Title: ACX Emissions Committee Framework Update
Authors: Kevin Chan, David Korpi, Ryan Carman, Dylan O’Reilly, Chase Coleman
Status: Proposal
Related Discussions: ACX Emissions Committee, Native USDC and CCTP Integration
Summary:
The ACX Emissions Committee (AEC) was formed in January 2024 and has now operated for over 5 months. The AEC has permissions to control ACX emissions using a transparent and restrictive framework to make predictable and measured changes to emissions for an asset depending on the pool utilization rate of that asset and the yield earned on comparable bridges. As the Across bridge develops and the cross chain interoperability landscape evolves, the AEC may need to update the parameters of its original framework. The AEC is now proposing a modification that will allow more flexibility to adjust emissions in assets that have persistent low utilization. This low utilization was observed in USDC after Across protocol integrated Circle’s Cross Chain Transfer Protocol (CCTP) for liquidity pool rebalancing. USDC utilization now hovers around 20% and will likely stay there or trend lower. The proposed modification to the AEC framework will help adjust ACX emissions to address structural changes such as this or other significant developments in the future.
Motivation:
Since its formation, the ACX Emissions Committee (AEC) has reduced ACX emissions by 60% from 277k ACX per day to now 110k ACX per day. The actions taken by the AEC since inception can be tracked in this spreadsheet and the data to inform these decisions are monitored on this dashboard. Despite this large reduction, the Across bridge still had sufficient liquidity provider (LP) assets to grow and secure the position as the number one bridge by volume. The AEC accomplished this through the use of a transparent and restrictive framework to optimally manage ACX emissions. After operating for over 5 months, the AEC recognizes a need to modify the existing framework to provide more flexibility to adjust emissions in assets that have persistent low utilization.
Across protocol’s integration of Circle’s CCTP in May 2024 for liquidity pool rebalancing highlights this need for an updated AEC framework. Since the deployment of CCTP, Across’ USDC utilization has decreased to around 20% and is expected to move even lower. At the same time Across USDC LPs are still earning a 10% to 18% yield in comparison to a Yield Index of 10.8% as observed on the AEC dashboard. The CCTP integration is a major structural advancement for Across that will likely require less USDC to operate efficiently in the future. CCTP enables the movement of native USDC at a small cost (and at much faster speeds than the canonical bridges). The current AEC framework has no way of decreasing ACX emissions to reflect this structural lower demand for USDC.
As a refresher, the current AEC framework uses two factors to regulate ACX emissions:
- Across pool utilization - The 7-day average pool utilization of each asset.
- Competing yield - The Yield Index for each asset that is computed as a 7-day average of the TVL weighted yield of pools on Stargate, Hop, and Synapse.
Using these two factors as inputs, the AEC built a simple framework (Table 1 below) to determine whether action needs to be taken on ETH, USDC, USDT, and DAI. If an action is required, the AEC can only increase or decrease emissions of an asset by 25% and then wait 14 days to re-evaluate and take further action if needed.
Table 1 - Original AEC framework
| Across Pool Utilization | Decrease emissions by 25% if total Base LP APY vs Yield Index is | Increase emissions by 25% if total Base LP APY vs Yield Index is |
|---|---|---|
| 0 - 40% | +25% | -75% |
| 40 - 70% | +50% | -50% |
| 70 - 100% | +100% | -25% |
The AEC now recognizes a need in the framework to address assets that have persistently low utilization rates as illustrated by the integration of CCTP. The Across DAO should not over reward LPs for providing assets that are not in demand. To address this, the AEC proposes modifying the table and adding a new row that actually decreases emissions, even when the current APY is below the Yield Index, only when utilization of an asset is below 25%. The proposed new framework is illustrated in Table 2 below.
Table 2 - New AEC framework
| Across Pool Utilization | Decrease emissions by 25% if total Base LP APY vs Yield Index is | Increase emissions by 25% if total Base LP APY vs Yield Index is |
|---|---|---|
| 0 - 25% | -50% | -95% |
| 25 - 50% | +25% | -75% |
| 50 - 75% | +50% | -50% |
| 75 - 100% | +100% | -25% |
Here is an example of how the AEC would act today when evaluating the USDC pool:
- USDC Pool Utilization = 24.03%
- USDC Base LP APY = 9.38%
- USDC Yield Index = 10.83%
- Across APY is -13.4% lower than the Yield Index which is higher than the -50% threshold for action
- AEC decreases emissions by 25% and resulting APY is 7.23% (note: AEC only decreases Rewards APY and cannot control the Pool APY)
- AEC waits 14 days and re-evaluates
The reduction of ACX emissions for USDC using this new framework would act to simultaneously decrease the size of the USDC pool and increase utilization to a healthier rate. The AEC believes this new framework will provide more flexibility to adjust ACX emissions for assets with low utilization and address potential structural changes similar to the integration of CCTP.
Specification & Implementation:
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The AEC is only amending the parameters of the original framework. Specifically, the thresholds where the AEC will act will be modified to correspond to Table 2 (New AEC framework) shown above.
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This new AEC framework table will replace the old table in the Across docs to ensure it is clear to all LPs and community members that the amendment was made.
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All other aspects of the AEC as outlined in the original approved proposal will not change. This includes items such as the long term goal, the wallet address that the AEC operates from and all its signers, and how the AEC operates and reports to the DAO.
Voting:
- Yes
- No
- Abstain