Summary
This proposal aims to increase the current monthly LQ market emissions distributed to lenders and update the minimum LQ per market and rewards scaling parameters:
-Increase the ~120k LQ in monthly emissions currently distributed to lenders across markets (100k) and LQ stakers (20k) by 20k LQ per month distributed to ADA borrowers proportional to their repaid interest.
-Decrease the current 500 LQ minimum per market monthly emission rate to 100 LQ minimum per market.
-Update the rewards scaling approach to use total interest repaid to lenders per market instead of the currently used total interest accrued on outstanding loans per market.
Reasoning
The current market participation rewards system distributes LQ to lenders across all markets with the following parameters voted in by the community during the last LQ emissions parameter proposal: 1. Stablecoins receive an equal 50% target APY 2. Each market receives a 500 LQ minimum 3. Remaining LQ rewards are scaled based on the interest accrued on outstanding loans in each market 4. max 100k LQ per month.
The current lender incentives of 100k LQ per month have helped bootstrap strong deposits in the DJED and iUSD stablecoin markets. The protocol continues its focus on supporting stablecoins with sustained borrow demand represented by the consistently ~70% utilization in most Liqwid stablecoin markets.
In the current rewards model after distributing LQ for the stablecoin target and the 500 LQ minimum per market, the remaining LQ distributed scales based on the amount of interest accrued on outstanding loans in that market (to incentivize lenders to supply in the most utilized markets). This proposal aims to update the scaling approach for the remaining LQ monthly distribution to be proportional to the interest repaid across markets. The current rewards scaling approach distributes LQ to lenders in a market proportional to the value of the market’s interest accrual on outstanding loans. This incentivizes lenders to deposit in markets with the most USD value in outstanding loans.
The proposed rewards scaling approach would distribute LQ to lenders in markets proportional to the value of repaid loans. This would incentivize new lenders to deposit in markets with the most realized interest income from loan repayments as they will have the highest LQ rewards yields.
As new markets are supported on Liqwid the 500 LQ minimum per month per market decreases the remaining LQ rewards distributed in each market. Reducing the minimum to 100 LQ from 500 LQ allows for multiple new Cardano native token markets to launch without diluting the emissions for lenders in existing markets.
As new collaterals are supported in the ADA market leading to increased market utilization, reintroducing borrow incentives for users with ADA loans based on repaid interest can help boost loan repayment. This benefits ADA lenders as an increased frequency of loan repayments at a monthly cadence means ADA market interest income is realized at a faster pace than it otherwise would be. The proposed 20k LQ per month in rewards emissions to ADA borrowers proportional to interest repaid would increase the current 120k LQ per month in rewards emissions to lenders and LQ stakers to bring total monthly rewards emissions to 140k per month.
Temp Check Poll
Do you support this proposal to increase LQ market participation rewards and update rewards parameters?
- Yes
- No
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