AIP-51 - Staking Pools Emissions Allocation Adjustment

ov3rkoalafied

This post serves to provide updated voting options for AIP-51 - Staking Pools Emissions Allocation Adjustment, as well as context for the changes.

Original proposal - https://forum.alchemix.fi/public/d/330-aip-51-staking-pools-emissions-allocation-adjustment

AIP-51 gives the following options, that could all be enacted independently:

Drop tALCX emissions from 12% to 7% (send 5% to treasury)
Drop gALCX emisisons from 10% to 6% (send 4% to treasury)
Stake an additional 69,420 ALCX in the Tokemak ALCX reactor (for a total of 138,840, which is 43% of the treasury-owned ALCX, which will decrease over time as emissions continue to be dispersed to the treasury)

The revised AIP-51 modifies the choices to the following, only one of which can be enacted:

No changes to ALCX emission distribution.
Eliminate tALCX emissions (12% to 0%), increase gALCX from 10% to 13%, and send the remaining 9% to the treasury. Additionally, stake 69,420 treasury ALCX in the Tokemak ALCX reactor (for a total of 138,840)
Drop tALCX emissions from 12% to 7%, drop gALCX emissions from 10% to 6%, send the excess 9% emissions to the treasury. Additionally, stake 69,420 ALCX in the Tokemak ALCX reactor (for a total of 138,840)
Option 2, but do not stake additional ALCX in the Tokemak ALCX reactor.
Option 3, but do not stake additional ALCX in the Tokemak ALCX reactor.

The primary change is the option to eliminate tALCX emissions rather than reduce both tALCX and gALCX. The reasoning is that tALCX was initially viewed as a way to gain the same anti-dilution effects as gACLX while also earning TOKE. However, tALCX APR is 43%, while gALCx APR is 28%, meaning we pay 50% more emissions for the same anti-dilution effect as gALCX. We do get TOKE emissions to offset this - but given the current low APR on the ALCX reactor, it would require a very strong TOKE resurgence to be worthwhile.

We are already well-positioned if TOKE succeeds, being one of the largest holders. We can continue to evaluate their progress and have a good baseline to restart accumulation if we feel they are starting to deliver on their vision, but for now the premium on tALCX vs gALCX may not be worthwhile. By eliminating tALCX emissions, we could instead take another step towards profitability, by virtue of decreasing short-term ALCX dilution, which is a protocol expense.

EDIT: Tokemak has also announced 2 more emissions reductions to the LD side, both before and after this update, which reduces the reward for staking more ALCX from the treasury / the reward for tALCX controlled by the DAO.

ButlerAndTheThirdStringers

As this proposal is written I would probably opt for option 4. Seeing as how the protocol is already very well positioned in its TOKE holdings, and is one of the largest holders, I don't think the marginal upside of accumulating more is worth the risk of a potential exploit (however small) that might lose those assets.

I would be open to option 2 if the percentage of treasury ALCX staked in the reactor is reduced, especially if it would enable us to reduce SLP emissions at some point in the future, but in my opinion 43% is way too much and would be poor risk-management.

ov3rkoalafied

ButlerAndTheThirdStringers Additionally TOKE announced another emissions slash to the LD side of things just before, and again after this update was posted, making the returns marginally smaller from adding more ALCX in the reactor.

0x7d54

ButlerAndTheThirdStringers At current prices, 25,000 ALCX = $475,000. Would you be sufficiently comfortable with this amount of risk, rather than the originally proposed 69,420 ALCX? Just trying to find a healthy balance. For me, I would like to be getting some benefit, however small, from treasury ALCX while there is that opportunity (I also think that it is important to continue to be a participant in the Tokemak ecosystem, as it builds).

ButlerAndTheThirdStringers

0x7d54 I'm not sure what a good number would be tbh. Gut feeling is that your suggestion feels alright, but I would be interested to hear other's feedback as well. I do think we should continue to support and it would be nice to earn yield in some capacity with that ALCX while the opportunity is available.

0x7d54

For what it's worth, I lean towards option #2 (though happy to also support this if there is an adjustment to the amount of treasury ALCX that we stake in Tokemak, to find consensus there). I am not super keen on principal for the raise in % to gALCX but I see the logic for this... and then we can always evaluate and potentially take another reduction on this later.

0xzert

I loved all the new options. Amazing job @ov3rkoalafied getting it redone with all the feedback.

I wish I had time to find the impact on the talcx, however, work and personal issues does not let me enough free time for it. Thanks

dixie

I'm happy to see this come up as an evolution of the original proposal. There seemed to be a bit of unhappiness with the cuts to (g)ALCX in the first version, which I can understand.

In general, I wish we could integrate strategies like tALCX directly into the main ALCX staking pool. The gALCX wrapper offers great UX, but I think it's a shame that it just parks ~230k ALCX (at present) in a contract and allows it to sit idly as an unproductive resource. In contrast with the relatively limited utility of unproductive gALCX that's kept on mainnet, tALCX offers quite a bit more value to Alchemix. However, it has a bad UX and the existence of two single-sided staking pools causes an inefficient allocation of ALCX emissions because of the friction involved in switching between the pools. In any case, I'd love to see a scenario where the tALCX and (g)ALCX pools were effectively merged, such that DAO could vote on allocating x% of staked ALCX over to Tokemak (or other IL-shielded single-staking destinations) in order to accrue productive third-party assets, whilst also helping to boost liquidity wherever ALCX is needed.

For reference, Tokemak currently holds ~450k ALCX, of which ~190k (~$1M) is deployed to the ALCX/ETH Sushi pool, accounting for about 16% of the total liquidity in the pool (~$6.24M). This is of course much lower than the total capacity that Tokemak could direct if it chose to do so, and their internal governors are responsible for artificially restricting that. I think we're all patiently-impatiently waiting for the day where they open up the throttle a bit more, and start to actually use more of the deposits that they have access to (...safely, of course).

It's also worth considering, again, that Alchemix does have ~$6M liquidity in its primary DEX pool, against an MCAP of ~$23M, so I do think there has to be an argument for re-evaluating the ALCX/ETH SLP staking emissions (i.e. to confirm whether 20% of emissions is still the right number), and I think that the liquidity provided by Tokemak could play a role in that discussion.

Above all, I do think it's important that we take action now, and it's plainly apparent to me that more emissions need to be redirected to the treasury so they can be spent more effectively during happier times. I really dislike the weird personality split between the tALCX and (g)ALCX pools and I've absolutely love to see a creative solution to that, but I'm not (quite) foolish enough to think that it's reasonable to expect a magical solution.

ov3rkoalafied

dixie You could try bringing this to foobar's attention and see if this is feasible. I also think we have to understand that if tokemak is farming the alcx/eth lp, and we reduce the emissions, that could also cause them to deposit less depth to the alcx/eth pool.