Summary
This Proposal is to both decrease the Lower Bound of MIN Emissions by 40% and the Upper Bound by 25%.
We also introduce the members of the Emissions committee, and a compensation structure linked to a series of outputs.
Introduction
Here is how MIN Emissions work currently: The Daily MIN Emissions Rate is adjusted dynamically every 2 weeks, with the maximum weekly change being a 10% variation from last MIN Emissions Rate. A Working Group of volunteers monitors and decides on the adjustment.
For the last 3 months, Emissions have remained stagnant. Emissions were progressively lowered since the introduction of the Emissions Range Adjustment Proposal in July 2023. Once they met the lower bound, they remained unchanged. After 3 months of no changes, it is clear there is room for adjustments.
Reasons for the Emissions Range Adjustment
Recently, a group of tokenomics experts (Deus Ex DAO) was hired by Minswap Labs to provide insights and a Report on Minswap for the year of 2023. You can read a summary of the author himself here. The whole report can be read here. One of the main conclusions was that the MIN/ADA Pool is being incentivized too much compared to how much liquidity is needed. There are many measures that can be taken to address this, such as incentivizing MIN staking more heavily. Another measure is decreasing MIN emissions overall, slowly and progressively, and to keep readjusting and tweaking MIN Emissions.
Minswap is no longer in a Bootstrapping Phase. The DEX has been on mainnet for more than 2 years! While emissions are important to incentivize and keep liquidity, when moving into a more sustainable phase, it is organic trading fees that have to gain priority. For the last months, several community members have been doing heavy research on the optimal trading fees, why Dynamic Fees make sense, and how organic yields for LPs can be increased. We look forward to releasing it soon!
Emissions are not the most sustainable way to attract liquidity. Recently, Minswap has seen some projects migrate Liquidity to other DEX because of functionality (for example, Minswap only offers 0.3% fees, while other DEXs allow for other types of Fees). While this will be at large addressed in Minswap V2, there are other plans and ideas for how Minswap can attract TVL and Volume, without depending on Emissions. Leveraging the Minswap Catalyst LP voting power, Partnerships, better functionality and features or Catalyst Proposals are some of the plans we are working on for it.
The proposed lowering amount are:
- 40% for the Lower Bound: reduce from the minimum cap of 333,333 MIN a day, to 200,000 MIN a day.
- 25% for the Upper Bound: reduce from the minimum cap of 666,666 MIN a day, to 500,000 MIN a day.
The numbers are high to avoid having to do another Proposal to adjust the range again soon. As a reminder, Emissions get lowered slowly, with a maximum variation of 10% per adjustment from the previous rate.
Emissions Management committee Introduction
The Emissions committee is made up of the following 4 community volunteers and 1 Minswap Labs member:
Marco: with a background in TradFi, Marco has been involved in Minswap since the launch. He helped devise the MIN Emissions Formula, and is one of the tokenomics experts in the community. He did major research prior to the Stableswap launch and co-authored the Minswap DAO Emissions and DAO treasury Report 2023 .
Chicken: one of the most active Minswap community members on X and Discord. He authored the $MIN Token Burn Proposal, and has been involved in any major strategic decisions the Minswap DAO takes for more than 1 year.
Elder Millenial: Elder is a gigabrain that has become an expert in Python through his day job. He has helped Minswap with simulations (such as for the Stableswap), and has done extensive work to model out the optimal fees with a view to Minswap V2. With his knowledge and expertise in crafting the best algorithms, he also started his DEX Aggregator project, Steelswap. He also co-authored the Minswap DAO Emissions and DAO treasury Report 2023.
Contra: the Minswap in-house yield farming expert, Contra is known to be a Real Yield/cashflow maxi and contributed towards guiding Minswap in that direction. He provides great insights to anyone looking to yield farm on Minswap, coupled with a snarky comment here and there. He also o-authored the Minswap DAO Emissions and DAO treasury Report 2023.
PurritoGeneral: Miinswap Labs member with an inexplicable affinity for catgirls, waifus, and burritos.
Emissions Committee Expected Outputs
The Emissions committee decides bi-weekly on the lowering or increasing of Emissions. They have to provide at least a sentence of reasoning as to why they vote any certain way.
The Emissions committee will have the following Mandate: Optimize MIN emissions to maximize Minswap’s relative volume with efficient levels of TVL. The goal is to maximize Minswap’s share of overall volume traded on Cardano. This requires an efficient level of TVL where it’s high enough to promote low slippage but low enough that fees generated are a meaningful source of revenue for LPs.
If this Proposal passes, the Emissions committee will also be working on a Dashboard for major transparency and having better data for making decisions on emissions. This dashboard would include:
For every pool that receives MIN Emissions
- A dashboard of min emissions in MIN and in USD per day
- A dashboard of TVL per day
- A dashboard of daily volume (prolly average daily volume over previous 2 weeks or something)
- A dashboard of emissions per TVL(both min adjusted to ada price and unadjusted)
- A dashboard of emissions per ADV (both min adjusted to ada price and unadjusted)
- A dashboard of ADV/TVL
- A dashboard of MIN staking
- A dashboard of L = square root (k) a metric measuring liquidity
All of these would show time series so we can view how they evolve over time. It will be updated on a weekly or bi weekly basis.
Emissions Committee Expected Compensation and Rules
To keep the Emissions Committee engaged, and reward not only the future work but all the work that has been done for the last year (since the Minswap DAO Emissions and DAO treasury Report 2023), we propose the following compensation:
All members will be paid 100$ worth of MIN every month, except one member which will get the boosted comp of 200$ worth of MIN a month. This boosted comp will get voted on by the committee itself through a majority vote, close to the end of each month.
This compensation is to be paid at the end of each month, at the MIN price of that day. MIN will be withdrawn from the DAO Treasury every 6 months to cover all expenses for the next 6 months. It will be sent to a wallet controlled by Minswap Labs, which will handle the distribution to Emissions committee members. The compensation will remains long as the committee is active.
When it comes to the Rules, Committee members may choose to expell a member through a majority vote. There is a Mechanism for adding new members : so an addition of a new member must have an unanimous vote from the emissions committee. Only one new member can be added to the committee every 3 months. In case of a tie in a majority vote situation, it will be the vote from the PurritoGeneral that will serve as the tie-breaker.
(Post-Feedback Process additions)
After the feedback process, the following points have been added (through the Edit Post function) to the Proposal:
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The Emissions committee will have the following Mandate : Optimize MIN emissions to maximize Minswap’s relative volume with efficient levels of TVL. The goal is to maximize Minswap’s share of overall volume traded on Cardano. This requires an efficient level of TVL where it’s high enough to promote low slippage but low enough that fees generated are a meaningful source of revenue for LPs.
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Mechanism for adding new members : an addition of a new member must have an unanimous vote from the emissions committee. Only one new member can be added to the committee every 3 months.
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Payment : there are concerns about only one person handling payments. To avoid this here is an alternative measure: MIN will be withdrawn from the DAO Treasury every 6 months to cover all expenses for the next 6 months. It will be sent to a wallet controlled by Minswap Labs, which will handle the distribution to Emissions committee members.
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Addressing higher comp : all members will be paid 100$ worth of MIN every month, except one members which will get the boosted comp. This boosted comp will get voted on by the committee itself, close to the end of each month.
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Tie-breaker vote: In case of a tie in a majority vote situation, it will be the vote from the PurritoGeneral that will serve as the tie-breaker.