Reduce ACX emissions for Across ACX LP

Author: Kevin Chan Status: Proposal Related Discussion: https://forum.across.to/t/reduce-acx-emissions-for-across-acx-lps/1756

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Summary:

The Across DAO should decrease ACX emissions for Across ACX LPs by 50%. Across’ Reward Locking program is currently distributing ~30,000 ACX per day in base emissions to Across ACX LPs after the recent parameter changes. Emissions were initially set high to incentivize ACX airdrop recipients to not immediately sell their tokens and to get these token holders familiar with the reward locking mechanism. Given it’s been almost a year since the launch of the token, the community should consider reducing these emissions.

Motivation:

The Across DAO treasury is currently rewarding a significant amount of ACX to ACX holders via incentives. In total the DAO is spending 47,714 to 91,714 ACX per day on ACX related pools.

30,000 to 60,000 ACX /day - Across ACX LP (1 to 2x multiplier)

7,000 to 21,000 ACX / day - wstETH/ACX Balancer pool (1 to 3x multiplier)

10,714 ACX / day - WETH/ACX Velodrome pool bribes (75,000 ACX per week)

Total = 47,714 to 91,714 ACX / day

Of the 3 liquidity pools, the Across ACX bridge pool is the least utilized. At the moment the amount of ACX bridged is small, especially in comparison to the size of the pool. Emissions were initially set high for Across ACX LPs to incentivize ACX airdrop recipients to not immediately sell their tokens and to get these token holders familiar with the reward locking mechanism. Given it’s been almost a year since the launch of the token, the community should consider reducing these emissions. Decreasing rewards to Across ACX LPs may also incentivize ACX token holders to instead provide liquidity in the ACX token itself via the wstETH/ACX or WETH/ACX pools. This also helps address a concern by the community that the ACX token needs to be more easily tradable.

The Across DAO should decrease ACX emissions for Across ACX LPs by 50% resulting in base emissions of ~15,000 ACX per day for this pool. This would decrease the APY to a range of ~4.7% to 9.3% from the current APY of 9.3 to 18.6% as observed on the Across Rewards page. Choosing the optimal number for this change is difficult; therefore, the Across community should continuously monitor ACX token activity and make future modifications as needed.

Specification & Implementation:

The Across DAO wallet controlled by ACX holders has admin rights to change the parameters of the Accelerating Distributor contract that powers the Reward Locking program. The exact transactions to make these modifications can be put to a vote and executed on Snapshot via the oSnap module which is already implemented.

The proposed Snapshot vote and oSnap transaction will reflect a change in the emission rate for Across ACX LPs to ~15,000 ACX per day (from~ 30,000 ACX per day currently).

Downside (Cons):

The potential risk to the decreasing emissions to Across ACX LPs is selling pressure from ACX holders. Staked ACX LPs may find the lower APY unappealing and may choose to unstake and sell their ACX position. A couple of observations counter this concern:

1. Recent data and analysis show Across has a loyal set of LPs. These LPs are happily earning ACX through reward locking and have not claimed and sold their rewards. It implies most ACX holders believe the token offers value and are unlikely to sell.
2. ACX token holders still have attractive alternatives to earn rewards and may instead utilize their tokens in other pools that better serve the community. For example, wstETH/ACX LPs are currently earning 16.2 to 41.8%.

Voting:

A "yes" vote will set base emissions in the Reward Locking program for Across ACX LPs to ~15,000 ACX per day which is a decrease of 50% from current incentives. A "no" vote would leave all Reward Locking parameters unchanged.