Should the Weekly iETH SNX rewards be reduced?

Due to the growing popularity of iETH, it may be time to reduce the SNX rewards distributed to holders.

Currently, iETH holders receive 32k/week in SNX rewards.

Please discuss below if you are in favor of reducing iETH rewards and to what amount.

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It’s not a good idea to reduce snx reward on iETH incentive. People will remove sETH/WETH liquidity from balancer, then sell sETH and iETH. After that, there will be less sETH liquidity.

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Hopefully that will reduce the premium we’re having on the peg… Also if what you say happens, will also help reduce the skew in the debt pool (if people dump sETH and sETH goes to sUSD).
Therefore, i’m all for removing this incentive all together… The iETH experiment continues to be funded by the foundation for the the purpose of testing demand, and that purpose has more than run its course…
Also I’m not sure it’s us snx community members that decide on this incentive, it’s the foundation…

I guess we can find a bit of middle ground here and start reducing: starting gradually to 30K, then 28K and finally 26K. Once we are there we can maybe regroup and re-evaluate?

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Last time we reduced the rewards from 32k to 16k we saw a disproportionate reduction in people holding it so I think any reduction should be gradual. It isn’t simply testing demand imo but supporting it, it is beneficial to have a constant iEth demand to offset the sETH demand not just in periods when traders suspect eth is likely to drop in value as the sudden increase of some large traders suggests is the case now.

I also think it’s worth considering that inverse cryptos can hedge each other to an extent so the current level of iEth also helps hedge the increase in sBTC we’ve seen due to the curve pool. While sBTC isn’t perfectly correlated to Eth it is very close.

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Ok my issue with this is that minters can hedge… I don’t want to drain the foundation because minters don’t want to take responsibility… I mean it’s just holding ETH, can’t be simpler than that really… These rewards should be zero. The only people who support iETH are those that are leaching the rewards from it

No, as I’ve said before to you I think you underestimate the importance that these initiatives have with bring brand recognition and new traders to Synthetix. I don’t see how doing that is a bad use of the foundation funds given it promotes the project. Ideally you want defi traders to associate the idea of opening a short with Synthetix and if you look at current usage of other shorts that clearly isn’t the case.

To do this the rate paid needs to be competitive enough to going yields and also to over weigh the time needed to understand the risks of the position and mechanisms by which they can enter the market.

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But the people that are holding iETH in this escrow are not trading, they are just holding iETH (aka farming, I invite you to check their wallet as I did)…The foundation money is better spent in incentivizing trading than incentivizing this, which is causing the debt pool to skew

In my opinion neutralising debt is very much important at this point of time when Synthetix is in growing stage. which attracts lot of newbies and pro traders towards staking and trading because of having strong non fluctuated sufficient collateral backed for the synths they trade. At the same time, where the demand is having for synths like sETH and to neutralise this we should have sufficient iETH with incentives. Until there is no incentives for iETH, not much interested to trade or store iETH. When we start taking out incentives then everyone will move forward to sETH other than already existing sETH, which makes the debt will be more fluctuative than before. And we have seen this before when we have only most of the synths in sETH. I think we should wait and provide incentives for some time until there is a genuine interest from traders who wants to short ETH.

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As it stands, there are not sufficient tools to maintain market-neutral debt. Explaining how the Synthetix system works is an arduous task when trying to teach someone who doesn’t have a background in finance. Requiring them to manage their debt is another task that will turn users off to becoming investors and staking SNX. We are in a really good place right now with the synth pool being 55.1% sUSD and an additional 9.4% of market-neutral ETH, putting the effective non-fluctuating debt at 64.5%. This limits the debt risk for all of the new investors who may not understand the system that well, which we are inevitably getting on this run-up. I’m all for decreasing this reward once there are sufficient tools to maintain market-neutral debt. But as it stands there are not.

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Putting burden on minters to hedge their debt when there is huge price of gas for every action they take is not advisable when we consider small stakers. And it will ultimately discourage the minority stake holders to not stake until there is market neutral debt.

And I know that for the returns what the stakers earning they should be ready to do neutral or maintaing their debt as per global debt. But as I see Synthetix is more community focused which should be more inclusive and supportive for small holders.

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Yes sorry I should have clarified I meant in the long term. Someone who is familiar with synthetix from having used the iEth pool is much more inclined to then trust buying a synth such as sDefi where as people not familiar with the project may simply say “well it’s a nice product but I want to hold it for X months and don’t really trust the security/concept of this company to do that”. It’s building good will and reputation that will pay off once the true volume makers such as stocks and derivatives arrive. Current SX market volume/participation doesn’t mean much as I hope we’d all agree it’s currently in the development stages with mostly crypto-centric synths that are available natively on exchanges anyway.

I think as DeFI and crypto in general expands people will place a lot of weight in which projects have a proven track record for safety and familiarity.

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Now that is a good honest opinion, that I appreciate you having shared it with the community. Thank you

There is no rush to reduce rewards and while we’re getting a huge new influx of holders/stakers, we want to make the platform as welcoming and simple as possible. Minimal debt management is the best way to do that.

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I think a gradual reduction makes sense. Given that the price of SNX has risen so much, the debt pool is now less skewed towards ETH. That being the case, the iETH program is probably less needed. It should still be done on a curve though in order to support a gradual unwinding and prevent any shocks if the price of SNX were to crash and the outstanding sUSD supply were to shrink.

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Until automatic debt management is a feature, we should not reduce this reward pool. As we enter into a full bull market, debt owners will get crushed if they hold sUSD and there is no iETH to balance it out.

All of Synthetix are ETH believers. In a crypto bull, they will all be mega long ETH. I imagine iETH would be pretty close to zero without incentives. We need to keep this incentive high.

It is a disservice to SNX holders to not have an option for automatic management yet require active management to keep from being crushed by ETH. Disincentivizing the iETH pool is the wrong direction to be heading. This would only make the iETH/sETH disparity grow larger. As of the time of this writing, there is 3x more sETH than iETH. Based on that we should be increasing the iETH rewards. I am not suggesting that since there is already push back for trying to keep it the same. But at the very least we should keep the incentive at 32,000/week.