[DEXTF-9] On liquidity mining rewards change (Part 1)

Rationale

As per the community’s suggestion, we split the original DEXTF-8 proposal into a few proposals to vote on its different components. DEXTF-8 contained changes that the community supported and a more controversial component that merits a separate discussion.

Liquidity is essential for DeFi index investors that want to trade in and out of a position without losing on slippage (sharp price movements after your order is processed). In other words, investors do not require rewards to hold onto an index position; they are interested in exposure to a particular DeFi category.

Likewise, Fund Managers are currently rewarded based on fund AUM and yearly performance, both of which do not encourage liquidity provision. Instead, Fund Managers were motivated to create their funds and hold them to receive Fund Manager and Investor rewards.

We are proposing to remove rewards attributed to both Investors and Fund Managers currently and cut $DEXTF emissions to curb the rampant inflation.

Problem:

• Liquidity is too shallow on many funds, not allowing Romans to trade on DEXes with acceptable slippage.

Solution:

• We are removing the rewards currently allocated to Investors (I) and Fund Managers (FM), allocating rewards (proportionally to AUM) only to Liquidity Providers (LP).
• Reducing $DEXTF emissions from current levels to 10,000 $DEXTF daily (30% of which to DEXTF/ETH pool, 70% to other pools irrespective of the pair).

Why is this good for all parties involved?

• Funds will gain a significant boost in liquidity. Both Investors and Fund Managers must provide liquidity to be eligible for rewards unless the interest is to hold on to a fund token for capital appreciation only. Those funds that are well managed and have the support from the community will prosper significantly.

Conclusion

If passed, the changes will be effective 1st October 2021.

Voting validity

4 days (out on 21st September, valid until 25th September)