REGEN inflation upgrade: Incentivize LPs at protocol level.
This is a rough draft of a proposal we are hoping to pass. It is a follow up to Will Szal’s “Tokenomics Upgrade: LP Incentivization”.
REGEN lacks liquidity on Osmosis DEX. This creates problems such as slippage. The issue with incentivizing LP pools for a finite amount of time, is that DEX users then also provide liquidity for a finite amount of time. This creates a short term price increase, followed by a token price decrease when incentives are ending.
Our proposal is to increase REGEN inflation by 15%, with all of this increase going to the OSMO/REGEN pool on Osmosis DEX. We do not want to use the current inflation on REGEN to achieve this, as it may incentivize some people to unstake tokens that are currently securing the network. Using the budget module would allow inflation to be split, so that there would be no effect on rewards to REGEN stakers.
Once this is completed, we intend to create a separate proposal that will request matching incentives from Osmosis.
The technical requirements for this on the REGEN Network side would be:
Budget module - To split inflation between staked REGEN and LP incentivization.
My first instinct is to generally support this experiment, which I think I do. At least the protocol controlled value aspect of it which seems like a good path to go down.
I agree that increasing inflation is a good means to allocate funds to other streams, rather than potentially driving down validation rewards as these parties are securing the network (I believe dilution will eventually kick in with this proposal one way or another but this is a softer way of transitioning and the benefits of liquidity may drive up price to offset this anyway).
Still, I feel that it’s probably worth zooming out a little on the subject of PCV and inquiring into the budget modules general significance in relation to the wider network.
From existential nature (quantitive) to essential nature (qualitative) I tend to see the ecosystem through the following lens:
Network security / validation
Tokens
Wallets / interface
DAOs / groups
Projects / Registry.
Through this frame, I note that this proposal follows on in sequence from maintaining network security to increasing token emissions in order to create liquidity. Why does liquidity matter though? Token price.
So assuming that we’re not there for short term speculative reasons, why does token price matter? My suggestion is that it should be to support the financial independence of csDAOs; who are reliant on funding from their staked tokens. As these funds are related to exchanging token rewards on the market, price becomes relevant, which in turn is pretty dependent on liquidity.
Ok, so this explains why I’m generally in favour of this proposal.
Given the existential nature of tokens/price, it linearly makes sense that this economic intervention should follow validator commissions/reward (the networks economic a priori). Doing so ties nicely with raising the capacity of csDAOs, to whom the first batch of allocations have been awarded (balancing token price with the enDAOment of furt
What are the current inflation parameters? Would InflationMax and InflationMin be increased by 15%? From my understanding the initial token design was based on the Cosmos hub one, is this correct as the one below? https://github.com/gavinly/CosmosParametersWiki/blob/master/Mint.md
It seems everyone agrees that more liquidity is beneficial and a great thing for Regen.
I’m also hearing that some members want the incentives to go to contributors and active participants (I get it!..but disagree).
My thoughts are that this is idealistic and not practical for actually getting the liquidity Regen needs for large (enterprise) level growth which is where real impact happens in my opinion.
It seems almost like a closed system then. Regen holders get more regen to do regen things and all traffic stays in the community.
Mass adoption doesn’t happen in a closed loop, especially if the UX doesn’t make it easy to join the loop.
As most things, generating more liquidity comes at a cost and I strongly feel that teaming with Osmosis to provide extra incentives in an LP (as well as eventually pairing with interfluid staking and securing the Regen network) will be worth the cost.** I believe most would join the pool in a set-it-and-forget-it mind set.**
There has been mention of not wanting “degens” or reward chasers just pumping and dumping but with stable ongoing incentives why would they leave? I personally wouldn’t.
Speaking of my own story, I actually bought my first Regen tokens on Osmosis then did more research and became an active participant. Since then I have joined Refi DAO events helping a team in Brazil with Agroforestry Journals and now have been converting acres of fields on my own property into native vegetation and forestry practices for restoration from being inspired by the Regen community. I started as a degen reward chaser!!…then evolved.
This methodology isn’t just liquidity incentivizing reward chasers.
It’s about creating more enterprise/mass adoption potential.
It’s a giant billboard for onboarding new users on a $500,000,000 MC platform.
It’s creating the kind of deep liquidity that Regen has agreed it would benefit from.
Also….new money = new users = new ideas = new possibilities.
Agree with separating the proposals. This should probably also contain some mention of the ability to turn off inflationary rewards should liquidity objectives be in some satisfactory range with that range yet undefined and dependent on market conditions.