Hi @FlorianVolery and Community.
I back the intent of this post entirely and believe that this reduction of emissions is currently needed to support price and protocol stability, increase the safety pool and to explore the POL further to generate more revenue. With the analysis provided in this Temp Check and along with the details shared in the Liqwid Protocol - Data analytics over the past 12 months
As laid out in my analysis in the 12-month post, we historically have been looking at 60k-100k worth of LQ sell pressure a month. Most price swings occur due to ~1-5k ADA worth of sell-offs that are recouped by smaller bu s., which is evident from the constant sell wall of 22k vs the total buying orders of roughly 23k ADA
this sell wall has been there for months. Reducing emissions will reduce this wall and bring more orders into the 2% depth of the order book, stabilizing the price.
In Point 1
reducing the total emissions by 95K will be significant enough to stabilize the selling pressure in the market. While also preserving LQ for future adjustments up or down.
in Point 2
The original proposal to increase the APR to 50/30/5 did not directly indicate when this would reach a sufficient level of dispersed LQ to stakers or did it explore until the past month when the 2.1 million LQ would deplete for stakers. This is an error for the greater community and learning lesson in governance because we did not maintain an analysis of this proposal sooner. Significant community analysis has revealed that this stake pool will not run out at the end of 2024. However, it will run out mid- to end-of-2025 by all analysis accounts, which makes the additional six months trivial.
The LQ staking pool is not the main source of sell pressure( 100k + 20k User Dist. Stakers present day 40k a month). However, this dispenses more and more LQ each month and is projected to payout 100K+ by September 2024, negating Point 1 reduction. This means the stake pool must be reduced before September for all three points to have a positive outcome. A return to a flat 5% + aquafarmer is too extreme, and a balance can be found. Many great proposals have been shared in this forum and temp check, with insight on working toward a better balance of LQ emissions. We need to see only a 60-100k emission reduction. Point 1 achieves this. A stake pool incentive higher than 5% will also allow LQ holders to achieve a higher return and still reduce emissions. To find the balance, we must define and measure the long-term strategy for the stake pool. How long do we want it to last, how fast should we go through it before slowing it down, and so forth? All three of these points are foundational. Point 1 is the cornerstone we need to build more upon. The 50% APR should be removed immediately; this will reduce the payouts/emissions and preserve the LQ pool while it can be assessed in real-time(versus in a vacuum of spreadsheets) if Point 1 is sufficient enough along to reduce LQ emissions to achieve stability. As proposed by Florian, the next three months should be enough time to work through the outcome of Point 1 and see if the stake APR needs further reduction. If it has not, then a return to a flat 5% should occur. Removal of the 50% will also keep the initial playing field level as its only been active for a few weeks. This will allow community sentiment to stay positive. For anyone who truly calculated their own analysis for 50% rewards ( on their own ROI for staking) would have realized that it was not sustainable and would need to be adjusted. The amount of LQ we want the stake pool to emit in the next three months should be decided upon after Point 1 goes into effect and a minimum of two months for analysis. Why, currently, of all emissions the stake pool is the smallest. Placing a cap on how much can be emitted per month could also be an option to explore and help overall protocol health during that three-month moratorium.
Point 3
is a nice addition to elevating some contention from point 1. This will be a long play as the current value in the present day is not significant but has the potential to be significant with Liquids year-over-year growth.
Would you be more willing to support Point 2 with a reduction in Staking APR after a 2 months analysis of the affects of Point 1?
- Yes
- No- never
- No- because I already support Point 2 as is.
- No- Point 2 still needs more revision to support Staking APR reduction