KIP-5: Align APY

Summary

We propose adjusting the reward rate to align the APY to the approved APY framework in KIP-3. This adjustment is necessary to correct for Polygon’s faster block times (leading to a 7.2 hr rebase instead of 8). In order to maintain the approved 22,000% target APY in KIP-3, the reward rate would be adjusted from 0.46 to 0.417%.

Motivation

See below for an explainer for the motivation and rationale behind KIP-5: https://klima-dao.notion.site/KIP-5-Explainer-959aab27dcf14e9ba9c01540fa70a1a7

See below for the community forum discussion regarding KIP-5: https://forum.klimadao.finance/d/4-kip-5-rebase-timing-and-apy-alignment

Proposal

Factoring in a rebase period of 7.25 hours per rebase, a resulting 1,200 epochs per year (rounded down to be conservative) can be utilized for the APY formula.

To achieve our target APY of approx 22,000%, the reward rate should be set to 0.417% (assuming 92.5% of KLIMA is staked). This change would be made over an additional 25 epochs (8 days) after the conclusion of the change approved in KIP-3.

The Policy team will continue to monitor the block and rebase times to ensure the reward APYs are consistent with community approved APY targets, and propose additional adjustments if necessary.