stargatefi

This proposal references this discussion on Commonwealth

Issue Statement

SIP #5 proposed the TVL incentivized target to be calculated using the formula:

• TVL Incentivized Target = Target TVL - POL - Asset Surplus/Deficit

In the event there are large asset surpluses in the pool, this would mean that the TVL Incentivized Target would equal zero, which creates some challenges:

• Without incentivizing liquidity on these pools, liquidity provided will also drop, and the surpluses will increase.
• Pathway credits are allocated based on the liquidity provided to the pool (and not the assets in the pool).
• The result is fewer credits allocated to pathways because liquidity provided has decreased. This leads to a more inefficient use of capital.
• Also, in this current scenario, once balancing transfers are completed the asset surpluses will be removed, and there is a likely chance that liquidity on these pools will now run in deficit, due to the removal of liquidity incentives.
• Finally, it makes sense to have more consistent liquidity incentives on pools so that liquidity providers do not need to constantly move their allocations to and from pools.

Solution

Change the TVL Incentivized Target formula to:

• TVL Incentivized Target = Target TVL - POL

This update will increase capital allocation efficiency & create a more consistent incentive program for Stargate liquidity providers.

Liquidity incentives will increase (if this were implemented in the previous month, projected STG emissions would have gone from ~408K STG to 458K STG), but this is needed to create long term efficiencies for the Stargate protocol.

Success

Success is determined by creating more balance between Stargate liquidity pools, improving the price for Stargate transfers.

Execution

Update the existing model to reflect the new formula for TVL Incentivized Target.

Time & Costs

Model update: 1 HR

Summary

Stargate should update the formula for TVL Incentivized Target to improve credit allocation efficiency and to provide liquidity providers consistent incentives.