the treasury. This can be done through additional bonding and tALCX allocation.

The reasoning for obtaining each asset and their weighting related emissions weighting is as follows:

ETH/DAI - More ETH/DAI means more boosted yield and more protocol owned alAsset liquidity, therefore the weighting is increased.
ALCX/ETH - this doesn’t benefit the protocol as much as alAsset liquidity, plus tokemak may make this less necessary - however the tokemak reactor is not yet live. Therefore the weighting is kept the same. In the future, this could be split out and staked into tokemak (ALCX) and alETH (ETH) liquidity.
TOKE - More toke means more potential efficient ALCX liquidity through tokemak. The single stake ALCX pool has a very similar risk profile as the tALCX pool, therefore the weighting for tALCX was increased. 10% of emissions are still kept with single-stake ALCX as this pool will likely become the DAO pool. Additionally, removing or massively reducing single stake would disproportionately harm smaller stakers (as compounding is more expensive with tALCX) and may create a larger barrier to entry for newcomers.
CVX - Bribes are currently the most efficient way to rent liquidity from Curve LPers, However, this does not offer permanent liquidity. Owning CVX would give the DAO a way to permanently secure gauge rewards for alAssets - in a way, owning CVX is “free rent”. Additionally, it lets the DAO bribe CVX voters to pay gauge rewards to LPers - both of which include the DAO itself, which makes the DAO owned LP even more of a yield bearing asset. Lastly, owning CVX offers flexibility to shuffle around “owned” liquidity between various Curve-native alAsset pools - which is a flexibility protocol owned liquidity doesn’t have. This could be used to obtain a temporary liquidity boost for alAssets that are getting debt ceiling increases (ie, temporary increased demand).

Notes on other adjustments:

alUSD3CRV pool ALCX rewards are being made obsolete in favor of bribes, as bribing is a more efficient way to secure liquidity. We have 560m of TVL in the alUSD pool with only 5m of weekly volume. We likely only need about 25-50m of liquidity for that, but if we drop rewards too much then we risk a depegging event when users unstake. Therefore, alUSD bribes are remaining - given bribe efficiecy, the elimination of alUSD liquidity mining should result in a 50% reduction to the alUSD pool.
alETH has even less volume than alUSD (likely due to the low debt cap and 25% collat ratio). Total emissions for alETH liquidity renting have been reduced to 2/3 of those related to alUSD. Saddle is not being fully phased out as they would be a good partner for launching new more obscure alAsset pools that would be unlikely to receive curve gauges. There is also the new option for stakers to obtain saddle rewards, which lessens the need for ALCX rewards.
Bond BCV for all assets should be adjusted to a faster price decrease rate, as demand for bonds has been steadily increasing (more bonding activity on-chain and a higher frequency of users voicing they haven’t been seeing adequate bond discounts lately - though this could also be due to the downtrend).
This proposal assumes current emissions are in line with step 2 of AIP 29, which will be enacted in the coming days. Despite these emissions adjustments occuring relatively close together, this proposal shouldn't create much redundant dev work.

A vote "for" indicates you are in favor of these emissions adjustments.
A vote "against" means you want the emissions adjustments to remain as is.

Gooiban

I'm mostly for this, except for the increased alUSD bribes.

As you said; Right now we are renting more liquidity than we need, and I think this applies to alUSD liquidity too.
So ~ doubling the alUSD bribes seems a bit excessive.

I think those emissions should be spent on more bonds to get more permanent liquidity aswell.

ov3rkoalafied

Gooiban I agree - would like to somehow define what is an acceptable amount of alUSD liquidity and confirm that 4.7% bribes would be enough though. I think that would correspond to about 10% emissions (since bribes are at least 2x as effective), so it would effectively be a cut from 20% emissions (if liquidity mining) to 10% emissions (liquidity mining) - is half the alUSD pool still adequate?

scoopy

ov3rkoalafied

currently we are spending _2k ALCX a week on alusd3CRV, with 700 coming from bribes. I think we could reasonably half this, so that we spend 2k ALCX every other week on bribes. That results in a 50% reduction in the farming ALCX budget for alUSD3CRV, but with the increase in bribes from ₁₄₀₀ every 2 weeks to _2k every 2 weeks, it will result in similar APR but half the expense to us. I'd like to propose this alternative to the farming/bonding weights. It is very similar to Ov3rkoalified's proposal but with some minor adjustments to ensure there isn't a precipitous drop in yield for our alAsset markets, which could lead to stressing the pegs and people arbing via the transmuters. Therefore bribes are actually increased by 4%. Since Tokemak has become a great sink for liquidity and ALCX has been listed on basically all of the major exchanges, we can safely reduce emissions for the ALCX/ETH pair by a lot. The APR of the pair will be reduced, but it is expected that some of the liquidity leaves, which will balance this out. Of the exiting liquidity, the ALCX and tALCX pools should be sufficient to capture most of the LPs' ALCX, while alETH LP positions could capture their ETH side.

Total bonding weight is a bit smaller than Ov3rkoalified's proposal and has more allocated towards CVX. Acquiring CVX with 10% of the weekly rewards will net the DAO ₁₅-20k CVX a week. Currently, our bribes result in ₂.7 million CVX votes between alUSD, alETH, and d3. Therefore, if we continuously acquire CVX, we can put a significant dent in the amount of ALCX that we need for bribes in the future. As our CVX reserves increase, we need less and less for bribes, which will coincide nicely with the emissions reductions over time. Considering we claw back a portion of the bribes with our CVX voting and also farm CVX and CRV with our alUSD and alETH LP, there is tremendous incentive alignment with this weighting.

ALCX/ETH SLP 40% -> 22%
ALCX 15% -> 10%
tALCX 5% -> 10%
alUSD3CRV LP 10% -> 0%
alETH Saddle 3% -> 2%
bribes 12% -> 16%
alUSD 8% (max 2k every 2 weeks, remainder will be banked for future weeks)
alETH 6% (max 1400 every 2 weeks, remainder will be banked for future weeks)
d3 2% (max 400 every 2 weeks, remainder will be banked for future weeks)

Bonds 15% -> 40%
ALCX/SLP 10%
DAI 10%
WETH 10%
CVX 10%

scoopy

adding onto the above post, I ran some numbers.

Our alETH pool currently has 712m locked into it and it received 1.35m CVX votes. That equates to $527 of liquidity per CVX vote, which currently costs $28. For purposes of sustainable liquidity, it makes more sense to actively acquire CVX than it does to acquire more DAI and WETH. Therefore, I would like to propose the bonds be of the following weights:

Bonds 40% of total emissions:
10% ALCX/ETH SLP
5% DAI
5% WETH
20% CVX.

This would mean the DAO would accumulate ₃₀ CVX a week. If so, 30k * 527 (the amount liquidity per CVX), we can sustainably incentivize _15m of additional liquidity per week (and 18x more efficient than sourcing the liquidity directly via Alchemix DAI and WETH bodns). Long term acquisition of CVX is by far the most economical means to secure alusd and aleth liquidity sustainably.

0xFelix

In my opinion this comes a bit too quickly after AIP-29 considering we haven't even started step 2 from that proposal yet. That being said, I agree with the direction for bonds and bribes and acquiring CVX.

What I question are the steps related to the SLP, tALCX and single-staking. To me adjusting these doesn't make a whole lot of sense until the Tokemak reactors are actually live and we have some data to check the performance. What I would much rather see is the following:

After the Tokemak reactor is live and we've reached >10/15% liquidity to market cap ratio for ALCX/ETH SLP through the reactor and POL, make the adjustment to the SLP/tALCX/single stake emissions. At that ratio combined with the new CEX listings I'm confident we will have enough liquidity for the utilization of the pool and demand for ALCX.
If we have sufficient liquidity remove all incentives for the SLP
Use this 25% emission saving for a higher % allocation to tALCX, bonds and perhaps for the DAO itself (i.e. "burning" part of the emissions).

So it could look something like this:

Step 1:
ALCX/ETH SLP 25% (as per AIP-29)
ALCX 15% (as per AIP-29)
tALCX 5% (as per AIP-29)
alUSD3CRV LP 10% -> 0%
alETH Saddle 3% -> 1%
bribes 12% -> 14%
Bonds 30% -> 40%

Step 2:
ALCX/ETH SLP 25% -> 0%
ALCX 15% -> 10%
tALCX 5% -> 10%
alETH Saddle 1%
Bribes 14%
Bonds 40% -> 50%
DAO fund 15% (for future use)

JackWhite

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