On July 12th, the last emission of 276,923 MTA will go out for EARN rewards as agreed upon in the governor approved MCCP-4 MIP. Beyond that date, we do not yet have consensus around how MTA rewards will be distributed.
IMHO We should use this moment as a chance to rethink MTA rewards and the total supply emission from a first principles line of reasoning. Lots has changed over the last 3-6 months, and some of our current MTA rewards can obviously be reallocated in more optimal ways to accrue long term value to the mStable protocol and mStableDAO.
A summary of MCCP-4 emissions
We have some existing commitments:
- MTA rewards to Polygon/Matic for Save on Polygon (3 months from July 5th. c.20.5k MTA per week)
- MTA rewards for FRAX pool (3 months from July 5th. c.20.5k MTA per week)
The topline considerations for us to quickly align on are below. Obviosuly there is much more to consider, but I think we should initially focus our conversation on finding consensus regarding:
- How much MTA in total should go out on a weekly basis after MCCP-4
- Where it goes (what are we trying to incentivise?)
- How often it is distributed (weekly at present)
I personally think we should lock MTA emissions in into perpetuity. Think of it as the rest of MTA’s mining reward emission (like for a POW coin). We should signal publicly and with certainty what token inflation looks like for the rest of MTA’s emission. I feel many sophisticated market participants are (rightly) worried about the vagueness of MTA’s long term supply emission and this has meant they have remained on the sidelines.
Automate the emission distribution process as much as possible. The current setup where rewards are sent out each week is outdated given where mStable is today.
I see some no brainer changes we can make to better accrue value to mStable. I’d be interested to see what other Metanauts think are the obvious “quick win” type changes we can make to the current emission.
- The 5k weekly MTA/ETH Uniswap v2 emission.
We are sending 5,000 MTA every week to Uniswap v2, whilst the protocol’s emphasis should be on bolstering liquidity on Uniswap V3 for its improved capital efficiency.
I suggest the mStableDAO simply redirects this 5,000 MTA amount to a Visor actively managed LP position for MTA/ETH on Uniswap v3. This has the following benefits:
- Improved liquidity support from v3’s capital efficiency gains
- Compliments the mStableDAO’s existing 1 sided MTA liquidity in Bancor
- The DAO keeps custody of the 5k MTA per week, instead of it being handed out to liquidity miners many of whom dump the token. Value accrues in the protocol treasury
- The depth of liquidity would grow over time, and reach a point where it is sufficient and the emission can be stopped
- Trading fees accrue to mStableDAO for MTA/ETH pair into perpetuity
- No risk of angry farmers losing out on IL from contributing MTA/ETH LP tokens
This is the start of one of the largest discussions in mStable’s young life as a project. Reframing rewards in the long term will touch many other parts of the mStable protocol that are already in existence or scheduled in the roadmap. I’ve listed some items for consideration below, however this list is not exhaustive:
- Staking rewards in the long term? How will we do rewards for staking V2?
- Eth L1 vs L2s, both today with Polygon but also 6 months from now with other L2s live
- Liquidity Utilisation Ratios - can we continue to flexibly reward pools based on performance whilst locking in an emission plan into perpetuity? I think we can but the devil will be in the details.
- Rewarding STAKED MTA instead of unstaked MTA. Like AAVE currently does.
Metanauts assemble I look forward to hearing your responses.