[Temperature Check] – $IDLE incentives distribution update

A proposal to discuss a change to the $IDLE incentivization emission through the Liquidity Mining program and the Gauges system.

[...]

Proposals

We will list four ideas to address the $IDLE’s distribution strategy challenges:

1. Adjust $IDLE incentive distribution

We would like to propose a change to the daily $IDLE distribution rate (currently at ~3200 $IDLE/day) by decreasing it to ~2000 $IDLE/day. This change would affect both the Best Yield strategy (Liquidity Mining program) and the Perpetual Yield Tranches (Gauges distribution) and can be summarized as follows

• Best Yield strategy: 2,215 → 1000 $IDLE/day
• Perpetual Yield Tranches: 990 $IDLE/day

The updated distribution rates would let us increase the length of both incentivization programs up to early February 2023. The following tables show a comparison of the current monthly distribution vs a preview of the updated distribution after July 2022.

2. Gauges distribution adjustment

A distribution of $IDLE incentives through Gauges can better attract new users to the Idle ecosystem. The Gauges mechanism lets the community choose which pool to reward most every week.

The DAO can also leverage the use of Gauges for partnership reasons, increasing the gauge weight of a specific pool together with partners. The most significant example of DAO 2 DAO collaboration in this sense is the strategic partnership with Lido.

The $IDLE gauges incentive distribution to Senior PYTs should end in early October according to the initial timeframe set. We would suggest increasing its length to match the updated Liquidity Mining program duration, i.e. February 2023.

• Perpetual Yield Tranches: 990 $IDLE/day

One of the goals of the next mandate will be to fully leverage Voters’ Extractable Value (VEV) potential. We do expect an increase of interest by partners and the community to interact with the Idle Gauge system. There is already a discussion going on for the $IDLE listing on VeToken Finance, while other partners, such as Angle Money, are ready to incentivize manually Idle stakers’ Gauges votes.

In addition, the Gauges mechanism’s nature does promote an increase of $IDLE staking, aligning the interests of new depositors to the ones of long-term IDLE token holders.

3. Best Yield deployment into Senior PYTs

Thanks to the Senior PYTs integration into the BY strategy, the reduction in the incentive distributed to the BY wouldn’t affect too much the final return for users.

Idle Finance has always shown APYs on its dashboard split between the underlying return and the incentives one, integrators, on the contrary, show APYs coming from Idle as a sum of the two, i.e. underlying + $IDLE yields.

To hedge partially the consequences of a change of the distribution rate on Idle integrators’ APYs, Idle DAO will start deploying some of the BY funds into the Senior PYTs pools. Besides adding a new yield source, the BY strategy will be able to offer higher yields by leveraging the higher APYs generated by the PYTs underlying, as well as meet the high-security standards of the BY strategy with the built-in protection mechanism of Senior PYTs.

4. Governance mining

Instead of distributing governance tokens only to liquidity providers, we can share part of the tokens based on Governance contributions in proportion to protocol impact. The underlying assumption here is that contributors, those who put time and effort into the protocol, are much more aligned with the long-term success of the protocol than yield farmers.

Idle DAO has just released a Governance Mining program. In the proposal presented by @emixprime, we set some guidelines to reward contributors with a high impact on the DAO governance.