IDLE incentives distribution update V

Summary

A proposal to discuss the IDLE liquidity mining program continuation, adjustment or closure.

References

• IDLE incentives distribution update I - Aug 2022
• IDLE incentives distribution update II - Jan 2023
• IDLE incentives distribution update III - Apr 2023
• IDLE incentives distribution update IV - Aug 2023

Background

The IDLE liquidity mining program for the Best Yield vaults, and partially for Yield Tranches through the Gauges system, has been running since 2021. Multiple distribution rates were applied during this period, specifically:

• Distribution I from 01/01/2021 until 08/06/2022 with 3,205 IDLE/day
• Distribution II from 08/07/2022 until 12/31/2022 with 1,990 IDLE/day
• Distribution III from 01/30/2023 until 03/13/2023 with 500 IDLE/day
• Distribution IV from 04/09/2023 until 02/04/2024 with 250 IDLE/day

The acquisition cost of new liquidity through the LM program has shown significant variation over time:

[quote="Biaf, post:1, topic:1030"]

The Best Yield vaults received around 168k IDLE incentives (for an average $ value of $117k) and created around $18k in fees for the DAO.

• For every $1 spent in IDLE incentives, the BY strategies generated $0.16 in fees for an overall acquisition cost of $0.84.

[/quote]

[quote="Biaf, post:1, topic:1104"]

The Best Yield strategy received around 116k IDLE incentives (for an average dollar value of $478k with IDLE price equal to $4.12) and generated around $225k in fees for the DAO.

• For every $1 spent in IDLE incentives, the BY strategies generated $0.47 in fees for an overall acquisition cost of $0.53

[/quote]

[quote="Biaf, post:1, topic:1149"]

The Best Yield strategy received around 21k IDLE incentives, i.e. 47% of the funds, (for an average dollar value of $9k with IDLE price equal to $0.42) and generated around $22k in fees for the DAO.

• For every $1 spent in IDLE incentives, the BY strategies generated $2.49 in fees

[/quote]

Distribution 4

The Best Yield vaults received around 38k of IDLE incentives, for an average dollar value of $8.4k at a price equal to $0.22 for the period. The vaults generated around $15k in fees for the DAO.

• For every $1 spent in IDLE incentives, the BY strategies generated $1.7 in fees

The latest rounds of distribution show a positive cost of acquisition driven by a mix of low amounts of IDLE distributed, prices, and liquidity retention from the previous periods. These results seem to suggest that the incentivisation program for the Best Yield vaults has lost its efficiency and calls for a revision.

Proposals

1. Pause the Liquidity Mining program

One option is to pause the Liquidity Mining distribution

• From 250 to 0 IDLE/day

From a DAO treasury perspective, this option would stop the emission of IDLE and reduce the selling pressure on the DAO governance token.

Given the current low emission, the yields of BY vaults would be minimally affected. A possible downside of this pause is linked to the integrators that rely on IDLE rewards. To adjust this the DAO may update the Integrators program and create ad-hoc solutions for partners that count on the additional return given by IDLE.

2. Continue the Liquidity Mining program for 3 months

The Best Yield vaults have been incentivised through the Liquidity Mining program with different distribution rates (3205 → 2215 → 1000 → 500 → 250 IDLE/Day). One option is to extend for another 3 months the program at the same distribution rate set:

• 250 IDLE/day for the next 3 months

The IDLE needed to fund this extension would be taken from the Ecosystem fund.

We need to note that at the current emission rate, the extra yield offered would be really minimal, ~0.1% at the current price.

Next steps

We would like to gather the sentiment of Idle DAO toward the listed options:

• Pause the Liquidity Mining program
• Continue the Liquidity Mining program for 3 months at a 250 IDLE/day

This post will be open for discussion and in less than 24 hours, if there are no objections, we will proceed with the Temperature Check.