Reduction of LQ Staking Rewards Rate to 2.5% APY

Temperature Check
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Rational

Following the analysis presented here, the Liqwid Core Team recommends reducing the fixed LQ staking rewards rate from 5% to 2.5% APR (Annual Rate per Year).

This adjustment aims to address the current excessive net inflation and align emissions with the protocol’s actual revenue generation. The proposed change supports a more sustainable token economy and strengthens the long-term effectiveness of the Liqwid DAO’s economic model.

Proposed Change and Forecasted Impact

By reducing the staking rewards rate to 2.5%, projected analysis shows that net inflation would shift from +141.5k LQ to +68.5k LQ under current conditions.

This adjustment aims to:

  • Restore balance between emissions and buybacks

  • Strengthen the long-term value proposition of LQ

  • Reduce short-term selling pressure

  • Enhance capital efficiency and sustainability for the DAO financing

This governance vote is a strategic recalibration to align staking incentives with current protocol revenue and market conditions. Lowering the LQ staking rewards rate from 5% to 2.5% ensures the DAO remains competitive, resilient, and economically sustainable—without compromising the dual-benefit model that sets Liqwid apart.

Conclusion

The Core Team recommends the adoption of this proposal to change the Staking Reward Rate to 2.5% APR. If approved, the change will take effect immediately following the completion of the vote.

Do you support this proposal?

  • Yes, I support this proposal to reduce the Staking Reward rate to 2.5%.
  • No, I do not support this proposal to reduce the Staking Reward rate to 2.5%.
0 voters
2 Likes
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hello
we have no clue right now of what the actual revenue generation are close to since the programmatic rewards are distributed on an unknow multi month basis depending on multiple human factors. yet, I doubt, so I voted “no” since i believe we need to attract people with something more than promises of better future, short term results, or hope , I might review this vote maybe, when we can check the coming rewards for the past few months. but yet again , I doubt.

if we lower the staking rewards, maybe could it be possible to review the protocol revenues on a higher rate then but I suppose this would be toxic for the protocol . i suggest this because some other protocols are giving more than 10% of their protocol revenues to stakers, but honestly I haven’t researched further on how they are doing it.:thinking:

cheers anyway see you in the voting pit :slight_smile:

3 Likes
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stakers currently get 10% of protocol revenue in Liqwid. this is the programmatic rewards you refer to.

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Yes, currently LQ stakers receive two forms of rewards:

  1. Programmatic Rewards – representing 10% of protocol revenues, distributed in the form of LQ buybacks, AND
  2. Staking Rewards – a fixed 5% APR, based on the amount of LQ staked.
    → This current proposal aims to reduce it to 2.5% APR

This dual reward mechanism provides stakers already today with both a share of protocol income and additional token-based incentives.

1 Like
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Let me play devil’s advocate on the reduction of the LQ staking rewards rate discussion:

  • Reducing the rate will lower the value proposition of the Aquafarmer NFT’s without any compensation or plan to reduce this immediate impact
  • In the report there is no mention of how staking rewards impact selling pressure, if any
  • Liqwid Labs seems to have had no issue with seed investors selling their tokens, but now that is (mostly) done we have to lower the staking rewards all of a sudden?
  • Offering a stable staking % will attract users, being unreliable with your token holders will alienate them
  • No new CNT’s have been listed even though WMTx has over 34 votes with 88% voting yes, who is gatekeeping governance?
  • Liqwid Labs seems to be pushing their own narrative through governance, no user made proposal is being ‘allowed’ to be voted on
  • If more CNT’s got listed the buybacks might have surpassed the emissions? No transparency in costs associated with this
  • Why do your token holders (stakers) have to pay the price for continued selling pressure? Where is this selling pressure coming from?

All of this combined makes me think that Liqwid Labs should have a good long look in the mirror before pushing more proposals on the LQ holders who have less and less reason to hold on to the LQ token if this keeps up. Instead Liqwid Labs should support or create incentives to increase the amount of token holders. The LQ token should be something that you WANT to hold on to, because it has something to offer.

Right now, I’m getting a meager 5% staking reward which might go down to 2,5%. Unreliable programmatic rewards because Liqwid Labs does not seem to care about being punctual.

All in all I think Liqwid Labs still has a lot of room to grow into a more professional business, which is kinda funny to me as they are Cardano’s top DeFi protocol when it comes down to TVL. I am here to support them because I can see the potential, but please stop alienating your token holders.

4 Likes
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Hey Yoven you bring up some points I want to address each:

  • Aquafarmers NFTs value proposition is always closely connected to the LQ token value proposition. Therefore any proposal that serves to increase the LQ token value prop by reducing inflationary selling pressure is adjacently increasing the Aquafarmers NFT value.
  • Staking rewards increases inflationary selling pressure yes. The only 2 options for active LQ stakers who claim rewards is a.) add their recently claimed LQ to their staking principal or b.) sell the LQ. In option a.) LQ staking rewards is gradually distributing larger LQ amounts each month with no logical method to curb accelerating staking rewards emissions. In option b.) LQ selling pressure from staking rewards subverts the DAO’s LQ buyback program.
  • Some seed investors/VCs have actually not sold any LQ so this is simply incorrect. Also this is not all of sudden this is the conclusion from staking rewards emissions data for the first 6 months of 2025.
  • I disagree that a stable staking % is what attracts new users because many Cardano protocols offer stable staking % and have a fraction of the token holders as Liqwid. The reality is Liqwid Core Team’s ability to continue innovating in the Cardano DeFi lending space and providing a strong product trusted by both large and small Cardano holders is what attracts new users to join the Liqwid DAO. Also the DAO has voted in an income split that distributes 10% of its protocol revenue directly to LQ stakers enabling all stakers to directly capture the protocol’s revenue upside. Again none of this is possible without a product with actual user demand and revenue. If Liqwid 10x’s its revenue off the back of upcoming catalysts such as RWA, Bitcoin DeFi and eventually V3 the Liqwid DAO will naturally attract a large number of new LQ holders and stakers. They will not have joined Liqwid DAO because we offered a “stable staking %”, they will join because we built an amazing product that generates significant revenues of which they receive 10% of.
  • The notion governance is being gatekept is wrong. Multiple proposals initiated by community members have been successfully passed and implemented before. WMTx support will be voted on in the next batch of governance proposals pending risk parameter considerations based on current WMTx onchain liquidity.
  • This point is false. There have been several community initiated proposals implemented following their successful onchain vote. Liqwid Labs only narrative is building products that service the Cardano DeFi ecosystem while supporting the growth of the Liqwid DAO.
  • Our current data shows CNTs actually generate very little revenues for Liqwid DAO. As you can see on CNT market dashboards in the app there are very low utilizations in these markets. Stats on CNTs usage as collateral in active loans is being actively collected and will be reported on soon but as of now, there is no evidence that points to CNTs listed being enabling enough revenue generation for LQ buybacks to surpass staking emissions no. The largest cost for CNT markets now and especially into the future post-Orcfax integration is oracle cost which the full amounts will be shared in an oracle proposal shortly for complete transparency into cost associated with launching new markets. Other cost (e.g. cost for offchain infra used to support markets) will also be shared with the DAO.
  • LQ token holders are not paying any price in fact the exact opposite they are earning 10% of the protocol’s total revenues while also earning LQ staking rewards. Cardano staking yield is continually decreasing and currently averaging ~2.11-2.6%. Hyperliquid staking yield is ~2.3%. Moving to 2.5% is in line with these staking yields and is actually a bullish move most long term aligned LQ stakers seem to support for the long term health of the DAO.

Liqwid Labs is focused on long term growth of the Liqwid DAO and specifically the development of innovative DeFi products that move us closer to growing tvl and active loans 10x. Most Liqwid DAO members support this vision and thus are okay with this reduction as it values long term growth over short term speculation. We certainly take all of your critiques of Labs under consideration and will make concerted efforts to a.) foster an innovative community-led governance system, b.) attract new Liqwid protocol users and LQ stakers.

1 Like
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From the proposal and comments, it seems the collective objective of everyone is to: reduce emissions while ensuring that Stakers do not get less LQ in thier pockets/wallets.

One possible solution is to defer Staking Rewards—essentially distributing them at a later date and over time. This way, we lower immediate emissions but still honor the value and trust of current stakers. If there’s concern about how to fund operations during this period, I’m confident a model could be worked.

For example:
LQ stakers could receive a 5% Staking Reward, but with the first distribution beginning in July 2029, and the tokens emitted gradually over 12, 24, or even 36 months—whichever duration best aligns with sustainability and protocol health.As for compounded staking, I’m sure we can devise a simple, fair method for implementation.Personally, I’d be more than willing to defer 100% of my staking rewards if it strengthens the protocol. After all, as you’ve pointed out, people are here for the product—not just the short-term rewards so why not differ ALL staking rewards…

Wouldn’t some variation of the above achieve the goals of this proposal while also signaling long-term commitment and goodwill to stakers? From my perspective, if someone is unwilling to defer their rewards, it actually reinforces the argument for reducing emissions—since they will most likely immediately sell off the rewards.

My broader point is this: we can reduce emissions while still protecting the interests of those who believe in Liqwid today—those who took the risk to stake in 2022, 2023, and now through 2025. If emissions reductions are healthy for the protocol, let’s move forward—but let’s not forget the early believers. If I had the ability, I’d be thinking about how to reward these contributors with a higher long-term allocation—as long as it doesn’t harm protocol sustainability; because these faith keeping supportors did not wait until Liqwid is at an AAVE level of success (yes, it is successful now), with an LTV in the billions, and the revenue to match.

Lastly, if this deferred Staking Rewards model is adopted, we can “throw a bone” to the Liqwid Finance Aquafarmer NFT Collection, such as a higher reward boost %.

This is in response to DC, but I’d love to hear what others in the community think as well.

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Hey @dcliqwidmaxi, I would like to thank you for responding to all of my points. I’ve given your answers some thought the last few days and without additional insight I can only agree to disagree for now. This is OK, we don’t have to agree. You are mostly talking about future plans and long term growth vs. short term speculation. I’d argue that short term speculation is also about being realistic and the realization that cutting staking rewards in half will directly negatively impact (less $LQ) your stakers once again, under the premise of unrealized future upward momentum. I would call that long term speculation, which is no better than short term speculation. Liqwid Labs has not persuaded me to believe that cutting staking rewards in half will be a bullish move so I naturally will want to hold on to what I have, in this case the 5% staking rewards. I believe it is too simple to state that lowering emissions from stakers will turn the tide in a significant way, mainly because I don’t believe stakers are representing a significant % of token sales. This is why I don’t like to see $LQ stakers (which I’d like to perceive as loyal supporters) being targeted (again) to reduce emissions. I hope this will give you some insight on my thoughts on the matter and I can only motivate others to do the same. I appreciate you for taking my points into consideration and I am happy to see such a constructive discussion taking place.

1 Like