Reduce ACX emissions for Across ACX LPs

[Kevin_UMA]

Header

Title: Reduce ACX emissions for Across ACX LPs
Author: Kevin Chan
Status: Proposal
Related Discussion: Reduce or Reallocate Across ACX LP emissions

Summary:
The Across DAO should decrease ACX emissions for Across ACX LPs by 50%. Across’ Reward Locking program is currently distributing ~30,000 ACX per day in base emissions to Across ACX LPs after the recent parameter changes. Emissions were initially set high to incentivize ACX airdrop recipients to not immediately sell their tokens and to get these token holders familiar with the reward locking mechanism. Given it’s been almost a year since the launch of the token, the community should consider reducing these emissions.

Motivation:
The Across DAO treasury is currently rewarding a significant amount of ACX to ACX holders via incentives. In total the DAO is spending 47,714 to 91,714 ACX per day on ACX related pools.

30,000 to 60,000 ACX /day - Across ACX LP (1 to 2x multiplier)

7,000 to 21,000 ACX / day - wstETH/ACX Balancer pool (1 to 3x multiplier)

10,714 ACX / day - WETH/ACX Velodrome pool bribes (75,000 ACX per week)

Total = 47,714 to 91,714 ACX / day

Of the 3 liquidity pools, the Across ACX bridge pool is the least utilized. At the moment the amount of ACX bridged is small, especially in comparison to the size of the pool. Emissions were initially set high for Across ACX LPs to incentivize ACX airdrop recipients to not immediately sell their tokens and to get these token holders familiar with the reward locking mechanism. Given it’s been almost a year since the launch of the token, the community should consider reducing these emissions. Decreasing rewards to Across ACX LPs may also incentivize ACX token holders to instead provide liquidity in the ACX token itself via the wstETH/ACX or WETH/ACX pools. This also helps address a concern by the community that the ACX token needs to be more easily tradable.

The Across DAO should decrease ACX emissions for Across ACX LPs by 50% resulting in base emissions of ~15,000 ACX per day for this pool. This would decrease the APY to a range of ~4.7% to 9.3% from the current APY of 9.3 to 18.6% as observed on the Across Rewards page. Choosing the optimal number for this change is difficult; therefore, the Across community should continuously monitor ACX token activity and make future modifications as needed.

Specification & Implementation:
The Across DAO wallet controlled by ACX holders has admin rights to change the parameters of the Accelerating Distributor contract that powers the Reward Locking program. The exact transactions to make these modifications can be put to a vote and executed on Snapshot via the oSnap module which is already implemented.

The proposed Snapshot vote and oSnap transaction will reflect a change in the emission rate for Across ACX LPs to ~15,000 ACX per day (from~ 30,000 ACX per day currently).

Downside (Cons):
The potential risk to the decreasing emissions to Across ACX LPs is selling pressure from ACX holders. Staked ACX LPs may find the lower APY unappealing and may choose to unstake and sell their ACX position. A couple of observations counter this concern:

1. Recent data and analysis show Across has a loyal set of LPs. These LPs are happily earning ACX through reward locking and have not claimed and sold their rewards. It implies most ACX holders believe the token offers value and are unlikely to sell.
2. ACX token holders still have attractive alternatives to earn rewards and may instead utilize their tokens in other pools that better serve the community. For example, wstETH/ACX LPs are currently earning 16.2 to 41.8%.

Voting:

Should the Across DAO set base emissions for Across ACX LPs to ~15,000 ACX per day which is a decrease of 50% from current incentives?

• Yes
• No
• Abstain

[berry4144]

Voting for the Dentist over the candy shop owner.
Turkey for Christmas…
Short term pain, long term gain…

[gmsteele]

Considering the recent drop in the multiplier that was supposed to be offset by greater emissions, now we come quickly back and say decrease emissions? I voted “no,” simply because to me the proposal does not clearly explain the goals, and more specifically discuss how this proposal is beneficial to me as an ACX holder and a liquidity provider.

[TheRealTuna_Across]

Looking at the data daily and Across is killing it. I think it makes sense to start tightening up where we hand out ACX, the loss in ACX rewards can be made up for in price growth. Long term holders will still be getting more than 10% APR with the multiplier which is a solid return for a single sided asset with huge upside. The future is bright, let’s not dilute it. Time to also talk more about the fee switch!

[Kevin_UMA]

It has a direct impact to ACX token holders. You can think of emissions in a couple of ways. 1) as we distribute ACX tokens we are increasing the current supply. That would have a negative impact on price. 2) ACX in the DAO Treasury is effectively controlled by token holders. It’s a real asset that can be used to incentivize activity or compensate people for work. There’s a finite amount of it in our treasury so we want to be careful in utilizing it well for our long term growth and value of ACX
So in the short term we may earn less ACX from staking but being careful with how we spend ACX will have major benefits for the long term.

[gmsteele]

Thanks for the reply. TheRealTuna was helpful to me clarifying that this was only for the ACX pool, I reread the proposal (several times), and at least to me it was a bit confusing because it talked about emissions from multiple pools and I personally just didn’t come away after reading it with a clear understanding of which pools were effected and a knowledge of how this would directly benefit me as an ACX holder. But maybe this was just my limitation.

But i’d say one of the behaviors we would like to incentivize is to have people not remove their ACX from the pool and dump it on the market (therefore lowering the price), and being able to stake mine is a big incentivizer to hold and not sell, so decreasing those emissions (on top of recently decreasing the multiplier) doesn’t mean everyone is going to dump, but it decreases the incentive to hold for sure.

But maybe that’s the beauty of locking ACX rewards in the pools, no one wants to lose the multiplier, so they keep most of them locked there and out of the ACX pool anyway. I’d say that it’s not increasing the current supply that’s the problem as long as people hold ACX, they don’t become something that can impact the price until a bunch of people try to sell a lot and flood the market.

But as someone who is not a huge whale (although what I have in is significant to me), being someone who got involved early, got the airdrop, staked from day 1, and continues to support the project, if the price of ACX goes up the largest benefit to me is to hold as much ACX as I can. As an investor, I expect the people at Across to do great things to build the value of the token, but as an individual investor my goal for how they go about that is not “token supply control,” or to decrease multipliers and emissions to make my personal contribution less valuable.

Just for me, I personally fail to see how the greatest benefit to me is to decrease the number of ACX I accumulate. And I also fail to see how my having less ACX helps improve the price. Yes, there’s a lot of “ME,” in those statements, and some may look down on that, but i’m an investor, I’m not in ACX for the feel good, right? My goal of having my money tied up in this project is to accumulate ACX and that I believe in an increase in long-term value, there’s a trade in me getting rewards for staking and making my funds available to help the bridge be liquid.

But at least in my circumstance a vote for “yes,” is a vote that goes against my personal interest and goals. Obviously by the current votes no one else agrees with me, and that’s ok. But right now, with the loss of multiplier and now a proposed loss in emissions that pool I was in is much less valuable than it was a few weeks ago.

[TheRealTuna_Across]

Something else to consider:
If you staked $1,000 in STG back in April it’s worth under $500 today and you would have earned $20 in rewards form trading fees.
How do I know this?
I did exactly this, I am an active airdrop hunter and use a small chunk of my stack to try and get airdrops such as Layer Zero. ACX price has remained much more stable during this time. We have not lost our principal and have been able to build a nice stack of ACX which is heavily undervalued considering we are the most efficient bridge and rapidly gaining market share against airdrop hyped bridges.

ACX fully diluted valuation is currently $55MM vs STG FDV of $458MM, which means if the superior designed bridge catches up then it would be x 8.33 price growth. In my opinion the ceiling for ACX is much higher than STG’s current valuation.

All in all what I’m getting at is that we are doing more to reward holders for holding then our competitors and even with this reduction the annual return will still be a nice boost. This is a low risk high reward investment and a small reduction in rewards shouldn’t scare anybody off. We have done very well during the bear market and I expect it will pay off when the bull market strikes.

[caesarsherrod.eth]

This does reduce inflation of the token, likely adding to its dollar value but as a voter & liquidity provider, this is a way for me to continue expressing my views in the DAO.

50% less for my staked ACX tokens, tokens that we guarantee aren’t being market sold, would reduce my ever increasing voice in the DAO as an LP & voter. I oppose this measure, because it reduces my ability to vote. Of course I could go buy ACX, and I do, but 80% of my stack comes from LPing.

[Kevin_UMA]

@caesarsherrod.eth

kens that w

thanks for your comments @gmsteele and @caesarsherrod.eth. I think one thing to note is staking isn’t the only way to accumulate ACX. Buying ACX is one way, but also contributing to the community and earning tokens through grants is another method. So a different way of looking at this is instead of paying people to hold ACX, we can conserve some of that and pay people to do work and contribute. i know both of you are involved in the community so this opens more opportunities for you to earn tokens in this way.
i think @TheRealTuna_Across echoes a lot of my views and describes things very well. if we are just throwing a lot of ACX to everybody the value of the tokens we hold and our governance power also gets diluted. and this is especially the case for people with less tokens.