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 above mentioned goals. We will start by looking at Astroport’s current token emissions. We will then dive into emissions offered by other AMMs and compare them to Astroport’s. Finally, we will propose a set of criteria which can be followed by the Astroport community when deciding which pools to incentivise and how much ASTRO to give to each of them as well as how current emissions may be adjusted.
Comparing AMM Incentive to Fees Ratios
The Astroport protocol is currently emitting approximately 19 ASTRO per block across 6 pools. This equates to roughly 273,600 ASTRO or roughly $27,360 per day at current prices.
Over the last 145 days, Astroport has generated $165k in fees, or an average of $1,137 in fees per day. The ratio of incentives per trading fee is currently 0.042. Let’s compare these numbers to other AMMs’ token emissions.
Osmosis is currently in its second year of emissions where 200 million tokens will be released. Of the 200m, 45% (or 90m tokens) are reserved for liquidity mining incentives. This equates to roughly 250k OSMO or $317.5k per day at current prices. Over the last 145 days, Osmosis has generated $4.2m in fees or an average of $28,965 in fees per day. The ratio of incentives per trading fee is roughly 0.09.
The Sushiswap Masterchef contract emits 100 SUSHI per block, priced at $1.70. Post-merge Ethereum block times are roughly 12s per block, meaning that Sushiswap is emitting $1.2m in incentives per day. Sushiswap has generated $18.9m in fees over the last 145 days or roughly $130k in fees per day. This ratio of incentives per trading fee is ~0.10.
Incentive to Fee Ratios Summary
Comparing the above incentive numbers, we can see that on average Astroport is paying approximately double the incentives relative to fees generated as compared to Osmosis and Sushiswap.
In our opinion and also based on community sentiment here and here, this ratio is too high and Astroport is in fact overpaying in incentives relative to the fees it gains.
To address this issue and prevent it from happening again in the future, we would like to propose a set of criteria which can be used by the community to streamline token emission proposals. If accepted by the community through an on-chain signalling poll, existing pools which receive ASTRO as well as upcoming ones should adhere to this framework.
Criteria for Existing & New ASTRO Emissions
When defining the criteria below we distinguish between major and non-major assets in recognition that some assets have more strategic importance to Astroport than others. A major asset is defined as one that satisfies all of the following conditions:
- Top 200 token market cap
- Of special strategic interest to Astroport
- Majority of trade volume occurring outside of Astroport
Note in the case of Axelar assets we consider them equivalent to their non Axelar counterparts, e.g native USDC.
Credit to Osmosis for their governance proposal from which this categorisation was inspired
Each and every current and future ASTRO emissions proposal should meet all of the following criteria:
- The pool has been trading on Terra 2 mainnet (Phoenix network) for at least 4 weeks
- LPs in the pool should already receive token emissions (using the Astroport dual reward feature), unless the pool is comprised of two major assets (see definition above) or one major asset where the other is ASTRO
- Dual rewards should continue for at least 4 weeks from the moment (and in case) the Assembly passes a vote to direct ASTRO emissions to the pool
- The target ratio of fees to incentives should be 0.1, in line with those of Osmosis and Sushiswap as shown above
Besides the above criteria, we propose the following framework to periodically re-evaluate current pools that receive ASTRO emissions:
- All emissions should be reviewed every 8 weeks. This includes reviewing pool performance (in terms of volume and thus generated fees) and third party incentives
- A pool should only increase or decrease its percentage of ASTRO emissions by 25% at a time (in a proposal posted every 8 weeks). For example, a pool that’s currently receiving 100K ASTRO per year can only increase its emissions by maximum 25K ASTRO (for a total of 125K ASTRO per year)
Based on this framework both ASTRO-LUNA and ASTRO-axlUSDC should receive incentives however we propose that ASTRO pairs are treated differently from other pairs with the following justification.
It is beneficial to Astroport for the ASTRO token to have deep liquidity. Firstly, this is necessary for those seeking to participate in governance to swap in and our of the ASTRO token. Secondly, an illiquid ASTRO token would result in spiky dollar values for pool incentives, making them hard to reason about for LPs. It is also not desirable or necessary to fragment liquidity by incentivising multiple ASTRO pairs.
To satisfy this we propose that the ASTRO-axlUSDC pair will be allocated ASTRO incentives, but ASTRO-LUNA will not. Additionally the amount of incentives will be set separately from this proposal and for now will remain unchanged.
This proposal seeks to reduce emissions by approximately half, bringing ASTRO emissions more in line with the capital efficiency of Osmosis and Sushiswap.
Furthermore, the current distribution of incentives has been decided by various governance proposals and is imbalanced compared to the fees generated to liquidity providers and xASTRO holders.
|Pool||Allocation Points||Avg. Daily Fees||ASTRO Incentives||External Incentives||ASTRO per Block||Fee:Emission Ratio|
Proposed incentives for next 8 week period
|Pool||Allocation Points||Avg. Daily Fees||ASTRO Incentives (given 25% max change)||External Incentives||ASTRO per Block||Fee:Emission Ratio|
The Astroport Incentive Framework is crucial to ensure the community has ample reserves which can be used for emissions as well as balance these emissions with fees generated by each pool. By standardising the way the community analyses emissions proposals, they can more easily make decisions on how to optimally use the ASTRO held by the DAO. We can also avoid the potentially political process of choosing which pools get incentivised and how much ASTRO each of them gets.
Data snapshot taken on October 31, 2022.