Proposal: Emissions Adjustments Across All Chains

Summary

This proposal outlines adjustments to XVS emissions across all supported chains based on market performance and use cases. The adjustments include a reduction based on relative market participation, reallocations between supply and borrow incentives, and eliminating emissions for markets with negligible impact. Below is a summary of the proposed changes:

Chain	Current Emissions (XVS)	New Emissions (XVS)	Reduction (%)
ZKSync	7,500	3,270	56%
Arbitrum	9,152	3,224	65%
Ethereum Mainnet	26,664	10,715	60%
BNB Chain	23,850	13,163	45%
Total	67,166	30,372	55%

A VIP will be required to make these changes, the actions for it will modify the reward distribution speeds on all chains, to match the ones in this proposal if approved by the community.

Details

Reduction Strategy

The reduction strategy is based on market participation (average supply and borrow over 90 days, or 60 days for newer markets) and the specific use cases of each asset:

• 30% Reduction: Markets with relative participation > 25%.
• 50% Reduction: Markets with relative participation between 10% and 25%.
• 75% Reduction: Markets with relative participation < 10%.

Supply and Borrow Incentives

To align emissions with market use cases:

Markets in the Core Pool

1. Non-Stablecoin Markets: Primarily used as collateral. Emissions will focus on the supply side to incentivize collateralization and maintain liquidity.
2. Stablecoin Markets: Predominantly used for borrowing positions. Emissions will focus on the borrowing side.

Markets in the Liquid Staked ETH Pool

3. ETH Market: Emissions will focus on the supply side to incentivize market liquidity and provide favorable rates for looping with LST (Liquid Staking Tokens) and LRT (Liquidity Restake Tokens) markets.

This structure optimizes emissions for the most relevant use cases, improving rates and user experience.

LST and LRT Markets

Emissions for LST and LRT markets are eliminated. An analysis of Ethereum Mainnet markets concluded that emissions have a negligible impact on these markets’ performance. These markets operate effectively without incentivization due to their inherent utility in staking and looping.

XVS Vault

A 30% reduction is proposed for the XVS Vault across all chains. This gradual reduction aims to assess user behavior following the adjustment. Based on the results, further changes can be made in the future to optimize emissions for the vaults on all chains.

Tables for Each Chain

ZKSync

Pool	Market	Current Allocation (XVS)	Relative Participation	Reduction	New Allocation (XVS)
Core	ZKSync	900	27%	30%	630
Core	ETH	1,200	23%	50%	600
Core	BTC	1,200	14%	50%	600
Core	USDT	900	13%	50%	450
Core	USDC.e	1,800	22%	50%	900
Vault	XVS	1,500	-	30%	1,050
Total		7,500		56%	3,270

Arbitrum

Pool	Market	Current Allocation (XVS)	Relative Participation	Reduction	New Allocation (XVS)
Core	ARB	319	5.64%	75%	239
Core	WETH	319	6.75%	75%	239
Core	WBTC	638	15.33%	50%	319
Core	USDT	638	8.38%	75%	479
Core	USDC	638	9.43%	75%	479
LST	WETH	3400	28.26%	30%	1020
LST	wstETH	850	14.77%	100%	0
LST	weETH	850	11.43%	100%	0
Vault	XVS	1,500	-	30%	1,050
Total		9,152		65%	3,224

Ethereum Mainnet

Pool	Market	Current Allocation (XVS)	Relative Participation	Reduction	New Allocation (XVS)
Core	WETH	633	4.58%	75%	475
Core	WBTC	1,898	13.45%	50%	949
Core	USDT	2,279	7.96%	75%	1,709
Core	USDC	2,279	8.42%	75%	1,709
LST	ETH	12,375	65.59%	30%	3713
Vault	XVS	7,200	-	30%	5,040
Total		26,664		60%	10,715

BNB Chain

Pool	Market	Current Allocation (XVS)	Reduction	New Allocation (XVS)
Core	XVS	1,200	25%	900
Vault	VAI	3,750	30%	2,813
Vault	XVS	18,900	30%	13,230
Total		23,850	45%	13,163

Supply and Borrow Emissions Distribution

Chain	Pool	Market	Supply Rewards (%)	Borrow Rewards (%)
ZKSync	Core	ZKSync	100%	0%
ZKSync	Core	ETH	100%	0%
ZKSync	Core	BTC	100%	0%
ZKSync	Core	USDT	0%	100%
ZKSync	Core	USDC.e	0%	100%
Arbitrum	Core	ARB	100%	0%
Arbitrum	Core	WETH	100%	0%
Arbitrum	Core	WBTC	100%	0%
Arbitrum	Core	USDT	0%	100%
Arbitrum	Core	USDC	0%	100%
Arbitrum	LST	ETH	100%	0%
Ethereum Mainnet	Core	WETH	100%	0%
Ethereum Mainnet	Core	WBTC	100%	0%
Ethereum Mainnet	Core	USDT	0%	100%
Ethereum Mainnet	Core	USDC	0%	100%
Ethereum Mainnet	LST	ETH	100%	0%
BNB Chain	Core	XVS	100%	NA
BNB Chain	Vault	VAI	0%	100%
BNB Chain	Vault	XVS	100%	0%

Recommendations

The proposed adjustments aim to optimize XVS emissions based on the specific use cases and performance of each market, while relocating rewards to favor the most frequent market use cases.

• Reduce total emissions by 55%, reallocating incentives to markets with higher performance and relevance.
• Align emissions with use cases: supply rewards for collateral markets and borrow rewards for borrowing markets.
• Eliminate emissions for LST and LRT markets as data shows negligible dependency on incentivization for these assets.
• Gradually reduce XVS Vault emissions by 30% to evaluate the effects on user behavior and adjust based on observed results.
• Maintain flexibility to reassess emissions based on future market conditions and data.