**Proposal to improve Liqwid protocol: LQ rewards parameters**

Temperature Check
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Summary

This is the second of two proposals containing the final outputs of the LQ rewards parameter changes outlined in the initial post by Liqwid community member @AliD. The original post and responses can be found here and in the governance discussion channel in the Liqwid Discord: Proposal to improve Liqwid protocol

Updates

  1. Remove the stablecoin target for stablecoin suppliers and individually calculate LQ rewards for stablecoin suppliers using the same method currently in place for all non-stable markets (based on interest repayment amount)

  2. Extend the 20k LQ per month borrow rewards for ADA borrowers to include all borrowers in every market (LQ is allocated to borrowers pro-rata based on interest repaid).

  3. Create a Liqwid Rewards subDAO which reviews market data bi-weekly (interest accrued, interest repaid, utilization, TVL) and use it for tuning the 1. lender multipliers (currently all set to 1x) and 2. borrower-lender split of the 120k LQ rewards total monthly amount, (e.g. updating from 100k-20k LQ split for lenders-borrowers to 90k-30k LQ). The subDAO would not be able to issue more than the 120k LQ monthly max, the only two actions the Rewards subDAO control are tuning multipliers and rebalancing the split of LQ rewards.

Reasoning

  1. Stablecoins are varying too much in interest repayments to treat them identically and this will only grow as upcoming Cardano native stables are launched on Liqwid.

  2. Instead of exclusively allowing ADA lenders to access subsidized borrowers, allow lenders in all markets to.

  3. Similar to how the Minswap Farm tiers rebalancing process works based on defined metrics (e.g. 7d USD trading volume for each pool) are used to update the split of MIN rewards across pools. The LQ rewards subDAO team would analyze the latest data on market utilization, interest repayment and accruals and use this to update the lender multiplier and the split of lender-borrow monthly LQ incentives (currently 100k LQ lender rewards to 20k LQ borrower rewards per month).

*Note the LQ rewards subDAO team would NOT have the ability to increase monthly LQ incentives, only to 1. update the lender multipliers and 2. 1rebalance the total lender-borrowing split.

Do you support this proposal to update LQ rewards parameters?

  • Yes
  • No

0 voters

2 Likes
2

I will also support this for myself and my delegates.

  1. Remove the stablecoin target for stablecoin suppliers and individually calculate LQ rewards for stablecoin suppliers using the same method currently in place for all non-stable markets (based on interest repayment amount)
  2. Extend the 20k LQ per month borrow rewards for ADA borrowers to include all borrowers in every market (LQ is allocated to borrowers pro-rata based on interest repaid).

I believe the above two points are perfect to focus rewards to the markets which are generating real yield from interest repaid benefitting the protocol and LQ stakers. Solid proposals, shout out to @AliD for starting these discussions.

3 Likes
3

Sounds like a reasonable proposal.
Beside the rewards re-balance, these sub-DAOs gracefully transition to a decentralized structure for Liqwid.

3 Likes
5

Not sure if the first version can be seen.
For point 1:
*Will the protocol cease rewarding suppliers for assuming the risk of bringing bridged assets to the platform?
*How will they be accounted for in the revised LQ rewards framework?

I concur with point 2.

Regarding point 3, will you implement a 1:1 cap to deter borrowing solely for the purpose of maximizing LQ rewards? This measure aims to prevent arbitrage, akin to the recent instances observed with the Optim bonds, where borrowers were borrowing ADA while reaping LQ rewards exceeding the interest they incurred on the borrowed ADA.

1 Like