[DIP-008] Reallocation of existing rewards to fund dfxStables LP rewards.

This is a proposal to adopt the reallocation of existing rewards to fund dfxStables LP rewards.

Motivation:

dfxStables are the clear next step for our stablecoin ecosystem. Our fractional stablecoins will produce a revenue stream for our protocol that is necessary for sustained and continued growth. As a protocol, we should incentivize liquidity providers to mint dfxStables and to provide liquidity in these new dfxStables pools.

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Specifications:

The dfxCAD/CADC liquidity pool already exists, and the other three (3) dfxStables pools are in the process of being finalized.

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Proposed Changes:

Currently, there is approximately 568,750 DFX/month allocated to the existing stablecoin pools that is used to reward and incentivize liquidity providers.

In order to incentivize liquidity in the dfxStables pools, but not increase the total amount of DFX distributed each month, we should reallocate 160,000 DFX from the 568,750 monthly DFX rewards currently given to the existing stablecoin pools and use that 160,000 DFX as rewards for the dfxStables pools.

Because we are reallocating existing rewards instead of adding more DFX to the rewards, this proposal will necessarily reduce the amount of DFX each existing stablecoin pool receives for rewards each month. To free up 160,000 DFX, the rewards for the existing pools will be reduced by approximately 28% each. Here is a breakdown of the changes –

The 160,000 DFX would be reallocated as follows –

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Pros:

• This will create demand for dfxStables, because liquidity providers will want to take advantage of the reward incentives for participating.

• The demand for dfxStables will bootstrap liquidity for dfxStables. The protocol itself benefits from this liquidity, by using dfxStables to generate fees for the protocol itself.

• Reallocation of existing rewards, as opposed to adding new rewards, helps maintain proper tokenomics and does not flood the market with additional DFX.

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Cons:

• This will reduce the current reward allocation to existing stablecoin pools on ETH by 28%.

• The reduction in reward allocation to those existing pools will lower APY.

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Proposed Incentives:

• Current LP rewards for existing ETH stablecoin LPs reduced approximately 28%. This reduction will free up 160,000 DFX.

• Use the 160,000 DFX to incentivize liquidity in new dfxStables pools, equally distributed as 40,000 DFX per pool.

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Additional References:

dfxCAD: The Time is Now - https://medium.com/@dfxfinance/dfxcad-the-time-is-now-463a206d0536

Exploring Project X - https://medium.com/@dfxfinance/exploring-project-x-2883f80b4b5f

DFX Dual Recap - https://medium.com/@dfxfinance/dfx-dual-recap-7153e77a5720