XVS Emissions Reduction Proposal (#4)

Summary

This proposal outlines a strategic approach to reduce XVS emissions by 59%, from 501.96 daily emissions to 204.74.

Details Considerations: All market values are taken from January 5, 2024.

Current market status:

Table 1: Market Status

Rating System: The rating system combines two critical factors:

• TVL Rating: Lower ratings for higher TVL, indicating a conservative approach to emission reduction in markets with high TVL.

• High (1 Point): Markets with a combined supply and borrow TVL exceeding $100 million.

• Moderate (2 Points): Markets with a combined TVL between $20 million and $100 million.

• Low (10 Points): Markets with a combined TVL under $20 million. Sensitivity Rating: Based on the proportion of emissions in supply and borrow yield. Markets with low sensitivity are recommended for more aggressive reduction.

• Low Sensitivity (4 Points): Emission proportion in supply and borrow APY below 10%.

• Moderate Sensitivity (2 Points): Emission proportion ranging from 10% to 30%.

• High Sensitivity (1 Point): Emission proportion exceeding 30%.

Considerations:

• Markets with a TVL below $20 million (e.g., BCH, AAVE, TUSD) will take a value of 10 in the TVL rating as they are considered negligible in their contribution to protocol reserves and are recommended for complete emission elimination.

• VAI will be treated differently as it requires emissions to incentivize its use and staking.

Table 2: Rating system per market

Suggested changes:

• In markets with high TVL but low sensitivity, like USDT, USDC, and CAKE, there is an opportunity for a more aggressive emission reduction of 75%.

• A 50% reduction is proposed for major assets like BTCB, BNB, and ETH to balance market importance with emission control.

• For assets with low TVL, such as ADA, XRP, and LINK, a complete emission reduction is recommended due to their minimal impact on protocol reserves.

• VAI emissions will be reduced by 50% to maintain attractive incentives and staking yields for users.

Table 3: Proposed emission changes

Conclusion:

The proposed emission reductions are calculated to protect significant markets. The dual-factor rating system ensures both the market size and its sensitivity to emission changes are considered to evaluate the specific reduction amount per market. Ultimately, we expect to lower the total daily emissions from around 502 XVS to 205 XVS, achieving a significant 59% overall reduction.