ARC-42: Update the Total ASTRO Emissions Per Block and the Allocation Points on Terra 2

[stefan]

Summary

This proposal aims to reduce the total ASTRO emissions per block to approximately 13.3 ASTRO as well as update all generator allocation points in order to bring the fee:emissions ratio for all pools (that receive ASTRO) closer to 0.10.

Abstract

Back in November 2022, we proposed that Astroport emissions should be adjusted so that the fee to emissions ratio falls closer to the ones observed on Sushiswap and Osmosis. The Astral Assembly followed-up with an on-chain poll which changed the distribution of ASTRO as follows:

Pool	Allocation Points	Avg. Daily Fees	ASTRO Incentives (given 25% max change)	External Incentives	ASTRO per Block	Fee:Emission Ratio
axlUSDC-LUNA LP	40026	$991.42	$9,201.60	$0.00	7.10	0.1077
ASTRO-axlUSDC LP	30018	$176.36	$6,900.70	$0.00	5.32	0.0256
axlUSDC-axlUSDT LP	11257	$14.70	$2,587.76	$0.00	2.00	0.0057
LunaX-LUNA LP	7504	$7.56	$1,725.18	$0.00	1.33	0.0044
ampLUNA-LUNA LP	7504	$1.31	$1,725.18	$0.00	1.33	0.0008
VKR-axlUSDC -LP	1538	$12.12	$353.66	$0.00	0.27	0.0343
ASTRO-LUNA LP	0	$88.33	$0.00	$0.00	0.00
TPT-LUNA LP	2152	$49.48	$494.82	$3,080.74	0.38	0.1000

The total amount of emissions per block changed as well from approximately 19 to 17.73 ASTRO.

This proposal aims to update the allocation points for all currently incentivized pools. Furthermore, the proposal aims to change the amount of ASTRO distributed per block to approximatelly 13.3 ASTRO so that the change in allocation points has its desired effect of bringing all pools close to the 0.1 fee:emissions ratio. Assuming this proposal passes, the new distribution of allocation points will look as follows:

Executable Message

The internal proposal message to change the amount of ASTRO distributed per block looks as follows:

    "set_tokens_per_block": {
        "amount": "13133400"
    }
}

The internal proposal message used to change allocation points looks as follows:

{
  "setup_pools": {
    "pools": [
      [
        "terra1ckmsqdhlky9jxcmtyj64crgzjxad9pvsd58k8zsxsnv4vzvwdt7qke04hl",
        "55127"
      ],
      [
        "terra16esjk7qqlgh8w7p2a58yxhgkfk4ykv72p7ha056zul58adzjm6msvc674t",
        "40542"
      ],
      [
        "terra1khsxwfnzuxqcyza2sraxf2ngkr3dwy9f7rm0uts0xpkeshs96ccsqtu6nv",
        "533"
      ],
      [
        "terra1kggfd6z0ad2k9q8v24f7ftxyqush8fp9xku9nyrjcs2wv0e4kypszfrfd0",
        "206"
      ],
      [
        "terra1cq22eugxwgp0x34cqfrxmd9jkyy43gas93yqjhmwrm7j0h5ecrqq5j7dgp",
        "145"
      ],
      [
        "terra18mcmlf4v23ehukkh7qxgpf5tznzg6893fxmf9ffmdt9phgf365zqvmlug6",
        "449"
      ],
      [
        "terra1ces6k6jp7qzkjpwsl6xg4f7zfwre0u23cglg69hhj3g20fhygtpsu24dsy",
        "2893"
      ],
      [
        "terra1h3z2zv6aw94fx5263dy6tgz6699kxmewlx3vrcu4jjrudg6xmtyqk6vt0u",
        "105"
      ]
    ]
  }
}

Final proposal message:

[
  {
    "order": "1",
    "msg": {
      "wasm": {
        "execute": {
          "contract_addr": "terra1ksvlfex49desf4c452j6dewdjs6c48nafemetuwjyj6yexd7x3wqvwa7j9",
          "msg": "ewogICAgInNldF90b2tlbnNfcGVyX2Jsb2NrIjogewogICAgICAgICJhbW91bnQiOiAiMTMxMzM0MDAiCiAgICB9Cn0=",
          "funds": []
        }
      }
    }
  },
  {
    "order": "2",
    "msg": {
      "wasm": {
        "execute": {
          "contract_addr": "terra1ksvlfex49desf4c452j6dewdjs6c48nafemetuwjyj6yexd7x3wqvwa7j9",
          "msg": "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",
          "funds": []
        }
      }
    }
  }
]

Next Steps

The community can debate this proposal on the forum for a week, after which the Assembly should post a the proposal on-chain.

Copyright

Copyright and related rights waived via CC0.

[LesBeauxJetons]

Thanks for the details.

Do you have a current table outlining the average fees per pool so we can see what values where used to calculate what the rate of emission per block should be to get to the 0.1 ratio? I am interested to see which price (in USD) was used for Astro.

Let’s not forget that Astro did +100% recently. If the new emission rate is based on a price of 0.10 USD and we have a correction on the Astro price after that, then the ratio will become too high and incentives in the pools for volatile assets (i.e. LUNA and Astro) might not be enough to cover the IL risks associated with LPing those assets.

So we might see a loss of liquidity, which will increase slippage, which might result in lower volume, then lower fees, etc.

I think 19 Astro per block to 17,73 Astro per block was a safe move. 17,73 to 9,5 is way too fast I think and will result in less liquidity in the pools.

I think a less drastic change should be implemented. We should go step by step. Maybe to 15 Astro per block for the next step so we can see the impact on liquidity and see if the Astro price will be stable in the next 1-2 moths. Then another drop in rewards could be proposed.

[AstroMan]

In the table can you please show the adjusted amount of Astro per block, per pool?

I agree with the previous post that this downward shift is too drastic & will result in several potential negative consequences to the protocol.

There was general agreement in sentiment that the 25% adjustment per period was acceptable and appropriate. Then after 1 cycle you are wanting to rip this up? I think this is disrespectful to the Astro token holders, liquidity providers & general principles of governance.

[John_Galt]

I, too, am expectantly waiting to see the new table with 9.5 ASTRO per block. Assuming we keep the ASTRO pool with 5.32 ASTRO per a block, that leaves only about 4 ASTRO per block for all the other pools. But I guess that’s all they need to hit the target ratio, given how the price of ASTRO has appreciated lately.

I’m a little incredulous about the two posts above me. Guys, don’t you realize that Astroport hugely benefits by slashing incentives on Terra? Several of the pools being incentivzed generate basically 0 revenue for the protocol. So why should we keep incentivizing them? It’s just a waste of ASTRO.

While it’s extremely unlikely that the price of ASTRO falls drastically relative to tokens being incentivized any time soon, if this does somehow happen then incentives can simply be increased / rebalanced again in eight weeks. The beauty of completely removing the 25% cap on incentives adjustments is that it frees the Assembly to fully adjust incentives to the target ratio every eight weeks, without any lag or delay. This will result in more efficient incentivization, less waste, and more revenue for the protocol.

[MaxCallisto]

Here are some useful stats post-reduction of ASTRO emissions from 17.73 ASTRO per block to 9.5 ASTRO per block.

ASTRO price = $0.0972
All data are taken from tfm.com (Snapshot 6th Feb 2023).

Rather than taking the ASTRO price at snapshot, if ASTRO is at a 8 weeks moving average at $0.077, the stats will look like this:

As you can see, there are only 2 pools; LUNA-axlUSDC & TPT-LUNA above the 0.1 target ratio. The reduction in ASTRO emitted will not affect these 2 pools, but rather the other pools. Most importantly, the ASTRO-axlUSDC pool will have its emissions slashed by half to reach a target ratio of 0.1.

Since a deep liquidity of ASTRO is required, I suggest that the target ratio for ASTRO-axlUSDC be lowered to 0.05, where the other pools to remain at 0.1 ratio to reduce the price impact of large swaps to and fro ASTRO.

[LesBeauxJetons]

Thank you @MaxCallisto for the data.

Am I correct to understand that the current proposal would then not change the Astro rewards for the pools currently above the 0.1 ratio and that all reduction of rewards (so the difference between 17.73 and 9.5 Astro per block) will be concentrated only in the pools having a ratio currently inferior to 0.1? So the proposal would not impact, for example, the Astro rewards on the LUNA-axlUSDC and TPT-LUNA pools for example? Maybe @stefan could confirm this also. That is not clear for me reading the first message of the thread.

My understanding was that the drop in rewards would affect all pools in a proportional manner.

[MaxCallisto]

Yes, lowering the emissions to 9.5 ASTRO per block will reduce the rewards for all pools in a proportional manner.

[stefan]

Here’s a new table where the protocol only emits 9.5 ASTRO per block. Note that in this table we try to bring all emissions closer to the 0.1 ratio. Some pools like axlUSDC-LUNA and TPT-axlUSDC did better than the others so we propose that pool that performed really well get a 25% cut in emissions and those that underperformed get a 33% cut

[AstroMan]

So you’re reducing emissions even for pools that meet your target ratio? Just admit what this proposal is all about which is dumping Terra for Injective…

[John_Galt]

This table is kind of arbitrary, isn’t it?

Why are the LUNA and TPT pools losing incentives such that they’re being brought above the target ratio? Why is the ASTRO pool incentives per a block going down to 1.8? Why are the LSD pools being reduced to 0.4 per block?

I’m not opposed to these changes, it’s just that they’re all arbitrary. The framework is not being followed.

That said, I am totally in favour of this change. We all need to keep the big picture in mind. Astroport will be a multichain DEX on Terra, Injective, and Sei, as well as a vault provider on Osmosis. Also, Astroport will be integrated with Mars on Injective and Sei. These are very big and ambitious plans. If the builders want to reorganize incentives with these huge plans in mind, then I fully support them.

Also, another thought that just came to mind. The heavy incentive reductions for the LUNA and ASTRO pools are probably in anticipation of those pools being transitioned to the new passive concentrated liquidity pool type, which requires fewer incentives.

[stefan]

As mentioned in the first sentence from this section, the very first version of the incentive framework already mentions a 50% reduction in overall emissions on Terra:

Astroport Incentive Framework

This proposed Emissions Framework for Astroport aims to achieve several goals: • provide a blueprint for anyone to submit ASTRO emissions proposals which comply with guidelines accepted by the community • serve as a guide to adjust ASTRO emissions for all pools that are currently incentivised • balance the value of the fees generated by each incentivised pool with the value of the ASTRO given out in the form of emissions In this post we’ll dive deeper into how this framework aims to achieve …

The initial amount of ASTRO distributed per block (late last year) was approximately 19 ASTRO. This proposal aims to apply the change mentioned in the Incentive Framework (cut the amount in half to 9.5 ASTRO per block).

Now, I think it’s fair to leave the axlUSDC-LUNA, TPT-axlUSDC and ASTRO-axlUSDC emissions unchanged. As for the table being arbitrary: the way to be impartial would be to bring all other pools closer to a 0.1 fee:emissions ratio

[John_Galt]

I agree with your point about being impartial.

According to the table, there’s a total of 1.88 ASTRO per block going to the USDC-USDT pool and LSD pools, despite these pools generating basically no revenue. At the same time, the table removes incentives from the LUNA pool such that the fee to incentives ratio rises to 0.246. That’s inconsistent.

Given that the Astral Assembly has voted for a target fee to incentive ratio of 0.1, and that the Assembly is likely going to vote to remove the 25% cap on incentive changes, it would be more consistent and less arbitrary to adjust your table by 1) removing virtually all incentives from the USDC and LUNA LSD pools, and 2) giving them to the LUNA and TPT pools.

Why should Astroport continue to incentivize pools that generate basically no revenue?

By removing virtually all incentives from those non-revenue pools, we could:

• lower the ASTRO emissions per block to 9.5
• and get the LUNA and TPT pools closer to the 0.1 ratio

I would support this plan.

[stefan]

Alright, took the feedback we got from multiple community members and made a new table.

To adhere to the 0.1 ratio as agreed in the original framework emissions per block would actually need to be higher than the 9.5 ASTRO proposed here. Since the underlying goal is to bring incentives inline with the target ratio, we suggest updating this proposal to the following:

• 13.3 ASTRO per block
• alloc_points distributed as in the table below:

[8punt6]

I fully support the new proposed distribution where the emissions for the LUNA and ASTRO pool remain the same and LSD emissions get cut

[Philipp]

Hi stefan, can you publish how you calculated the daily fees?

[Fluffy_trex]

I don’t mean to be rude, just trying to understand the Astroport team thought process.

Why did we spend time building a framework for incentives change, which included discourse between community members and devs, if we are going to abandon it immediately?

The rules of that prop which passed were very clear (approach the goal emissions ratio over time through reduction in emissions every 8 week period max 25% change. We have not yet undergone one cycle of emission changes based on that government vote.

There is nothing in place that requires these proposals to be upheld. Is that good for the protocol? I believe this behavior jades xastro holders and will prevent participation in the future.

[BackBoneLabs]

I am extremely confused here…

Why is there basically a 98% reduction to all LSDs pools in this measure, when the previous prop (Astro port incentive framework) was just discussing a 25% reduction, stepped down in 8-week intervals?

It is premature to cut these pool incentives considering the many projects that are building utility for these LSDs and getting ready to come to market. We won’t know the trading volume on these pools for at least another 60 days.

[Valrich79]

That was my thought as well it would be stepped down over time & phased out. This plan is eliminating lsd incentives immediately.
Why does the 25% cap need to be removed?

[stefan]

The intention was not to abandon the framework but rather to simply decrease overall emissions because most pools were overincentivized. The first version of this proposal wasn’t the best so we listened to the community and posted an update

[stefan]

Currently there isn’t demand to swap LSDs. That can change if they have more use-cases besides simply holding them (as you pointed out):

0xdef1

Once a LSD builds more organic volume then it can become eligible for more ASTRO