Stop ACX Emissions on ACX LP

Proposals
1

Title: Stop ACX Emissions on ACX LP
Authors: ACX Emissions Committee (Kevin Chan, David Korpi, Ryan Carman, Dylan O’Reilly, Chase Coleman)
Status: Proposal
Related Discussions: ACX Emissions Committee, ACX Emissions Committee Framework Update, Reduce ACX emissions for ACX LPs, WBTC LPs and wstETH/ACX LPs

Summary:
The Across DAO should stop ACX emissions for Across ACX LPs. The ACX liquidity pools are being rewarded a high APY in comparison to the utilization of the asset or necessity of the emissions.

The ACX Emissions Committee only has permissions and a framework to control ACX emissions for ETH, USDC, USDT, and DAI. We are putting together this one-off proposal to decrease ACX emissions in a similar way to ETH, USDC, USDT, and DAI.

Motivation:
The Across DAO should optimally manage ACX emissions for all liquidity it incentivizes. One way that we have done this previously is by creating the ACX Emissions Committee (AEC). The AEC uses a transparent and restrictive framework to adjust emissions awarded to Across ETH/USDC/USDT/DAI LPs. The framework monitors the utilization and comparable yield alternatives of each asset to make ACX emissions adjustments. Across ACX LPs were excluded from the AEC’s purview because there are more considerations than just utilization and comparable yields when we think about what the “optimal” ACX emissions to pay are.

ACX emissions for ACX LPs 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. Base emissions currently stand at 7.5K per day. ACX utilization consistently sits close to zero given a lack of bridging needs. Yet, the emissions rate for the ACX LP is by far the highest at 11.7K ACX per day (~$2,700) taking into account the multiplier (which exceeds the sum of emissions being used for ETH, USDC, USDT, and DAI).

The AEC believes these emissions are unnecessary and the DAO should preserve ACX capital especially at these price levels. The Across DAO should decrease ACX LP base emissions by 100% from 7.5K ACX per day to 0 ACX per day.

Specification & Implementation:
The ACX LP base emissions are currently 7,500 ACX per day. Our proposal is to drop this to 0 ACX per day. If approved, this will be implemented by the AEC.

Rationale:
Rationale is described above.

Downside (Cons):
As highlighted in previous discussions on the forum, there is the potential that some ACX LPs withdraw their funds and sell – The AEC believes that this will be a relatively muted effect as strong ACX holders will be unlikely to sell at these low prices.

Voting:

Should the Across DAO end ACX base emissions for ACX LPs? A “YES” vote means that you would like to decrease the ACX emissions being paid to ACX LPs from 7,500 ACX/day to 0 ACX/day. A “NO” vote means that you would like the ACX emissions being paid to ACX LPs to stay the same.
  • Yes
  • No
  • Abstain
0 voters
1 Like
2

My belief is that the most likely people to sell ACX is those farming the asset pools. Some may believe in ACX growth potential but others might not care. Would be nice if we had some data on what percentage of LP’s are moving their earned ACX into the ACX LP. Turning off emissions might stop some selling but will it find buyers? Probably not. When someone needs cash and has to sell an asset, they may sell something else instead due to fear of losing their rewards multiplier, but now there’s no reason to lock in? Why not reduce instead of remove?

What about turning on the fee switch? Is there no room to charge fees that go to holders and still be competitive? Will that ever be a possibility? That’s the sort of narrative that will attract speculators and long term holders, but will it ever happen?

3 Likes
3

Any LP’s that claimed their earned ACX and moved it into the ACX LP would be resetting their multipliers on the pools they claimed from. So I’m not sure people are engaging in this particular behavior.

4

There are a few ways of looking at this.
The first is that those solely farming the rewards will pull their capital and sell as they are no longer being incentivized to hold the asset. This may cause some selling pressure in the short term but are of the belief that this will not represent the majority of ACX currently staked in the pool.

Another way to look at this is that investors analyzing Across will see that we made a fiscally responsible decision to reduce the marginal amount of ACX hitting the market. We noted that ~25% of our emissions were being paid out to a group of LPs who were already bullish on Across and decided it would be better for the long term prospects of the protocol to converse that capital.

We debated whether or not we should just reduce the ACX emissions to a lower level but we all agreed that any meaningful reduction would leave the pool with a very low rate of return and would have likely the same impact as just setting the emissions to zero.

1 Like
5

I cant comment on the fee switch but what I can comment on is how incredibly competitive the market is from a pricing standpoint. We spend a large amount of time and resource analyzing how we fare on the most important routes from a pricing and speed perspective. We’re regularly making adjustments on the order of less than a basis point in order to stay ahead of the competition where it makes sense to do so.

With this in mind, I think increasing our pricing now would put us in a very uncompetitive position and would significantly impact our order flow.