Reduce Balancer wstETH/ACX LP emissions

Author(s): ACX Emissions Committee (Kevin Chan, David Korpi, Ryan Carman, Dylan O’Reilly, Chase Coleman) Status: Proposed Related Discussions: Reduce ACX emissions forum post, Emissions committee

Summary:

The Across DAO should decrease ACX emissions for Balancer wstETH/ACX LPs. The Balancer wstETH/ACX LPs are being rewarded a high APY in comparison to the necessity of the liquidity. The ACX Emissions Committee only has permissions and a framework to control ACX emissions for ETH, USDC, USDT, and DAI. We are putting together this proposal to decrease Balancer wstETH/ACX LP emissions in a similar way to ETH, USDC, USDT, and DAI.

Motivation:

The Across DAO should optimally manage ACX emissions for all liquidity it incentivizes. One way that we have done this previously is by creating the ACX Emissions Committee (AEC). The AEC uses a transparent and restrictive framework to adjust emissions awarded to Across ETH/USDC/USDT/DAI LPs. The framework monitors the utilization and comparable yield alternatives of each asset to make ACX emissions adjustments. Balancer wstETH/ACX LPs were originally excluded from the AEC's purview because it was a different type of asset and served a different role.

The Balancer wstETH/ACX LP is the second highest use of ACX emissions at 19k ACX per day. It is the only reward locking pool that still offers a 3x multiplier. As a result it pays the highest APY to LPs ranging from 20% to 50%. These high ACX incentives may have been necessary to have liquidity at the launch of the token, however, Across Protocol and the ACX token have gained more brand recognition and such an aggressive use of rewards may no longer be needed. Furthermore, there are two reasons incentivized liquidity may no longer be as necessary:

1. Though modestly sized, the Across DAO has close to $1MM of protocol owned liquidity through its proposal with Arrakis. The performance of this Uniswap v3 vault can be viewed here. If more liquidity is needed, Across DAO could continue to pursue this route rather than pay emissions.
2. ACX has been listed in more centralized exchanges. Bitget, AscendEX, crypto.com, and Coinbase have all added ACX as token that can be traded on their exchange.

ACX liquidity on decentralized exchanges continues to be important and still represents a fair share of total volumes. However, the cost is high and the need for this has decreased. Therefore, a modest decrease in emissions here should be warranted. The Across DAO should decrease ACX emissions to the Balancer wstETH/ACX LP by 25% from 7k ACX per day to 5.25k ACX per day. (See Table 5 below for proposed changes.)

Specification & Implementation:

The Balancer wstETH/ACX LP emissions are currently 7,000 ACX per day. Our proposal is to lower this by a relatively modest amount to 5,250 ACX per day. If approved, this will be implemented by the AEC.

Rationale:

Rationale is described above.

Downside (Cons):

The only downside is that this is likely to decrease the amount of liquidity in the Balancer wstETH/ACX LP but we believe that for the reasons above the impact of losing some of this liquidity is low and that the emissions will still be plenty to attract a moderately high amount of capital.

Voting:

A yes vote means that you would like to decrease the ACX emissions being paid to Balancer wstETH/ACX LPs from 7,000 ACX/day to 5,250 ACX/day.

A no vote means that you would like the ACX emissions being paid to Balancer wstETH/ACX LPs to stay the same.