[LRFC] Update for ongoing Lyra protocol incentives

Simple Summary

Modify ongoing liquidity incentives across all markets.

Abstract

Rebalance incentives across all markets to help drive more volume towards the most popular markets. Also, move more incentives towards Optimism as both the cost of hedging is reduced and there are more funds available for incentives (OP).

Motivation

The funding rate on GMX is negatively affecting the ongoing profitability of the Arbitrum deployment. As such, this rebalance of incentives aims to reduce the total outstanding volume of the market, as well as correct incentives on markets that are both overutilized and underutilized.

Specification

Some of the values are conditional depending on the result of other LRFCs passing. Specifically:

• Arbitrum BTC market deprecation: this vote passing would result in the proposed new rewards being set to 0

Rationale

Values were determined through a calculation of comparing current pool utilization (peak over last 7 days) to a target utilization of 85%. This works out a target pool size, which is floored at $200k. The target pool size is then multiplied by a target APY of ~10% and current token value to work out the fortnightly reward. This final value is then rounded to 3 significant digits.

Given the desire to move more incentives towards the Optimism deployment, trading rewards on Arbitrum are also reduced by 60%.

Test Cases

N/A

Configurable Values

Optimism markets

market	current epoch rewards	proposed new rewards
ETH	13300 OP	14600 OP
BTC	1900 OP	2270 OP
ARB	1900 OP	603 OP
OP	1900 OP	603 OP
LINK	0	603 OP
XRP	0	603 OP
Trading rewards	7500 OP	7500 OP

Arbitrum markets

market	current epoch rewards	proposed new rewards
ETH	433000 lyra	255000 lyra
BTC	333000 lyra	125000 lyra / 0 lyra*
Trading rewards	66000 lyra	26400 lyra

* Value is dependent on logic defined in Specification section

Copyright Waiver

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