[LRFC] Update for ongoing Lyra protocol incentives

Lyra Request For Comment (LRFC)
1

Simple Summary

Modify ongoing liquidity incentives across all markets.

Abstract

Rebalance incentives across all markets to help drive more volume towards the most popular markets. Also, move more incentives towards Optimism as both the cost of hedging is reduced and there are more funds available for incentives (OP).

Motivation

The funding rate on GMX is negatively affecting the ongoing profitability of the Arbitrum deployment. As such, this rebalance of incentives aims to reduce the total outstanding volume of the market, as well as correct incentives on markets that are both overutilized and underutilized.

Specification

Some of the values are conditional depending on the result of other LRFCs passing. Specifically:

Rationale

Values were determined through a calculation of comparing current pool utilization (peak over last 7 days) to a target utilization of 85%. This works out a target pool size, which is floored at $200k. The target pool size is then multiplied by a target APY of ~10% and current token value to work out the fortnightly reward. This final value is then rounded to 3 significant digits.

Given the desire to move more incentives towards the Optimism deployment, trading rewards on Arbitrum are also reduced by 60%.

Test Cases

N/A

Configurable Values

Optimism markets

market current epoch rewards proposed new rewards
ETH 13300 OP 14600 OP
BTC 1900 OP 2270 OP
ARB 1900 OP 603 OP
OP 1900 OP 603 OP
LINK 0 603 OP
XRP 0 603 OP
Trading rewards 7500 OP 7500 OP

Arbitrum markets

market current epoch rewards proposed new rewards
ETH 433000 lyra 255000 lyra
BTC 333000 lyra 125000 lyra / 0 lyra*
Trading rewards 66000 lyra 26400 lyra

* Value is dependent on logic defined in Specification section

Copyright Waiver

Copyright and related rights waived via CC0 .

1 Like
2

Support this proposal.

1 Like
3

In favor of reducing Arbitrum rewards and rebalancing OP rewards. Would prefer to go even further with moving liquidity to OP to make it a more attractive trading experience.

As long as liquidity is deeper on ARB there is no incentive for traders to migrate to OP, and we really should be pushing for a full migration at this point if traders are willing. Will be a better experience for everyone.

4

Might want to increase BTC rewards on OP a bit more since its already close to 100% util and we are potentially moving all of the ARB volume there.

5

Same, BTC Optimism vault rewards should be higher if we want liquidity to migrate there from Arbitrum. BTC Optimism has 600k $ deposited and the proposal only increases the rewards by 20% that seems low if we want the 3.7M $ deposited in BTC Arbitrum to migrate there. I would propose at least 3000 OP initially.

As per the ETH Arbitrum vault and trading rewards, I think it’s ok as in the proposal. I prefer to keep reducing the incentives progressively so trading and liquidity can migrate to OP in an orderly manner.

We can continue to revisit the protocol incentives in a monthly basis to adjust them to the protocl and market needs.

6

Updated to include rewards for XRP/LINK for next epoch as those snapshot votes have passed.

Vote has started here with that update: Snapshot

1 Like