I’d like to give a quick overview of my personal thoughts around revamping FLX incentives for RAI in the next weeks.
Currently we’re giving out 474 FLX per day in various incentives programs such as Uniswap v2 RAI/ETH, Aave RAI borrowers and Uniswap v3 RAI/DAI.
There are a couple of issues with the current distribution:
- It gives out too many incentives for the wrong things. For example, the RAI/ETH pool is mostly unused at the moment besides liquidations and arbing
- Aave liquidity ballooned with the help of stkAAVE and Idle rewards as well as due to partners such as Fei that are now lending RAI. This means we have Aave liquidity that’s sticky even without heavy FLX incentives and current incentives may give out too much
In the next month (and once the audit for it is done) we’d like to onboard RAI into Curve. Assuming the Curve community accepts RAI, we would like to do the following changes to our incentives:
- Decrease RAI/ETH incentives from 120 FLX per day to 0 over 3 to 4 weeks
- Allocate between 55-70 FLX per day to incentivize the Curve community to hopefully allocate a gauge for RAI
- Potentially allocate 10-15 more FLX for RAI/DAI Uniswap v3 or RAI/ETH Uniswap v3
We hope that these changes can help us increase liquidity and the supply of RAI while decreasing the amount of FLX spent on lesser used pools. In addition, we hope to decrease the amount of cash we throw to unproductive uses such as Uniswap v2.
Note that one major issue with giving up on Uniswap v2 is that all our liquidity sources would suddenly become concentrated. This can be really dangerous during a market shock so we may want to allocate some FLX to RAI/ETH Uniswap v3. In addition to this we should upgrade the keeper infrastructure so it uses flashloans from Aave and RAI/ETH Uni v3 to make sure there are plenty of liquidity sources in case of liquidations.
Lastly, we’re considering a decrease in Aave borrow incentives from 40 FLX to 20 FLX in the next few days as well as start to decrease RAI/ETH Uniswap v2 incentives soon.
This incentive revamp will soon be accompanied by a new tokenomics plan for FLX which would hopefully make the incentive distribution more manageable and sustainable while potentially moving away from buyback and burn.