Reduce Rewards on Curve - SNX 24,000

Simple Summary

Decrease SNX incentives on the sUSD Curve pool to 24,000 SNX per week


32,000 SNX per week from inflation rewards are currently paid to the sUSD pool on curve which incentivizes liquidity provision to the sUSD/ DAI-USDC-USDT pool.


The recent premium on the sUSD peg on Curve calls for taking action as traders feel a disincentive to pay it to buy synths.
Despite the recent price run up of SNX, accompanied usually by an increases in supply of synths, the premium has remained, possibly due to two main contributors:

  1. Farming purposes (CRV, foundation led incentives…)
  2. Increase in exchange activity

It should be mentioned that although many have been asking for a c-ratio change to stabilize the peg, the discussion under this research post, outlines the pros and cons of doing this.
The main argument for reducing incentives ahead of any c-ratio cut is to set SNX on a more sustainable long-term footing and decrease the leakage of value from minters, to the minimum required that achieves a stable peg.


Copyright and related rights waived via CC0.

1 Like

There is significant risk adding to a Curve liquidity pool and as it stands, SNX is the only incentive to participate in the sUSD pool. Factoring in the negative EV of smart contract risk on a new platform, in reality you need a minimum of 20% APY to be +EV. Without the SNX subsidy, Curve fees alone account for ~2% APY (not including that one big spike). If the Curve rewards are reduced and the price of SNX goes down, this can quickly kill liquidity. If people want to trade on the platform they can use Curve to swap into sUSD. If you’re bullish on crypto you would pick crypto over the APY provided by the sUSD pool. Maybe people don’t want to buy synths because there isn’t enough demand for synths (due to gas fees + a lack of L2, or some other reason). Making assumptions that it’s due to the sUSD pool on Curve is problematic because I think it is doing a good job to make managing debt easier and provide sUSD liquidity. And these assumptions could be taking away a good thing without enough evidence that it is the cause of lack of demand. There are several other potential causes that we know of such as gas fees, UX (L2), marketing issues, lack of demand without securities, etc. Remember the exchange space is extremely crowded, Synthetix has UX issues, and we need more assets that are unique to Synthetix. That just takes time. I vote to maintain the 32,000 SNX per week because I see tremendous value in this subsidy and an SNX price drop could kill liquidity at 24,000 SNX per week.


@George valid points, but you have to consider the fact that if we lower these rewards and something breaks we can always increase them back. Actually if SNX price crashes and we are at 24k rewards, we’ll have 8k worth of SNX more flexibility starting at 24k. History has shown that the size of the pool on Curve is extremely responsive to changes in $ value of these rewards.

Please don’t forget about the CRV tokens, which is also another incentive… basically it’s why the pool has grown 4 fold in the last month alone…

Well actually, having a premium on synths discourages traders from buying it, so no assumption there…

That said, I respect your vote, each person is entitled to their own opinion, I can’t convince everyone :smile:, but I can sure heck debate them…

Although it is thought to be true, there is nothing set in stone regarding CRV tokens back-paid to LPs.

Please tell that to the 20-30 million addition growth on the sUSD pool on curve that have piled their after they announced governance tokens then :smile:

I think it’s extremely risky to reduce the SNX rewards. The program has only been around for a few months, and while yes it has been successful, there is simply not enough sample size to discern that it can survive without a subsidy. Given how important the peg is to the SNX ecosystem and the success of the project, it would be foolish to try and continue to reduce the rewards at such an aggressive pace. It feels like a stepping over dollars to save pennies situation. 12k SNX isn’t going to hurt SNX stakers that much but removing the rewards and the risk it creates is asymmetrically negative.

The program has been around for a very long time, before it was sETH, now shifted to this sUSD, with the intention of paying a lower amount to put snx on a sustainable footing… Well that’s the intention of this proposal, snx long-term.

That’s how you conquer a mountain, baby steps… otherwise, you risk a crash

It add up week after week, think of it this way, it’s an investment in the long-term future of snx… In case of severe negative effects, we can always push it back up… Although I am in the camp that nothing will happen if we implement this proposal…

One last note,
I just love seeing people arguing now to keep rewards up, and last week the same people arguing to lower c-ratio… Both of these proposals aim at reducing the premium on the peg btw

That was a very different program. The implications of an sETH:ETH pool are much different relative to a sUSD:USDT:USDC:DAI pool not using constant product. Especially if we want to drive volume at scale, we will still need to subsidies to allow for adequate liquidity. We should reduce the rewards once the war is won, not a preemptive reduction when sUSD is still such a tiny market.

Which is why I don’t agree with a 25% reduction. That is not at all a baby step.

If it’s not broke, don’t fix it. Especially when being wrong is asymmetrically negative.

Making these jabs doesn’t really help your argument. Try to use logic.

Please have a look at some data before discussing these matters, look at exchange volume and compare it to the size of the pool for instance.
Add to that, it’s basically the same thing, go in from ETH or go in from stable coin, and btw the pool now on Curve is much larger than the one that we had back in the uniswap days.

I was basically referring to your point here “It feels like a stepping over dollars to save pennies situation”
pennies => snx rewards decrease => baby steps

This is exactly the kind of thinking, that causes problems down the line… I mean, I’m telling you, this is not sustainable for minters, their rewards in SNX are going to drop off significantly over the coming year… They cannot keep paying these high rewards… It’ll break soon and when it does you can’t fix it if you don’t take action yesterday.

Just highlighting here the point, that people I find often focus on their own short-term well being in making decisions/recommendations, rather look at a big-picture long term view of things… Like 8k will have a small incremental impact on the vision, but eventually, drop after drop hopefully, we won’t need to incentivize the peg at all, and the trading fees on curve will cover everything… I am certain that I have not convinced you of anything, which is why I invite you to vote what you feel is best for you… which is what you have done in the past and will continue to do in the future.