Third Emissions Bound Adjustment

[Ch_cken]

Third Emissions Bound Adjustment

Background

DEX tokens exhibit intriguing characteristics. During the initial phase of a DEX protocol, these tokens often experience high inflation rates designed to attract TVL and liquidity. Consequently, many DEX platforms strategically leverage their own tokens to enhance farm APRs for liquidity providers. Historically, emissions surpassed one million $MIN per day to incentivize liquidity as per this dynamic.

It is noteworthy that, as Minswap has solidified its position within the Cardano ecosystem and expanded significantly, the platform is now capable of offering competitive APRs purely from trading fees, significantly reducing reliance on token emissions. This evolution underscores an inverse correlation between emission rates and the volume dominance of Minswap against competitors.

Recognizing this critical dynamic, the Emissions Committee, a DAO-approved council established following the approval of this proposal, was tasked with monitoring $MIN token emissions. Guided by clearly defined mandates, the committee employs various tools to ensure emissions align appropriately with both the growth trajectory of the DEX and the long-term value of the $MIN token ecosystem. This delicate equilibrium ensures emissions reductions do not negatively impact TVL, while simultaneously protecting the integrity and sustainability of the $MIN token and its governing ecosystem.

To date, the committee has effectively utilized data-driven methodologies and strategic adjustments to achieve these objectives. Following the latest emissions adjustment, the committee successfully reached the DAO-approved lower bound established by this proposal.

Please note that the Minswap ecosystem is very complex and emissions alone are not the only factor that have an impact.

Proposal

After the most recent session, we have hit the lower bound of 100,000 $MIN per day. Currently, the established lower bound allows for an annualized monthly average emission of 3,041,666 $MIN. At the current market price as of April 11, 2025, this equates to a total value of approximately 105,137 ADA or $66,217.

While it remains uncertain how farmers will utilize their $MIN tokens, modeling a worst-case scenario wherein the entire emission amount translates directly into selling pressure results in a projected price impact of 2.112% on the V2 contract pool as shown below:

To provide the council with the necessary flexibility to effectively monitor key data trends such as volume, volatility, TVL, and token metrics, and to proactively meet its mandates, the council respectfully requests that the DAO approve a reduction of the lower bound by 75%.

Scope of Change

If this proposal is approved by the DAO the following changes will take place:

1. The lower emission bound will be adjusted to 25,000 $MIN per day.

Important Considerations

It is crucial to emphasize two points:

• Approval of this request does not mean the council will immediately reduce emissions to this new lower bound.
• The council’s authority is limited to adjusting emissions in direction-agnostic increments of 10% on a biweekly basis.

Considering these factors, should the council determine it prudent to continue reducing emissions, reaching the newly proposed lower bound would require approximately 14 consecutive biweekly adjustments. This process would span nearly 7 months, though realistically, it may extend to 7-9 months due to miscellaneous factors and potential data-driven interruptions in consecutive emission reductions.

This can be modelled as seen below using today’s prices of 0.0353 MIN-ADA & $0.63/ ADA.

Please note that these variables are subject to change and this is just an approximation using today’s numbers. Additionally, multiple data points would have to support a reduction at each session, if the data shows that we are losing TVL from lowering emissions, it will most likely not be reduced at any given session.

Month	Daily Min Emissions	~ Monthly MIN Emissions	~ Monthly ADA Value	~Monthly $ Value
0	100,000 MIN	3,041,667 MIN	105,137 ADA	$66,236
0.5	90,000 MIN	2,737,500 MIN	96,634 ADA	$60,879
1	81,000 MIN	2,463,750 MIN	86,970 ADA	$54,791
1.5	72,900 MIN	2,217,375 MIN	78,273 ADA	$49,312
2	65,610 MIN	1,995,638 MIN	70,446 ADA	$44,381
2.5	59,049 MIN	1,796,074 MIN	63,401 ADA	$39,943
3	53,144 MIN	1,616,466 MIN	57,061 ADA	$35,949
3.5	47,830 MIN	1,454,820 MIN	51,355 ADA	$32,354
4	43,047 MIN	1,309,338 MIN	46,220 ADA	$29,118
4.5	38,742 MIN	1,178,404 MIN	41,598 ADA	$26,207
5	34,868 MIN	1,060,564 MIN	37,438 ADA	$23,586
5.5	31,381 MIN	954,507 MIN	33,694 ADA	$21,227
6	28,243 MIN	859,057 MIN	30,325 ADA	$19,105
6.5	25,419 MIN	773,151 MIN	27,292 ADA	$17,194
7	25,000 MIN	760,417 MIN	26,843 ADA	$16,911

Emissions Impact Metrics

These are the metrics for your consideration since the last emission bound reduction was approved on December 13th, 2024.

Date	Emissions Change Amount	New Emissions	Minswap TVL (Millions ADA)
11/24/2024	-10%	202,636	108
12/18/2024	-10%	182,372	113.9
1/2/2025	-10%	164,135	113
1/19/2025	-10%	147,722	107.8
1/31/2025	0%	147,722	106.5
2/16/2025	-10%	132,949	104.8
2/28/2025	-10%	119,654	103.4
3/17/2025	-10%	107,689	118
4/3/2025	-10%	100,000	127.7

Emissions represent only one of several factors influencing TVL and volume. Broader macroeconomic conditions, crypto market dynamics, developments within the Cardano ecosystem, and Minswap’s business development efforts have a more significant impact on these metrics than emissions alone.

Nevertheless, for the sake of completeness, by applying a min-max normalization, we can effectively compare and visualize trends between emissions and TVL. While historical data may look like it is suggesting a weak direct correlation, the most recent observations indicate a strong inverse correlation which is a desirable outcome as it implies reduced dilution of token holders’ value while attracting greater TVL.

This skews the overall correlation and when we look at the trendlines, we can actually observe an overall weak inverse correlation which is exactly what we hoped for. Furthermore, during the period analyzed, TVL reached its highest point precisely when emissions were at their lowest, signaling strong organic liquidity within the Minswap ecosystem.

Adjusting the lower bound further enables us to better assess and respond to such market dynamics, fostering an optimal environment for continued growth and sustenance from organic volumes.

Proposal Compensation

Chicken spent the time required to put this proposal together.

For this proposal, the scope of work included tasks related to Content Writing and Data Analysis, based on standard hourly rates in New Jersey:

• Content Writer Average Hourly Rate: $41/hour
  
• Data Analyst Average Hourly Rate: $40/hour
  

Time and Cost Breakdown (Total: 12 hours):

• Content Writing – 3.5 hours × $41 = $143.50

• Proofreading – 1 hour × $41 = $41.00

• Data Collection – 2.5 hours × $40 = $100.00

• Data Analysis – 3 hours × $40 = $120.00

• Data Visualization – 2 hours × $40 = $80.00

Total: $484.5

Total One-Time Compensation Requested: $500 (Rounded Up)

[PurritoGeneral]

thanks for the great work!

[CWSchub]

So in summary, Minswap can affort to keep cutting emissions because of the feedback between tvl and trading volume, making the MIN token rewards by emissions redundant compared to the trading fees.

I appreciate how this proposal will influence future tokenomics decisions, this seems to be a precursor to another token burn proposal.

My question is:
What scenarios has the emissions WG considered which would result in an increase of emissions and how ready are they to pivot should the need arise?

Edit: Thanks for the proposal as always Ch!cken, thank you for your work.

[CWSchub]

I’ve also realised that the jump in TVL is due to the Wanchain-Indigo-Minswap initiative.

So, while MIN emissions have decreased over time, other projects have decided to increase their own emissions via Minswap (namely thanks to incentivising the iAsset stableswaps), resulting in an increase in TVL.

Therefore, while there appears to be a negative correlation between TVL and MIN emissions, there surely is a positive correlation to exMIN Farming incentives.
Thus I would argue that Minswap needs to be careful that projects don’t start incentivising TVL on other DEXs.

It’s a careful balance I trust the wg is aware of, but for the regular reader this might not be immediate.

[Ch_cken]

Hey brother, thank you!

This is just one of the many data points currently being monitored. If you’re interested in exploring more metrics, feel free to check out the $MIN dashboards linked in the Linktree below.

While some metrics—like the one mentioned in the proposal—are used consistently, others are more qualitative and influenced by factors such as business decisions (like the Wanchain example), broader macroeconomic trends, and ecosystem dynamics.

The committee is equipped to adjust emissions by up to 10% on a biweekly basis, which means any changes are gradual and responsive rather than drastic. Our approach is always guided by current market conditions and the data available at the time.

Of course, it’s hard to predict the future, and I can’t speak on behalf of the entire committee. But what I can say is that we’re committed to responding thoughtfully by observing how emissions shifts affect the protocol and adjusting accordingly to meet our DAO approved mandates.

Link tree in bio: www.x.com/navir333

[gcarrharris]

That’s a well written proposal sir. Paints a nice clear picture, thank you!