Summary
This proposal seeks to cut the protocol-funded LP incentive on the Curve stLINK/LINK pool by 50% to fund the SDL Treasury with stLINK. Today the pool holds about $4.66M of liquidity and pays LPs roughly 1.40% APY in stLINK-LINK LP tokens, from a stream the protocol funds out of its own staking yield (stLINK converted to LP tokens and streamed to the gauge). A full year of on-chain trading data shows the pool is structurally underutilized. The median trading day moves only about $82k, which is 1.75% of the pool’s depth, and the pool generated just $6,866 in swap fees across the entire year while being paid about $65,000 in LP incentives.
We are paying roughly 9.5 times what the pool earns. halving it lets the DAO keep the stLINK instead of routing it to rent liquidity the pool does not need. A 50% cut retains about 4,550 stLINK (~$34,000) per year for the Treasury, which is staked LINK that compounds inside the protocol rather than being paid out.
Motivation
These venues were built to make wstLINK a productive DeFi collateral, with the real prize being a market where wstLINK enables stablecoins borrowing, and an AAVE e-mode listing. In the current bear market and total TVL, that has been much harder to land than anticipated. Until it arrives, the incentives mostly subsidize leveraged staking and idle Curve depth, neither of which needs the level of spend we are running. Shrinking the spend now preserves the Treasury for when the conditions to build the real use case return, or for any other proposals by the community.
Scenarios: what the APY does if some LPers leave:
| Pool depth |
Change vs today |
Resulting LP + fee APY |
| $4.66M |
0% (today) |
~0.85% |
| $3.73M |
down 20% |
~1.06% |
| $3.26M |
down 30% |
~1.21% |
| $2.80M |
down 40% |
~1.41% |
Specification
Reduce by 50% the emission rate of the protocol’s Curve LP incentive distributor, the contract that converts staking yield into stLINK/LINK LP and streams it to the Curve gauge at 0x985ca600257bfc1adc2b630b8a7e2110b834a20e. Route the retained stLINK (~4,550 stLINK - $34,000/year) to the Treasury.
Vote
- YES: Halve the Curve LP incentive now, let SDL expire, retain the stLINK in the Treasury.
- NO: Keep the current stLINK-LINK LP incentive unchanged.
5 Likes
This makes sense.
I don’t know SDL’s stance on stacked smart contract risk, but I would suggest progressing to advanced treasury mechanics like utilizing morpho (if they don’t already) and more aggressively. Auto-compounding within the treasury is awesome, but given the nature of SDL which is a smart contract tool that services the market for the biggest smart contract asset there is - I think that not only is this a good idea but that it may be a bit conservative.
This may already be happening in other ways, but I haven’t looked. Is there a treasury money-flow map page or a discretionary funds money flow map?
Also, as stlink and wstlink opportunities increase we’ll need the ability to ReSubsidize the Curve Pool quickly. I say this because of the nature of smart contracts the iteration and innovation curve slopes are much sharper because adoption happens more quickly.
The ability to change this needs to be able to be done quickly at the decision, financial, and execution level. I’m not sure if these considerations are already handled, but I think it’s worth mentioning.
1 Like
Decreasing SDL rewards is option. However, the platform may alternatively boost Morpho’s wstlink and the Curve’s stlink/link-ng instead to encourage liquidity providers. There is a possibility that less will contribute to Morpho and the Curve pool if we do not continue providing rewards at a similar rate
Yes, there could be a scenario where some people withdraw their positions, but the APY will then increase. Keep in mind that the pool is heavily underutilized, meaning we overpay for not much to gain, at least at this moment. As for SDL rewards, they are not in discussion at all: no SDL emissions anywhere to be renewed. This is purely for stLINK incentives.
The treasury’s address is 0xB351EC0FEaF4B99FdFD36b484d9EC90D0422493D there’s also the Fireblocks address which is 0x25d0d4c5caa077e64d4829197e6ce1ac9ff237aa. I totally agree that we should leverage DeFi using the treasury funds, but at the moment we do not have any for it. The stablecoins we do have are earmarked for existing services (H&T accounting, Hypernative etc). Once we will have substantive amount to increase the DAO’s treasury we should def leverage it via DeFi. We’ve started something at a small scale with the SDL/LINK LP position the DAO holds in UniV3.
1 Like